The Road to Credibility argues that the Conservatives’ failed experiment with Trussonomics presents an opportunity for the Prime Minister and Chancellor to set out a renewed economic philosophy based on longstanding Conservative principles.
Boosting economic growth should be a priority for any Government, but true Conservatism must be grounded in realism.
The UK economy faces long-term structural challenges and the Conservative Party must be honest with the public and acknowledge that even the most perfectly executed policies will produce slower growth than before the financial crisis.
Politicians and policy makers must not use the pursuit of growth to dodge difficult decisions on the other major challenges facing the UK economy in the coming years: tackling historically and internationally high levels of economic inequality, and confronting the Government's unsustainable long-term fiscal position.
To recover their reputation for economic responsibility, the Conservatives must replace the Trussonomic ideology that has been so strongly rejected by the markets and the public with a principles-based approach drawing on a broader tradition of Conservative economic thinking stretching from Thatcher to Macmillan, Disraeli and Peel.
Across two centuries of Conservative economic thinking, four principles endure.
Pragmatism: Conservative economics has been sceptical of ideology and grounded in realism. It has rejected intellectual rigidity, instead adapting to address the issues of the day.
Stewardship: Conservatism has embraced change, both for the progress it delivers and as necessary for political and social stability. The task has been to manage it carefully, taking action to protect disrupted people and communities must be protected.
One Nation: Conservatives believe that prosperity and opportunity should be broadly shared across society, with the poorest in particular supported to flourish.
Empowerment: Conservatives believe the size of the state should derive not from any arbitrary metric but from a clear conception of its role in enabling rather than controlling economic activity, and in ensuring the provision of services and support across society.
The road ahead
This paper rejects the idea that Treasury orthodoxy must be completely overhauled, arguing that evolution, not revolution, is required.
It does however set out a range of areas where significant departures from the status quo are needed, including:
- Loosening the interpretation of fiscal rules so investment in human capital is given the same priority as investments in infrastructure and R&D.
- Devolving tax powers to England’s cities, towns and communities.
- Re-introducing a contributory element to the welfare system as originally envisaged by Beveridge to ensure a stronger safety net.
- Reforming the tax system, including by abolishing inheritance tax reliefs, introducing higher council tax bands and raising capital gains tax rates.
Commenting on his paper, Onward Policy Fellow and former Senior Advisor to two Chancellors of the Exchequer Tim Pitt said:
“The Conservative Party has veered one way then another on economic policy, driven at different moments by political expedience, economic necessity and raw ideology - with Trussonomics simply the latest iteration.
“The immediate task facing the new Chancellor is to put the public finances back on a sustainable path. More broadly, it is to restore the Conservatives’ shattered economic credibility.
“Yet in seeking to restore that credibility, the risk now for the Conservative Party is that, desperate for stability and some kind of economic narrative after years of uncertainty, it simply reverts to the comfort blanket of Lawsonian orthodoxy. Because for all its undoubted strengths, that orthodoxy was designed to tackle the economic challenges of half a century ago. And while some of them endure, the challenges facing the UK economy in the coming decades will be fundamentally different, the answers to which cannot simply be cut and paste from the specific circumstances that the governments of Margaret Thatcher faced. "
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