1/10 Rebooting Project Cameron: Cameron needs to renew his Grand Bargain with Clegg

By Tim Montgomerie
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Like John Major’s government this government is doing very good things. Michael Gove’s school reforms could be as significant as Michael Howard’s prison reforms. Iain Duncan Smith’s welfare reforms are set to be more far-reaching than Peter Lilley’s social security reforms. Eric Pickles’ localism bill will be as big as the regeneration policies of Heseltine and Curry.

But there are unflattering comparisons too.

Cameron’s government is beset by many of the same problems after 18 months that the last Conservative-led government suffered after 18 years. The scale of backbench rebellion. The violence of language between Downing Street and Eurosceptic backbenchers. The relentless hostility of the centre right press. The lack of a political narrative. The sense that, because of factors beyond its control, this is a government that is in office but not in power.

What can be done? During today I'll be suggesting ten things that might help this Government and the Conservative Party, in particular, to recover its initial momentum and sense of purpose.

1/10 A second Grand Bargain between David Cameron and Nick Clegg

At the beginning of the Coalition the critics of hung parliaments were briefly confounded. Rather than a lowest common denominator arrangement the Coalition possessed ambition. The Liberal Democrats gave the green light to deficit reduction, serious reform of the welfare state and elected police chiefs. Mr Cameron agreed, in return, to Mr Clegg’s plan to take the low-paid out of income tax and for extra money for inner-city schools. The Tories got new constituency boundaries. The Lib Dems got a vote on AV.

Since that time the Coalition has lost its rose garden warmth and ambition. Some retrenchment has been sensible. The early ambition went too wide (eg on health) but not deep enough (eg supply-side economic reform). Nonetheless the overall zeitgeist of that heydey period has been lost. Especially since the tution fees debacle and AV referendum It's been replaced with suspicion and a lot of Lib Dem roadblockery. The Lib Dems have frustrated what the Govt needs to do in the crucial areas of economic reform and relations with Europe.

Some Conservatives think we should merely force the Liberal Democrats to give ground on these two issues. We could, of course, threaten them with a general election but I don't think Cameron would even contemplate that. If we are to get freedom to renegotiate Britain's relationship with Europe and more radical economy-boosting measures we need to go back to the spirit of the early 'Grand Bargain' and offer them something in return. In an article for today's Times (£) I suggest what that might include:

"Few things have caused his party more unhappiness than the health reforms. By installing someone like Vince Cable as Health Secretary, Mr Clegg can ensure those reforms are implemented in accordance with what Shirley Williams and others see as the best traditions of the NHS. The Liberal Democrats could also be offered higher taxation of accumulated wealth in return for lower taxation of wealth creation. Not only could this include the end of the counter-productive 50p tax, it would also be a genuinely dynamic thing to do. Britain taxes income too much and unearned wealth too little. Conservatives interested in a more enterprise-friendly tax system should embrace a change that involves, for example, higher council tax on high-value properties and fairer income tax thresholds."

Many readers won't like these trades and perhaps there are better ones to make... but in my opinion they are open up the possibility of getting what the country wants on Europe and what the country needs on economic reform.

> In the second part of this series at 10am: What Cameron needs to do on Europe.