Tory free marketeers are trimming their sails

The writer is director of the Social Market Foundation

Plainly, last month’s UK general election changed politics. Not yet so easily visible is how much it changed the Conservative party, and not just in terms of personnel and territory. Nothing less than the Tory relationship with the state is shifting.

For a generation, Conservative attitudes to the public sector have varied from wary to hostile. The descendants of Margaret Thatcher hallowed her name by arguing that the state is usually the worst option for running things. The tax take should be minimised and regulation reduced, since individuals and enterprises left to their own devices will allocate resources more effectively than politicians and officials.

Even if these articles of faith have sometimes been honoured more in the breach than the observance, they have underpinned modern Toryism. But the arrival of new Conservative MPs from places where “Tory” was often a term of abuse could combine with the inclinations of their leader, Boris Johnson, to bring about a reformation of the faith.

Of the 58 seats Conservatives gained in December, all but three were taken from Labour, some for the first time. If some of the new Tory intake were surprised to become MPs, they have got over the shock and quickly decided that they want to remain MPs at the next election. Many believe that re-election depends on the state doing more, not less, in their seats and in the country as a whole.

Early demands from the new intake have included more spending on their local schools, and public insistences that the HS2 high-speed rail project go ahead despite a possible £106bn cost. Future demands will go beyond bridges and bypasses and encompass higher health spending, substantive (and costly) help for high streets, more emphasis on vocational education and maybe even more generous welfare payments for claimants with a long history of work.

To observers, the arrival of Tories from Labour’s broken heartlands presages an internal Tory fight over economics, small-state libertarians battling free-spending interventionists. To many of the participants, however, that battle is already over. Laissez-faire lost.

The most significant moment of the election campaign came on November 18 when Mr Johnson said he would scrap planned cuts in corporation tax in order to spend on the NHS instead. That spoke volumes — and not just about the prime minister’s commitment to a “northern strategy” that had already seen him tell colleagues he was prepared to lose southern Tory bastions such as Guildford to get his way.

As important as that policy choice was his party’s acquiescence: Mr Johnson’s Conservatives are content to put state spending before tax cuts. He became their leader because of his differences from the unloved Theresa May but, economically at least, his premiership is likely to recall her belief in “the good that government can do”.

Much is made of the views and influence of the 2010 crop of Tory MPs, whose leading lights — Sajid Javid, Priti Patel, Dominic Raab, Liz Truss — achieved high cabinet rank after arguing that the bloated state must shrink and the British economy open further to international capital and competition. Their prominence and history fuelled talk of a “Singaporean” Brexit with Britain transformed by Thatcherism 2.0.

In fact, the buccaneers have mostly trimmed their sails to catch the wind blowing towards a state that does more, not less. Mr Javid’s pragmatism is most visible — a devotee of Ayn Rand, the chancellor now champions industrial strategy and a higher minimum wage. But most now accept that austere libertarianism is no way to keep a job in the Johnson administration.

But if the state is to do more, where does it find the money? Colleagues say that if Mr Johnson has an economic philosophy it is “cakeism”: he would like to spend more and tax less, without borrowing more. The Treasury, fearful of Brexit turbulence and an overdue global downturn, is keen to support him in the last of those ambitions at least.

Aware of the limits on public funds, some northern Tories, including pensions minister Guy Opperman and Simon Clarke at the Treasury, are keen to see more pension funds investing more in infrastructure and innovative new businesses that might bring growth to the places the Tories will defend at the next election.

Such businesses may well find the state keen to support them with favourable planning rules and maybe even targeted tax breaks and other incentives. Using public funds to entice favoured companies to politically convenient places? That might strike some free-market purists as distinctly un-Tory, and even dirigiste. The new breed of Conservatives would counter by recalling how Nissan decided in 1984 to set up a new car plant in Sunderland on the strength of promises of help from a state then overseen by one Margaret Thatcher.


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