What do the Tories need to say about cuts?

The biggest challenge for the Conservatives between now and the election is to tell the electorate enough about their fiscal plans to ensure they have a post-election mandate but never enough to imperil an election majority*.

In meeting that challenge they are getting somewhat conflicting advice from centre right think tanks.  The TaxPayers' Alliance and Reform are urging “meat not mood” with regard to intentions.  Policy Exchange and the Centre for Policy Studies argue that big principles rather than long lists are more what is required.

In April, Reform's report ‘Back to Black’ set out £30 billion of cuts and argued that no budget should be protected.  The TPA (with the Institute of Directors) published a report last week that set out £50bn of spending cuts. This week, Reform's Lucy Parsons welcomed Vince Cable's list of £14bn of spending cuts which Reform had published.  She concluded that "his proposals will do much to engage the public in the tough choices the UK faces" and concluded that it was "the kind of credible plan that the public is still waiting to see from the Conservative Party.”

Andrew Lilico, Chief Economist of Policy Exchange, had already set out a different viewpoint (also on CentreRight). He argued against an explicit list of cuts – partly because of the sheer scale of deficit reduction that is going to be necessary.   He calculates that a £100bn adjustment will be necessary to take Britain back towards sustainability.  Lilico argued that “cross-cutting themes” including a “general policy towards public sector pay, pensions or the general approach to procurement” should play a much larger role than specific cut suggestions.

Andrew Lilico’s argument is backed by Jill Kirby of the Centre for Policy Studies. Talking to ConservativeHome, he CPS Director said that direction of travel is more important than a ‘shopping list’ of cuts. It should be remembered that –also facing a dismal economic inheritance - Margaret Thatcher did not set out line-by-line cuts but made strong arguments about her intentions.  She said that exercises by think tanks (and our own ‘StarChamber’,) were still “very useful” for an incoming government but politicians did not need to specify which they would sign up to. The TPA agrees that the Tories do not need to publish an exhaustive list of cuts but examples that add up to double-figure billions are necessary in order to gain credibility with the public and the media.

Policy Exchange’s Neil O’Brien worries that ‘big lists’ are difficult to translate into government. Many of the necessary cuts will only be clear when Cameron/Osborne are in government and after the whole of Whitehall has been enlisted in a delegated search for efficiency. O’Brien also worries about crude across-the-board freezes in public sector pay when the last decade’s growth in pay has not been across-the-board. Pay for health-related workers has gone up twice as fast as for the police, for example.  Should all now suffer equally? No.

David Cameron and George Osborne have made their intentions clear in some important regards.  There are five areas of particular clarity:

1. They have said that there will be cuts but have not yet specified a scale of cuts that will restore Britain’s public finances. Shadow Treasury Team sources attribute this, in part, to a lack of certainty about future economic growth.
2. Last week’s speech on the pay of ministers and the perks of MPs made it clear that the political class will share the pain of adjustment. This is an important step towards possessing some moral authority in ‘the age of austerity’.
3. The ‘rich’ will share the pain, too.  There’ll be no early reversal of the 50p tax rate and there are (as yet unspecified) warnings about axeing tax credits for those earning £50,000 and more.
4. The Tory commitment to ringfence the NHS and international development  budgets – but not, for example, defence – makes it clear that Cameron is a different kind of Conservative leader.
5. The party will hold an emergency budget soon after winning office in a sign that the course of economic policy will change quickly.

In my mind there are three things that the Conservative Party still needs to do: (1) It has not made it sufficiently clear that the next few years are going to be painful; (2) It has not reassured that any tax rises will be temporary and (3) We haven’t yet had a big ‘to-the-camera moment’ that can be used in the years ahead to say ‘we have a mandate to make these difficult cuts’.

Taking those three points in quick succession:

(1) THE NEXT FEW YEARS ARE GOING TO BE PAINFUL
George Osborne’s speech to Demos in August was a mistake in this regard.  He came close to saying that public service reform would be enough to put things painlessly right. That’s the wrong strategic message.

(2) ANY TAX RISES WILL BE TEMPORARY
The Conservatives (somewhat dubiously) have protested that they are not even discussing tax options. When they do discuss tax options they need to insert sunset clauses into what they propose. Every Tory message on the budget must show that there is light at the end of the tunnel.

(3) THE BIG TRUTH-TELLING MOMENT
David Cameron needs a look-into-the-camera moment that gives him the mandate for the tough times ahead.  I’m thinking of something like George H W Bush’s 1988 ‘Read my lips’ passage. It’s not an ideal example because Bush reneged on his promise but Bush made a promise to keep taxes down. Cameron will be making a very different promise – of austerity. My point is it needs to be a high-impact moment of candour.

What the Conservative Party needs most of all is what Lord Lawson has called a doctor's mandate.  The patient knows that it is ill and that illness has produced a fear of the future.  The patient does not need to know exactly how the doctor intends to make them better but they need to know that there will be a period of discomfort associated with the medicine, a period of convalescence and then every prospect of a return to full health.     

Tim Montgomerie

Nigel Lawson backs strong regulation for 'vanilla' high street banks and lighter regulation for the rest of the financial sector

Former Chancellor of the Exchequer Nigel Lawson has spoken to a conference organised by London's new Legatum think tank today and urged a split between banks that perform retail and investment banking functions.

According to a press release from Legatum (I do not have Lord Lawson's full text), "he called on the Government to split up the banks, saying that, ‘plain vanilla’ banking, (high street banking) should be split up and regulated, but that the rest of the financial sector should be allow to operate under a light touch regime on the understanding that there would be no help from the taxpayer for those who gambled and lost."

He said that banks had forgotten economic history and thought that the good times would roll and roll. "We know from history," Lord Lawson said, "the bigger the binge the bigger the hangover".

Writing on CentreRight recently, David Green of Civitas outlined a model of small retail banks that could invest in their localities.  

Tim Montgomerie

PS Do keep an eye on the Legatum think tank. I'm confident that it is going to be a big gain for the centre right community in Britain. Although it has a global remit - with a focus on prosperity, civil society and international justice and security issues - it is determined to put deep roots down in London. It held a conference today on the future of capitalism and with the Henry Jackson Society is holding an important conference on Iran on Thursday. One of its team members, Ryan Streeter, wrote for ConservativeHome yesterday on the need for Britain to renew its enterprise culture. Much more about Legatum on its website.

Who can revive the IEA... and how?

Earlier today Iain Dale broke the story that John Blundell is to leave the Institute of Economic Affairs.  The official statement is here.

The IEA and the Centre for Policy Studies drove the Thatcherite revolution but the IEA has been much less influential since then.

If I had to name the top centre right think tanks now it would be Policy Exchange and the Centre for Social Justice.  Reform and the CPS would be my next most influentials.

The TaxPayers' Alliance and MigrationWatch are hugely important but neither are quite in the conventional think tank mould and that brings me to my point: Are think tanks thinking enough about how best to change the intellectual and political climate?

Daniel Finkelstein urges the IEA to use this moment to consider whether it's "a body that wants to influence policy, or is it primarily concerned with educating people about free markets?"  A good question but there are other questions too.  Too many think tanks are doing the same things that a 1970s think tank would do.  They're still producing papers that aren't well read and measuring their impact by newspaper column inches.

None of the think tanks have a really good blog (the ASI's is best) but, then again, are blogs important?

Continue reading "Who can revive the IEA... and how?" »

Who is your Campaigner of the Year?

Yesterday we sought your nominations for Parliamentarian of the Year.  Today we are seeking your nominations for Campaigner of the Year.  The Campaigner can be an organisation, a parliamentarian, a blogger, a publication... entirely up to you.

CONSERVATIVEHOME THAMES CRUISE WITH DAN HANNAN MEP
The awards will be presented during a Thames boat cruise on Thursday 23rd July from 7pm until just after 10pm. I am delighted to report that Daniel Hannan MEP will be joining us for the cruise and will be making a brief speech.  One other speaker will be announced soon.  The cost will be £30 and will include a big BBQ.  After one free drink there will be a cash bar.  If you'd like to join us for the cruise please send a £30 cheque (made payable to ConservativeHome) to ConservativeHome, 5 The Sanctuary, Westminster, London, SW1P 3JS.  Alternatively you can pay by PayPal.  Click here and pay £30 and we'll send you a confirmation email.

Tim Montgomerie

The TaxPayers' Alliance is more likely to deliver Eurosceptic change than UKIP

David Cameron has written to all Tory members today.  In an otherwise unremarkable two page letter he devotes one paragraph to UKIP (click to enlarge):

It's all true, of course, but it's unlikely to stop UKIP doing well on 4th June.  UKIP may even beat Labour.  UKIP will prosper because of anger at the mainstream parties, because of their hardline stance on immigration and because the public are increasingly Eurosceptic.

An ICM poll for The TaxPayers' Alliance and Global Vision - published overnight - finds strong support for Britain asserting greater independence from Brussels.  Key findings include:

• 69% want the British Government to start breaking EU rules.  78% of Conservative voters support EU rule-breaking.
• By 57% to 37% Britons favour unilateral repatriation of powers if the EU refused to give us permission to do so.
• 75% of people believe that any decision to give more powers to the EU must always be put to a referendum, while only 23% believe such decisions should be taken by MPs.
• Membership of the Euro (which would have greatly handicapped our economic recovery) is rejected by 75% to 23%. Even 58% of Liberal Democrats oppose membership.
• 67% agree that the economic crisis demonstrates the need for Britain to take back control of trade and economic policies.

All Eurosceptics should rejoice that The TaxPayers' Alliance - as successful as MigrationWatch in changing public opinion - have turned their considerable skills to the European issue.  Their determination to connect the issue of the EU with people's wealth and policy on immigration is particularly important.  Too many of the Eurosceptic groups have been too abstract in their campaigning.

My guess is that, in the long-term, the campaigning of the TPA will do more to move the nation's political establishment to a Eurosceptic position than UKIP.  UKIP's 2004 victory produced no big changes.  Progress in 2009 will (rightly or wrongly) be dismissed as mainly a protest vote.  If change is going to happen it will happen at Westminster and I bet any Ukipper £100 that there'll not be one MP elected under UKIP purple at the next General Election.  If UKIP has any effect it will be to negatively deprive a few Tory MPs of victory and keep a Europhile LibDem or Labourite in the Commons.

My own belief is that Britain would be better off outside of the EU. I believe in a strong British-EU trading relationship but Britain should govern itself. I've applied to join the Better Off Out group and will be arguing for greater and greater independence for Britain but from within the Conservative Party... because change comes from within.

Tim Montgomerie

Are we all liberals now?

Shadow Chancellor George Osborne and Universities spokesman David Willetts have joined the board of Demos as part of this once Left-wing organisation's repositioning.  Writing in The Guardian Mr Osborne explains that he won't always agree with Demos' recommendations but hopes that many will influence Tory policy formation.

Demos has moved sharply to the centre in recent times and has set up the Progressive Conservative Project under self-styled Red Tory, Philip Blond.  Greg Clark MP and Zac Goldsmith are two of the PCP's advisors.

Continue reading "Are we all liberals now?" »

Think tanks and campaigners

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