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Screen shot 2012-05-15 at 13.34.15Garvan Walshe was National and International Security Policy Adviser for the Conservative Party until 2008. He is now studying for a PhD at the University of Manchester.

We need to step back a moment. Away from the instant post-election commentary dominated by pundits insisting that these shocking results prove that the Government must now do whatever it was the pundit insisted it do before the results happened.  For about ten years (since the Iraq war tore Blair’s big tent) we have won the votes of between a third and two fifths of the public. Labour have managed about the same.

First, the bad news. No amount of getting the message right, adjusting political tactics, moving to the right or moving to the centre, crafting messages, beefing up the Number 10 policy unit, or changing constituency boundaries is going to make much difference.

Now the good: Labour has exactly the same problem.

It stems from Britain’s economic structure. The post-war British industrial model: state-owned, with powerful unions and bereft of incentives for entrepreneurs to raise productivity, failed ten or fifteen years earlier than its cousins in Eastern Europe. When Britain could no longer afford the subsidies, it seemed that mines, car factories and steel mills began shutting down with brutal speed.


It seems that about half of people from manufacturing families whose jobs had gone ended up in solid, service sector middle-class occupations. But the private sector has offered the other half little more than casual labour, low-skilled clerical and retail work, call centre drudgery. Nothing that matches up to the well-paid work on assembly lines and in mines. They, their children, and now their grandchildren, too, blame us. It’s not for nothing that we poll around 20% in much of the North.

Gordon Brown had a solution for all this. The vast quantities of money generated by the financial boom financed an expansion of the State in Labour heartlands. Cynical Tories often say he was building a client state. People whose jobs depended on Labour and who could therefore be relied upon to vote that way. This goes too far.  Rather, he saw the City of London as a natural resource, like North Sea oil, whose benefits should be distributed to the population as a whole. Before the crisis, the Tories endorsed this idea, that’s why David Cameron promised to "share the proceeds of growth": there would have been more tax cuts, and fewer spending rises, but the economic model was the same.

Some of this money went into expanding traditional public services: more and better paid nurses, teachers and even police officers. But Labour also created whole new classes of lower-skilled public servants: healthcare assistants, teaching assistants and community support officers, to say nothing of tens of thousands of people employed by town halls and regional offices of central government and new "universities" offering two-year foundation degrees. Jobs better paid than those available to the same people in the private sector. And apparently as secure.

There was just one problem. The money ran out. As banks made losses and bonuses were slashed the city’s colossal tax revenues dried up.

Our arguments about rebalancing the economy don’t wash for these people. When they hear about austerity, they worry about their jobs, those of their friends, parents and cousins, and the future they’ll be able to give their children.

It’s of course different in the south, where the private sector is far larger than the public. There, money has become tighter too, they are asked to pay higher taxes to support public sector workers often better paid than them, working shorter hours and with better pensions. When they hear the Labour talk of fewer cuts, they worry it means higher taxes, or more borrowing and higher interest rates. When the economy was growing, Labour’s argument that the richer parts of the country had to help the poorer ones sounded reasonable, now we’re back to the old division between the "tax payers" and "tax eaters", and a Labour government as an instrument for plundering the latter to pay for their supporters.

Neither side will be able to command a stable majority. If we, or, they, communicate especially well, are determined enough, or are graced with a little luck, then Tories or Labour might just be able to scrape a narrow majority. More likely we’ll have coalitions, and economic stagnation in the south, and decline in the north, for the foreseeable future.

To win the majority that the country needs, we need to become a national party again. The pre-crisis plan – make our peace with Labour’s redistribution of boom-time tax revenues – failed. Instead the Government needs to find a way to revive the private sector in the North. We need radical supply-side economic reforms. Proper special enterprise zones in a few major cities: things like a very low flat tax for people who live and work there; exemption from national insurance for employees who work in those regions; new, rigorous, vocational education programmes (why not even try a few "vocational grammars": for youngsters who show non-academic promise?), allow the new zones to raise their own bonds for infrastructure development; no corporation tax for ten years. Turn the proposed police commissioners for Merseyside, Greater Manchester, South and West Yorkshire, Northumbria, into directly elected mayors with proper powers.  I could go on. The Treasury civil servants will hate every one of these ideas. That couldn’t be a better argument for them.

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