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By Paul Goodman
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Using claimants and bankers as scapegoats risks creating a culture of victimhood…

A scapegoat is a victim who takes peoples' sins on itself.  Doesn't the word apply to the small proportion of claimants gaining more than £26,000 in benefits and bankers taking a few millions in bonuses?  Don't get me wrong: I support the benefit cap, and oppose Stephen Hester's bonus, though since its predecessor had agreed its terms, the Government had no choice but to pay it, if demanded.   But the scapegoating of both groups is – like that of the original animal – essentially a displacement mechanism: afraid of confronting our problems, we are projecting them on others – and ramping up a culture of self-pity in doing so.

Former Conservative Governments were willing to tackle it.  Margaret Thatcher didn't have to grapple with discredited banks.  But she grasped that the state cannot fund the billions of pounds needed for public services by confiscating a few millions of pounds earned by richer people.  John Major didn't have the political cunning of George Osborne, who has devised the benefits cap as a classic "wedge issue" – ruthless turning the tables on Labour, who honed such tactics under Gordon Brown.  But Major did have Peter Lilley, who quietly but methodically set about removing future benefits from bigger groups of claimants, saving the taxpayer billions of pounds in doing so.

…resentment, and envy – from which the great Conservative Governments of the 1980s rescued us

In other words, the Conservative Government of the 1980s and 1990s were often weak on tactics but usually strong on stategy.  Like this Government, they grasped that Britain must compete in the world, and that taxes and spending must therefore be kept as low as possible.  But unlike it – free as they were of the constraints of coalition – they sought less to adapt to the weather than make it.  Last weekend, I reminded readers how the Thatcher Governments slashed the top rate of tax from 83% to 40% and the standard rate from 33% to 25% – framing in so doing a tax settlement that Labour didn't dare to begin to dismantle until the latter days of Gordon Brown.

The emerging culture of victimhood, resentment and envy is putting it at risk, at a time when the competitive challenge is greater than Thatcher could have imagined when she first came to office.  There is no cold war.  There is rampant globalisation.  Our old competitors, the European and north American economies, have been joined by most of the rest of the world.  And our position is in some ways worse than in 1979.  Our present levels of debt and of spending – on pensions, benefits, schools, hospitals, prisons, housing, road, rail, the military – cannot be reconciled.  Our expectations are higher than our bank balances can afford.

Can Boles & co do the same again?

To pretend that all our problems can be solved by pursuing a small number of claimants or bankers risks re-inventing the illusionist politics of the 1970s.  Hester's refusal of his bonus was a tactical defeat for Ed Miliband.  But the Labour leader may yet turn the current cultural obsession with bankers' salaries into a strategic victory.  David Cameron places more stress on presentation than Thatcher did.  But, policy-wise, he and Osborne aren't bringing anything like the same clarity to policy on tax.  To which a respose is: as the duo who effectively head and run the Government, their hands are tied by the realities of coalition, and there is some truth in this.

All the more need, then, for some other senior Tory – Iain Duncan Smith, Michael Gove or (as I've previously argued) the Party Chairman – to counter Nick Clegg and Vince Cable's calls for new taxes by pressing the case for enterprise, freedom and lower taxes.  If they aren't willing to do so, will other Ministers step into the gap – or MPs, including the big slice (about half) who entered the Commons at the last election?  Some of the signs are good: consider, for example, the fine work After the Coalition published earlier this year by five members of the new intake.  This brings us to Nick Boles's Macmillan lecture to the Tory Reform Group yesterday evening.*

The speech: strong at the core…

It's a mark of our fashion-led political culture that this setpiece, once the preserve of very senior politicians, was given by someone who has been in the Commons for less than two years.  This is not a criticism: politics changes, and I am not complaining about an opportunity being given to my newcomer of the year for 2010.  Agree with him or not, Boles sometimes serves as a outrider for Ministers, and what he thinks today may be what they do tomorrow.  I hope so in the case of his advocacy of tough new conditions on immigration – which added to yesterday by supporting a £5,000 immigration bond for foreign students.  This is not eclectic positioning but brave politics.

And he absolutely gets the problem about Britain's competitiveness: "I fear," he said yesterday, "that this obsession with the incomes of the wealthiest is blinding us to the biggest economic challenge that our country faces…making a few bankers and company bosses a bit less rich is not going to make most people in Britain any better off."  Elsewhere in the speech, he asked "the really hard economic question, which is why have people in low-and middle-ranking jobs not been able to secure a real increase in their pay for nearly a decade?" before giving the unpalatable answer: "the productivity of people in those jobs is falling behind that of their competitors."

…But weaker round the edges.  Tax rises won't solve our problems.  But growth measures may – and further spending restraint

His analysis of the competitive position was solid: Boles rattled through long-term productivity statistics, economic developments at home and purchasing power abroad.  But his prescription was less firm round the edges.  He urged a decision on London's airport capacity (excellent), an expanded school day (good), a transport "Oxbridge Brain Belt" (fine, though these groovy wheezes don't set my pulse racing) and a cut in employers' national insurance contributions (hooray!) rather than taking more people out of tax – paid for not by a mansion tax but by a land value tax from which farmland and peoples' homes would be exempt.

It is hard at this point not to boo.  I accept that taxes cannot simply be slashed when control of short-term borrowing and the maintenance of low interest rates is vital.  And I understand that this opens the door to arguments about cutting one tax by raising another.  But we are in danger of falling into the trap of trying to tax our way back to prosperity.  Inventing new wealth taxes that Labour or a Labour-led coalition would raise further is a road to ruin.  What was missing from Boles's speech was big ideas for further action on spending restraint.  "Britain doesn't need to get thin, it needs to get fit," he said.

For one reason or another, I don't move in the world of person trainers.  None the less, I suspect that any sensible one would tell you that you're unlikely to get fit if you're fat – or more overweight than your health can afford.  In other words, we need future spending restraint as well as tax cuts – and present pro-growth supply-side deregulation.  Radical ideas for spending reductions are inevitably controversial.  But without them there will always be a gap in any case for how Britain should meet the competitive challenge.

* The full text of Nick Boles' Macmillan Lecture can be found here.

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