After presiding over a period of economic stagnation, the Conservatives must rediscover the importance of economic growth and prosperity. Part of the picture will mean changing the rules to ensure that the private sector can build many more homes and workplaces. Britain also needs radically to upgrade its antiquated and insufficient infrastructure, with as much private involvement as possible. But while these measures are necessary, a proper growth agenda will go much further than building more.
Most economic growth comes from entrepreneurs and investors devising new and better ways to produce goods and services, which in turn drives output, higher wages, consumption and exports. Achieving this will require increasing productivity, lowering energy costs, encouraging domestic and foreign investment and, above all, fostering an entrepreneurial revolution. Skills need to be increased, those on welfare brought back into work, the cliff-edges created by the interaction of taxes and benefits addressed, marginal tax rates lowered, restrictions on investment imposed by risk-averse regimes for pensions and savings removed, and product and labour markets deregulated.
This new mission of national prosperity must grow wealth across the country, including in deprived areas, and lift wages as well as dividends.
Above all, the creeping sense that the government knows best should be discarded as thoroughly discredited. The cultural conservatives within the party have formed an accurate critique of our economic problems. Wages are too low; growth is too weak; many places have been left behind. But in searching for a solution, they have fallen into a trap.
The argument that a dirigiste approach – a bit of protectionism, picking a few winners, stricter rules on work-life balance – would perform better is wrongheaded. If the past 14 years have shown us anything, it’s that the experiment with greater economic meddling has resulted not in a shift of economic fundamentals, but of the national conversation and sentiment towards ground more suited to its Labour opponents. It is simply not true that the Conservative government was liberal on economics.
Just as the cultural conservatives must move towards free markets, however, the free-marketeers must acknowledge their own failures on cultural matters. In particular, unrestrained enthusiasm for immigration has resulted in the alienation of many voters, while failing to deliver the sort of growth necessary to overcome their objections.
The party should seek a new consensus. The current model of speaking Right while acting Left has failed. A focus on market economics married to cultural conservatism, however, may be just the ticket to revive the party.
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