5 October 2019

A long-term economic plan?


“How we are going to grow the UK economy I will tell you that it is by raising the productivity of the whole of the UK not with socialism…but by creating the economic platform for dynamic free market capitalism. Yes, you heard it right, capitalism. And when did you last hear a Tory leader talk about capitalism?”

This section of Boris Johnson’s big conference speech was music to the ears of free marketeers. It may have been a touch unfair on David Cameron, who was not shy of the C-word (even if he did occasionally add a caveat like “socially responsible capitalism”).  But compared to Theresa May’s grudging attitude to the market, it was good to hear some unashamedly pro-enterprise sentiments from the podium.

Still, aside from that brief passage extolling the virtues of free markets and competition, those who favour a smaller state, tax cuts and the like may have come away from the Tory conference a bit underwhelmed.

After years of styling themselves as the party of prudence, the Conservatives are now offering what many observers have described as a “splurge” of spending. Though, ‘Get Brexit Done’ was the centrepiece of conference, almost as prominent was the promise to ‘invest in our police / NHS / schools’. Now, with an election in the offing, an emphasis on boosting public spending is somewhat understandable – people like police, good healthcare and their children being well educated (though we know cash alone is not the answer here).

The leftward tack on spending seems a pretty clear tactic to neutralise Labour’s own high-spending plans for public services – a sign that even if Corbyn is historically unpopular, Corbynism has changed the political weather. Yet this also carries a political risk. As Julian Jessop noted this week, Mr Johnson can never hope to outbid a Labour Party that will always be willing to promise more, whatever the cost. The longer term economic problem, described by Ben Ramanauskas on CapX, is that turning on the spending taps risks further adding to the national debt, with all the negative consequences that entails.

A fixation on the deficit in recent years has often obscured the scale of our debt problem. Indeed, the conference moment that most struck a chord with me was at a fringe event when Tory MP Steve Baker held up a chart showing the UK’s national debt spiralling upwards over the next few decades.  At the risk of sounding like a fiscal Greta Thunberg, we really need to do something to stop that happening, and we need to now.

There’s also a worry that the party may weaken one of its key selling points – a reputation for good economic management. Voters may not always have loved the Tories or their leaders, but they have generally trusted them to keep a firm hand on the tiller, with ratings on economic competence tending to reflect that.

In terms of the fiscal outlook, it’s not so much the headline sums that are the issue, particularly given that interest rates are at a historically low level.  What’s disconcerting is that this money is being pledged at a time when our overall economic performance is so anaemic, and when there are signs of real uncertainty for the global economy.

And yet because we are just ahead of a general election, and because Brexit remains for now undone, those big structural issues are hardly being discussed as urgent priorities, let alone tackled.

Then again, maybe we should cut the Prime Minister some slack. He needs a Commons majority before he can give life to any of his policy proposals. And given the prospect of a Corbyn government, or extending Brexit for years and years more, a simple, expedient plan may be what the moment requires.

If Mr Johnson can emerge from the coming election victorious, let’s hope he remembers that “dynamic free market capitalism” is the way to ensure long-term economic success.

John Ashmore is Acting Editor of CapX