Alex Morton is Director of Policy at the Centre for Policy Studies, and was a member of David Cameron’s Downing Street Policy Unit.
The disastrous 2017 Conservative campaign looms over the Conservative Party – how a 20-point lead evaporated to just two points or so. But while some elements of that disaster, like the social care fiasco, were created by Nick Timothy and Theresa May, others were not so much created as revealed during the seven-week campaign.
Most of all, 2017 was the year that austerity died – buried in letters from headteachers to parents about school funding, in pledges about a new generation of council houses, in a mountain of waffle about the good that Government can do.
As we head toward another Comprehensive Spending Review, there is pressure across the board to spend more – not just on the NHS, but defence, education, the police, justice, local education, pensions. For example, while justified at the time, it is hard to see how further cuts to welfare via the current method (which largely consists of just freezing benefits) can continue past 2020. There will also be rising costs for pensions and interest payments, which reflect both demographic pressure and past mistakes.
But this is not just the fault of Theresa May or her ministers. Since 2010, we have failed to really reform government. Austerity was portrayed as a temporary aberration. We have not undertaken supply side reform to boost growth and enable both tax cuts and spending rises – the breathing space austerity created has been squandered. We have often also failed to make the case that a smaller and more effective state is morally and economically right.
The net result is a tax burden at its third highest level since 1945, on top of debt at its highest level since the late 1960s (when we were paying down the cost of two world wars) – yet the media lecture endlessly about the consequence of “the cuts”.
It is true that cuts can have negative consequences – for example, social care probably is at the limit – but what is rarely discussed as an alternative to poor outcomes is government reform.
The Conservatives should be focused on prosperity not austerity
Austerity was always a terrible slogan. No one wants austerity – everyone wants prosperity. The Coalition clung to austerity because it gave the Liberal Democrats an excuse to work with the Conservatives, and it gave Conservatives the confidence to reduce the size of the state after three defeats in a row. But the net result was that the government machine often ended up just salami slicing.
The Left claim that government spending creates wealth – a bastardised and overly simplistic Keynesian view of the world where more debt and spending are always positive. Conservatives repudiate that view, believing that growth can be based on doing more with less, and embracing new technologies and other disruptive forces. Yet our decision to focus in 2010 on austerity meant we effectively half-agreed with our opponents: in general, more spending is always good, but as an emergency we need to do some (temporary) cuts. This was the wrong path.
Much more suffering than the cuts is actually caused by our half-hearted attitude towards, or failure to successfully reform, government, whether the lower than international survival rates in the NHS or fact that it is going to take 15 years (at best) to introduce Universal Credit (compare the IT and physical infrastructure created by Amazon in the same period, which has grown by a factor of 35 in that time).
Those who pretend that keeping broken systems in place while arguing for showering them with more money are wrong. And the cost of that error is human suffering as well as higher taxation. Opponents to reform are morally as well as fiscally bankrupt – and we should never forget it, or let others forget it.
The Comprehensive Spending Review is a chance for reform – and Tory MPs can help
The problem is that we are now trapped. If we are such good stewards of the economy, and spending is in itself good, surely after eight years of austerity we should shower the public sector with spending? Because we have failed to make the case that people should keep more of their money, and that reform is good in itself, we are stuck.
The Comprehensive Spending Review has to be seen as a way to reset the narrative. Government need to focus on reform as a positive – not spending – and show it will improve public services while ensuring that taxpayers continue to see rising living standards.
Some have argued that in order to raise funds, we should go back to freezing income tax allowances or similar measures. This is the wrong path. It would play right into the hands of Jeremy Corbyn if ordinary people were to see their standard of living fail to increase because taxes increase, harming the economy as well as taking money directly from their pockets.
Recently a paper from the IFS showed that living standards rose at a rate of 1.8 per cent in the five years from 2011/12, actually greater than the 1.2 per cent recorded in the five years up to the 2007 crisis. This was only possible because the Government was holding down the rate of spending increases (it still grew by £54.6 billion from 2010/11 to 2016/7) and reducing the tax burden on ordinary people through the rise in the personal allowance – a policy first suggested at the Centre for Policy Studies.
For this reason, we at the CPS are asking MPs to help come up with ideas for reducing expenditure ahead of the CSR. Already, we have received ideas worth several billion that could make a real difference and help ensure we can boost the NHS without adding to the burden on taxpayers. We will be making a submission just ahead of the Conservative Party conference.
Leadership contenders would be better coming up with reform than posturing
Most of the Cabinet appear to be gearing up to score “victories” over the Treasury in the media. But these are not victories over Philip Hammond or Liz Truss. They are victories over the taxpayers of this country. The journalists who report this speech, or that comment, as if it is a tug of war between the Treasury and departments are entirely missing the point.
Outside of health and defence, where the pressures have grown in recent years, ultimately ministers who should be seen as winners are those who come forward with proposals for reform that save money and deliver better outcomes, and who implement them successfully, rather than seek plaudits in the leader column of The Guardian – or hollow victories that cost us taxpayers all too dearly.