By Tim Montgomerie
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As the Government's problems mount I note that some of the commentators most supportive of the Cameron project have been penning defences of the Coalition's economic policies in general and of the Chancellor in particular. Matthew Parris did so on Saturday. In yesterday's London Evening Standard Matt d'Ancona said Tory calls for a "growth strategy" were "more often ritual than rational". In yesterday's Times (£) Danny Finkelstein criticised "the Right" for a lack of discipline – a theme that Rob Leitch addresses today, on our own pages. Two days ago the FT's Janan Ganesh rode to Osborne's defence, attacking the Right for failing to give Mr Osborne more support.
In the fisk below I look at Janan's article and what I think are dangerous criticisms of the Conservative Right (or Conservative Mainstream MPs as I'd prefer to call them). What worries me most is not what commentators say. What I worry about is that Numbers 10 and 11 may share the views that are appearing in the columns of d'Ancona, Finkelstein and Ganesh. Do they really think they've done enough on growth? My own qualified defence of George Osborne's position is based on the view that he has been battling unsuccessfully for more growth measures, albeit belatedly. I'm also concerned that rather than asking themselves some very hard questions about their mismanagement of what is admittedly a difficult-to-manage party, the Tory leadership is blaming their critics for not showing more unquestioning loyalty. The language of some Tory MPs towards the leadership has been unnecessarily violent but (1) a record of appointing mates to Number 10 and the Cabinet, (2) of punishing any kind of critic and (3) running an unorthodox and ultimately unsuccessful election campaign is not the best way you earn loyalty.
Anyhow, let's look at Janan Ganesh's claims that the Tory Right has unrealistic expectations of George Osborne and the Coalition. Extracts from Janan's piece are in magenta and my comments follow in black.
JG: "When George Osborne began haggling with cabinet colleagues over cuts to their departmental budgets soon after taking office, he expected leftwing Liberal Democrats to be the hardest to bargain with. But it was Liam Fox and Iain Duncan Smith, the cabinet’s Conservative outriders, rather than the Tories’ junior coalition partners, who proved the most tenacious defenders of their fiefdoms."
What on earth is Janan talking about here? Welfare is actually delivering the biggest cuts of any Whitehall department. The MoD is enacting the biggest ever cuts to Britain's armed forces. The idea that IDS and Fox weren't understanding of the need for cuts is nonsense. Equally they were right to try and restrain the Treasury's bludgenous desire to cut everything in sight but they certainly played a full part in setting Britain back on path to fiscal sanity.
JG: "When the chancellor of the exchequer announced the withdrawal of child benefit from higher earners, polls showed broad public approval, as they still do. The rightwing press, by contrast, has never forgiven this raid on their own."
Some Tory MPs may have objected to a raid "on their own" (it hurt single earner couples very badly compared to double earners) but many simply objected to a very badly-designed policy (announced in the middle of 2010's party conference with zero consultation of relevant ministers) that meant people hitting the 40p threshold lost all child benefits overnight producing a 100% marginal tax rate. The Chancellor listened and tapered the withdrawal of benefit and few Tory MPs are now complaining.
JG: "Just this month, rail operators warned of higher fares to come and Tory MPs in commuter seats called on Mr Osborne to step in, presumably with taxpayers’ money. If the left are dogged enemies of austerity, the right are only fair-weather friends. Avowed believers in a small state often prefer the principle to some of its practical implications."
This argument against "economic nimbyism" has been featuring in two of Matthew Parris' recent columns (here and here) and I readily concede it has some basis although Tory MPs have only seriously rebelled against tax rises rather than spending cuts. The Right's reply to Parris/Ganesh would be that if cuts had been shared across Whitehall more evenly (eg aid, Europe, NHS and welfare spending for over 65s had been squeezed a bit more (creating different problems)) the pressures on, eg, police and transport budgets would have been smaller. There is something frustrating about budgets that were heavily squeezed under Labour are being squeezed some more (eg MoD) while budgets that grew and grew under Labour are now ringfenced (eg middle class pensioner benefits).
JG: "Many of them deride his deficit-reduction plan for falling behind schedule and insist that he should have cut deeper and faster. But he is in arrears because the economy has soured. The double-dip recession was caused either by his own cuts, in which case harsher austerity would have made things worse, or by external events such as the eurozone crisis, in which case it would have made little difference."
Let's accept – because of the €urozone – we would be in trouble now whether Left-wing, Right-wing or Cameroonian paths had been followed but how much trouble? In reality the Right believe that the Chancellor has relied too much on economically-destructive tax rises to cut the deficit. They believe that Britain is not over-taxed but is over-spending. They look, for example, at the Wisconsin model where fiscal order was restored without raising a single tax but by taking an axe to the bloated public sector. Wisconsin may not be a perfect model but it is far from irrelevant. The Chancellor's higher rates of VAT, CGT and extra green levies were never the only way.
JG: "If only Mr Osborne were a bolder supply-side reformer, they say, the economy would be doing better. But almost all of their proposals to lower barriers for businesses would yield results only in the long term."
This is my biggest disagreement with Janan. Economics is actually a very human discpline, despite what econometricians may tell you. Economies grow when investors and employers have confidence. Investors look at a country's Chancellor/PM in the eye and wonder if they should expand in Britain or elsewhere. It may be a few years before new airport capacity or cheaper energy emerges but is there a plan to deliver these things or is there endless prevarication? While long-term investment decisions may not produce huge gains now they do affect decisions taken today by economic agents. When the Coalition began it could have taken as bold steps on competitiveness as it did on deficit reduction. We could have been in a good position with the US paralysed between Obama and the GOP Congress and the Eurozone endlessly kicking the can down the road. Now, it's getting too late.
JG: "The right’s zeal for supply-side reform tellingly does not extend to opposing the onerous cap on immigration loathed by many employers. Again, most of Mr Osborne’s Conservative critics do not mean it when they say he should “do everything” for growth. They have ideological red lines that must not be crossed, economy be damned. Their attachment to restrictive planning regulations and Sunday trading laws, both of which the Treasury would like to relax, are salient examples."
Janan clearly speaks for many businesses here but I still disagree with him. We must have an immigration system that lets the brightest and best come here to travel and work and there may be unhelpful bureaucracy in the current system. Overall, however, UK businesses used the immigration system during the Labour years to import many ready-to-work low-skilled workers from overseas rather than recruit the UK unemployed. There's a short-term inconvenience but long-term gain if UK businesses are compelled to start recruiting domestically.
JG: "The chancellor is beleaguered by all sides but only one side can claim any coherence. He views Labour’s attacks on him as wrong but internally consistent: the opposition thinks he has tightened fiscal policy too aggressively and wants him to loosen it. By contrast, he regards the right’s anger as confused and self-contradictory."
My fear is that Janan is right when he says that the Chancellor has this view of the Right. Janan is writing a biography of Osborne and his columns often bear exceptionally close resemblance to briefings I get from Number 11. His recent takedown of Boris Johnson being an obvious example of this.
JG: "The Tory right are many things: fizzing with ideas; more diverse in social background than the blue-blooded modernisers; often shrewd in their big judgment calls, namely the folly of the single currency. But they are not biddable. They do not reward concessions to their demands; they pocket them and ask for more. Nothing is ever enough. The chancellor that rightwingers deride as a timorous tinkerer is enforcing the most sustained period of austerity since the second world war and still nursing wounds he took for cutting the top rate of income tax in March."
The Chancellor is not "timorous" when it comes to deficit reduction but he doesn't have an adequate growth agenda. If he had an adequate growth agenda then the situation now wouldn't be hugely different but there would be more belief that the light at the end of the tunnel wasn't so very far away. We could also do with a clear economic narrative. Even Bruce Anderson thinks so!
JG: "It should give the right some pause that many of the doughtiest supporters of the fiscal plan that the government embarked upon two and a half years ago are Lib Dems. They have been infuriating opponents of many good Tory ideas but they have not demanded slower cuts, or faster cuts, or turned squeamish when the axe has fallen on their favoured causes. Even as their poll rating has halved and voters defected to Labour, they have showed discipline. That is a quality Conservatives used to share."
Where to begin! Perhaps with the obsession with austerity. Despite what is suggested, the Right largely back deficit reduction. The concern is competitiveness and on the competitiveness front the LibDems are not good news. Whether it's sensible policies on energy subsidies, tax rates, further progress on education reform or deregulation the Lib Dems are on the wrong side of so many arguments.
My final word on this topic. It really isn't just the Right which doesn't think the Coalition has an adequate growth agenda.
We published the table above last week. It came from an Institute of Directors survey of their members. Only 15% of IoD members thought the Coalition was doing enough to reduce business taxation. Perhaps more relevant – because it doesn't involve any cost to the Exchequer – only 8% were happy with efforts to reduce complexity in the tax system. Only 8% thought the Coalition was reducing business regulation. Only 9% thought the Government was improving energy infrastructure. These are dismal numbers. Mr Ganesh et al can blame the Tory Right if they wish but they should spend more time worrying about business' verdict. There is an alternative economic policy – David Davis will set one out in an important speech to the CPS next Monday lunchtime – and there is no room for complacency.