Ryan Shorthouse is the Founder and Chief Executive of Bright Blue
The Tories need to be a bit more down-to-earth, basically. To win a majority, they will need to gain new voters on modest incomes in Northern England and Wales, who have long been sceptical of the Conservatives since Thatcher was seen to confrontationally close their mining communities. Brexit has been helping to turn these areas blue. But alone it is probably not enough. Boris needs a domestic policy agenda that can appeal.
The last manifesto was thoughtful, articulating distinctive principles and philosophy. But it was better suited to a seminar, not the doorstep. It lacked original and straightforward policies that those on modest incomes could see would make their lives better.
Conservatives shouldn’t try to be something they aren’t. Voters are not stupid: they know Conservatives believe in capitalism. Fiscal discipline. Low taxes. And voters won’t be duped by those selling a brave new world – of a brand new economic or social settlement. The liberal, capitalist country we live in, all things considered, is quite a good one. And politicians do not hold the keys to a house full of happiness.
But politicians can make changes to the way we are governed to make life a bit easier and better for those of modest means, who often find themselves struggling. A Conservative Government should prioritise doing more to support these people – and with what matters to them most: their finances and their families.
There is, to some extent, a good story to tell. The employment rate is at record levels. Over the past decade, average real incomes rose, albeit marginally, even when average real wages fell, because government stepped in and raised the minimum wage and the personal tax allowance. The top priority for any future tax cut should now be gradually raising the primary salary threshold for Class 1 employees’ national insurance, since – at £8,632 – it is much lower than the threshold of £12,500 for basic-rate income tax.
Nonetheless, those right at the bottom of the income scale have had a hard time this decade, thanks to the unnecessary and disproportionate cutting of working-aged benefits. Those on the centre-right should not be sniffy about a strong safety net. In a market economy and free society, where businesses and relationships inevitably fail, a robust welfare system is vital, to maintain participation in and support for the economic model conservatives champion.
The rollout of Universal Credit needs to continue, but it does require more investment. The value of some work allowances, which disregard a certain level of pay before calculating the level of benefit entitlement, needs increasing, especially for the second earner in a couple. Families should not have to wait a full five weeks before receiving their first Universal Credit payment. They should be entitled to a helping hand payment in the interim, equivalent to a certain proportion of their first payment. For ongoing Universal Credit payments, which are currently paid monthly and to one member of the household by default, families should instead have greater choice over the frequency and destination of them.
But Boris Johnson could be even bolder here. Yes, the four-year freeze on the value of most working-aged benefits comes to an end next year. Nevertheless, above and beyond this, greater financial support through the welfare system could be given, considering the UK’s net replacement rate – the value of out-of-work benefits relative to average in-work earnings – is lower than most other developed countries. But this need not be free money. The extra money ought to only be granted to people who have contributed more to the welfare system in the past, or are going the extra mile looking for work.
A contribution supplement should be added to the basic award that Universal Credit claimants receive if they have a longer work history. This could be tiered, giving higher amounts to people with very long National Insurance records. A financial supplement in the conditionality regime for current claimants could also be added, with work coaches rewarding those doing the most to prepare for and seek work over a long period of time, thereby compensating effort that has not materialised in employment.
The most important and intense time for families comes with the arrival of young children. The demands on the concentration and bank accounts of parents are considerable. Families do not need, and will not appreciate, finger-wagging about how they should be structured and organise their time. People want and know what is best for their families. Whichever way people want to conduct their family life, especially those on modest incomes faced with fewer choices, policies should be there to support them.
There is evidence that low-income mothers, who do not have access to generous occupational schemes, return to work sooner than they’d like after having a baby because of the statutory maternity pay that is available to them. In the first six weeks of maternity leave, they are entitled to 90 per cent of their gross salary, but they then switch to the measly base rate of just under £150 a week, which is significantly lower than the minimum wage for a typical full-time working week. For fathers reliant on statutory paternity pay, they are only ever entitled to the base rate. To enable low-income mothers and fathers to stay at home longer with their babies, the Conservatives should substantially raise the level of statutory maternity and paternity pay available.
For those wanting to get back into work, especially when their children get older, childcare costs can be crippling, eating deeply into household budgets and preventing some women in particular from re-entering the labour market. Costs are especially high in the UK compared to comparable countries because of the high unit costs caused by unnecessarily strict staff-to-child ratios.
Generous subsidies do exist already. But instead of waiting for a little more state subsidy each year, we could make childcare affordable for absolutely everyone overnight by offering all parents with children under the age of five government-backed, income-contingent loans, much like students get to afford university. This would be voluntary, and so would not force parents into debt, and it would complement the existing support parents receive for their childcare costs. It would allow parents to smooth their costs over a longer period of time, paying a smaller amount from their wages each month rather than a sizeable sum in the early years of a child’s life.
When families make decisions about childcare for young children, of course, it is not just a decision between two parents. It is often a decision that involves grandparents. Grandparents provide an awful lot of informal care, but there is no financial support or reward for them, despite the huge savings this brings for government.
Government has committed to enabling grandparents to access shared parental leave if transferred to them by parents, although this has been delayed. We could do more to support grandparents who need to and want to leave the labour market, either temporarily or permanently, for childcare responsibilities.
Currently, the Transferable Tax Allowance is available to married basic-rate taxpayers, where one member of the couple leaves the labour market to look after young children. This is pitched as supporting marriage. But there is no evidence it is incentivising marriage rates, now or when it existed in the 1980s.
The Transferable Tax Allowance does do an admirable job of supporting one-earner couples, though. It could be offered to all basic-rate couples, not just married ones. And to support two-earner couples, grandparents who are basic-rate taxpayers who leave the labour market to look after their grandchildren should be able to transfer their tax allowance to their working adult children. And then those parents could use that tax cut as they wish, including reimbursing the grandparents.
Some might call all this mere tinkering. But we shouldn’t and don’t have to promise the world. And what might appear small change can be very significant to those with stretched finances. And, as custodians of taxpayers’ money, the government should be careful with what it invests in. In their upcoming election manifesto, the Conservative Party needs to prioritise sensible support that will make life a bit better for those on low incomes who often struggle.