24 May 2024

A Conservative Agenda: Proposals for a fifth term

By Tessa Keswick

To celebrate the 50th anniversary of the Centre for Policy Studies and the 10th of CapX, we’ve been republishing CPS pamphlets from our archive. This week, it’s the prologue to Tessa Keswick and Edward Heathcoat Amory’s 1996 paper, ‘A Conservative Agenda: Proposals for a fifth term’. Touching on the economy, foreign policy, the constitution, they compiled a systematic narrative for what a Conservative government could achieve beyond 1997. The full paper can be read here.

The nations of the European Union are some of the richest in the world. They are also the most highly taxed, the most highly regulated and the most indebted. During the next century, governments must contain ever-expanding welfare demands – which could only be financed by a declining population of taxpayers – so that industry can maintain its competitiveness.

How should Britain respond to the challenges which lie ahead? Its response must be based on the bedrock of principles on which the Centre for Policy Studies has founded its recommendations for a generation and more. The development of free trade, a willingness to accept the challenge of free markets, the encouragement of enterprise, the concepts of duty, family, respect for law, national independence, individualism and liberty.

The Conservative Inheritance

Today’s Conservative Party is the beneficiary of two great political inheritances. From its Tory heritage comes the sense of public duty, the belief in firm government and a concern for the less fortunate. It puts the nation, community and the family above the individual. Pragmatism, not dogmatism, is its hallmark.

From its liberal tradition, the Conservatives draw an understanding of the importance of individual opportunity. This translates into policies which favour individual choice and responsibility, the free market and minimal state interference in everyday life.

These two inheritances can, and should, be complementary: the free market bolsters existing institutions and creates new ones. Equally, Conservative policies instil a sense of confidence in our great public institutions. Such confidence generates a willingness to take on the inherent risks involved in enterprise, personal choice and responsibility.

The balance between the two traditions has always evolved and it will continue to evolve. Through such organic change comes the ability to redefine one’s philosophy, and to meet new challenges.

The Economic Reality

The forces shaping tomorrow’s world are those of the international free market. The countries of Europe can no longer feel confident of retaining their economic pre-eminence. The third world’s fight for a higher share over one prosperity and or a beer standard of living will grow fierce. There are well over one billion Chinese – and sometime early in the next millennium, India’s population is forecast to overtake China’s. Cut throat competition from low cost environments with minimal or no welfare dependence is a fact of life. In Vietnam, 10 workers can be employed for the same cost as just one employee in Britain.

Companies are more mobile than ever. They can and will relocate to countries where they can enjoy minimal tax and regulatory impediments. Excessive government spending, leading to high taxation and high levels of borrowing, will be less practicable as tax environments and investment have to stand up to global competition. Even a Labour MP, Frank Field, has recently pointed out that corporate taxation is becoming a voluntary matter. Britain must engage in successful tax competition with countries around the world.

In most major European economies, government taxation as a proportion of GDP has increased significantly in the last 17 years. But in Britain, we have contained the proportion of wealth which the state takes from the individual. Even so, in 1995 the state still spent the equivalent of 43% of GDP – an insupportable figure when compared to Japan (36%), America (33%) and above all, the Asian Tiger economies (where the figure is often below 20%.) A high tax burden slows economic growth, and without raising any more revenue, discourages enterprise and fosters the dependency culture. If we are to create more wealth, we must strive not just to contain government spending and taxation, but to reduce it as a proportion of GDP.

Real jobs will be created by free enterprise offering goods and services at the right price. They will not come about through government edict. They will not, as the Labour Party seems to suggest, be protected by greater labour market regulation. The lessons of the United States are dear: there, while current job security may be relatively low, at least alternative employment is relatively easy to find. There, 35m new jobs have been created in the last 20 years, of which 30m were in the private sector; in Europe only 8 million jobs have been created – and 5 million of those were in the public sector.

Britain is in many ways not so badly placed to meet these global economic challenges. Our economy is in good shape, although the national debt is too high. Our investments abroad were, in 1994, almost as great as those of America. Britain has succeeded in attracting nearly half of all inward investment into the whole of the European Union put together. It must remain the next Government’s priority to maintain a favourable environment for both foreign and domestic investors. To do that we need stable monetary conditions, lower tax rates, good labour relations and a genuinely deregulatory regime.

The Challenge of Governance

The British constitution is not perfect. But it works and has successfully guaranteed the rights and freedoms of Britons for hundreds of years. From where do those critics who want to undertake an adventure of fundamental constitutional reform derive the arrogance to overturn the accumulated wisdom of centuries?

But examination of our ‘culture of governance’ is overdue. Business has had to ‘downsize’ to survive. Now it is the turn of the state. 

The intimate relationship in Britain between the executive and the legislature has traditionally delivered strong government. But it has been increasingly at the expense of effective Parliamentary scrutiny of the executive’s proposals. And it has cushioned the well-intentioned but poorly-managed civil service. In addition the last 30 years have seen an explosion of hasty and over-eager legislation in both central and local government.

Our new obligations in Europe add a further torrent of additional red tape on top of an already overloaded programme. Steps must be taken to reduce the burden of legislation – not least by reducing the number of statutes which are passed by Brussels and Westminster every year.

The real costs of over-regulation fall on business and individuals. A recent uncontested de-merger in the City cost £20m in regulatory paperwork, much of it of doubtful value. The new European Fire Regulations, contrary to Home Office promises, will impose substantial costs on small businesses. Successive CBI reports cite excessive regulation, paperwork and government-imposed costs as the worst obstacles to job creation. The same cry of despair is heard from the principal public services, from those who administer the health service, the police, the schools. If Britain is to remain competitive, the regulatory nettle must be grasped.

Throughout the public service, standards and efficiency can be expected to improve only when decision-making is devolved to those who are actually running and using the services. Local officialdom must be made to understand that they are there to serve the local community – not to harry them.

The process of delegating powers to the local level has begun, but should be extended: planning decisions should not be centralised in the Department of the Environment; police authorities should decide priorities for their localities and the composition of their boards, without ‘assistance’ from the man at the Home Office; parents should be able to choose where to send their children to school and schools should manage their own affairs; Hospital Trusts should be able to conduct their own business and choose the composition of their own boards. Every sector should be encouraged to raise additional funds for their local institutions. That will engender local pride and help to ensure that services meet local needs.

Support for the family should be at the heart of any reform of Britains institutions. In many ways, the nation stale and how it governed is a reflection of the traditional family structure. Both benefit from firm but limited government: both benefit from a mutual respect for responsibility, freedom and duty; and above all, both should be protected against increasingly hostile forces.

The family is under attack from many sides, but there are two areas where government can make a real difference: divorce legislation and taxation. The current tax system penalises the traditional family and current divorce laws undermine the very concept of marriage.

Efficiency and the Public Services

The growth of government spending must not be accepted as inexorable. Indeed, it must be reversed wherever practicable.

Why? Not only because of the need to remain internationally competitive. The pressures of an ageing population are equally relentless. The OECD calculates that state commitments to pensions could double the national debt in France and Germany by 2030 and bear even more heavily on Italy.

In Britain, while we have successfully taken the hard decisions to ensure private pensions supplement state provision, our support ratio, defined as the number of people of working age to those of retirement age, will fall from 3.3:1 to 2.4:1 in 2050. These are the challenges of tomorrow, but they must be addressed today.

The function of the state to provide good public services must be kept in balance with the rights of the individual. Most Conservatives today would regard that balance to have tipped too much in favour of the state. Expenditure on welfare, at £92bn pa is all but insupportable. Lifting more of the burden off the taxpayer – so essential for our continuing competitiveness – will only be possible if the proportion of the nation’s wealth devoted to this essential safety net is reduced. Some means-tested cash benefits have built-in ‘perverse incentives: that is, they encourage dependency and fraud. In 1995, despite a reduction in the rate of unemployment, two million new claims were made on welfare.

In reviewing welfare we need to proceed with the greatest care. But there is need for reform and room for greater efficiency in its delivery. Government should ask the private sector, wherever it has the know-how and discipline, to enter the field. This should lead to changes in the fundamental culture of welfare: an emphasis on obligations as well as rights; a coincidence of self interest and self improvement; and encouragement to move away from dependency and into work

A highly educated, skilled workforce is essential if we are to compete in the global market. Yet British children lag far behind their counterparts in the rest of the EU and the Far East, where children are expected to speak a second or even a third language, In Britain, one in four children leaving secondary schools in 1995 was rated poor in reading and writing skills in their own language, And 86% of English seven year-olds cannot multiply 5 x 5.

The present Government has strenuously sought to raise standards in our schools. Opposed only too often by the teaching unions and the Labour Party, it continues to try hard to re-introduce sensible teaching methods. At last we have begun to see a widespread agreement that the teaching methods introduced in the 1000s undermined the education of British children. Our teachers must rediscover the pleasures and rewards of good teaching practices,

Britain and the world

Free trade is the oxygen which sustains a trading nation and by virtue of geography, history, temperament and language, Britain is a trading nation. Our foreign policy must recognise this simple imperative. 

Protectionism – whether open or latent – must be fought. And there is nowhere where this battle is more likely to break out than in Brussels. Europe is developing far beyond the original intention of a Single European Market. Yet Britain has signed Treaties which involve us in a series of close and increasingly intrusive relationships.

The British Government must honour its commitments. But it must also do more to protect the nation’s interests. The bravest and the best should be enrolled to fight openly for British causes both at home and in Brussels.

The challenges which lie ahead are not of our own making. They emerge from the fluid and changeable nature of our world today. Change is rarely welcome. But security, like ‘rights’ and ‘freedom’, has to be fought for. It is won not by running away from, but by facing up to and overcoming, the challenges ahead. 

There is, as our founder Margaret Thatcher used to say, ‘so much more to do’.

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Tessa Keswick (1942-2022) was the Director of the Centre for Policy Studies from 1995-2004.

Edward Heathcoat Amory was Head of Economic Research for the Conservative Party.