13 January 2021

Levellers up vs libertarians is a false divide

By

Politics this year will be defined, according to The Times‘s Rachel Sylvester, by an internal battle between Tories “who want to remove the dead hand of the state, and the Levelling Up brigade, who want to extend the power of government”.

To test that claim it’s worth looking back at how the party’s ideology has developed in recent years. Back in 2012, five rising stars, all members of the Free Enterprise Group of MPs, published Britannia Unchained: Global Lessons for Growth and Prosperity.  They were Kwasi Kwarteng, Priti Patel, Dominic Raab, Elizabeth Truss and Chris Skidmore – four of whom are now in the Cabinet.

What did David Cameron, the Prime Minister at the time, make of the initiative? I suspect he quietly sympathised with some of their thoughts while wishing they could have exercised discretion. Cameron had sought to discard ideological baggage even before the previous General Election. When the book appeared he was managing the delicate task of governing in coalition with the Lib Dems.

Eleven years on the triumphalist title they chose also has a timely ring. The phrase ‘Britannia Unchained’ perfectly sums up the opportunities that Brexiteers believe our country now has. Digging out my old copy I can see much that the authors might feel vindicated over – as well as passages that they probably would prefer to forget.

We had better start by getting out of the way the bit that critics seized on – both at the time and since. The chapter on Work Ethic began: “Once they enter the workplace, the British are among the worst idlers in the world. We work among the lowest hours, we retire early and our productivity is poor. Whereas Indian children aspire to be doctors or businessmen, the British are more interested in football and pop music.” For politicians to insult their voters in this way is – in the Sir Humphrey Appleby sense of the term – “very courageous”.

It’s also a bit skewwhiff ideologically for free marketeers to focus too much on the merit of hard work. A better theme is how the miracle of capitalist innovation has lifted the multitudes out of drudgery. The truck driver Malcolm McLean pioneered the shipping container, thus cutting the cost of loading a ton of cargo to a tiny fraction of what it was before. The astonishing increase in productivity was a wonder to behold. But the problem beforehand was not that the dockhands loading the endless packages onto ships were lazy.

In mitigation the claim was not that we are inherently idle: “Two causes stand out: high tax rates and a poorly designed welfare system. For those without a job, generous benefits make it harder to motivate themselves to find a job. By contrast, those in work are put off from working any longer than they have to by the excess size of their tax bill.” Fair points.

Further progress is still needed to incentivise the rich and the poor. The top rate of income tax remains at 45% – it was cut to that level in George Osborne’s Budget a few months before Britannia Unchained was published. Welfare reforms do mean that the poor are better off working than on benefits – but not by much. Someone part-time (or on low pay) still does not keep much of their extra earnings. As Universal Credit is ‘tapered’ off, the income Tax, National Insurance and Council Tax take various slices. In some cases it means that for an extra pound earned only 20p is left to spend. Many may therefore still ask, as the authors did: “Why Bother?”.

This is not the only item of unfinished business. “Government has increasingly added to the regulatory burden for child care. Informal and cheap childminders are increasingly being replaced by heavily regulated nurseries,” the authors complained.

Soon after Truss became the minister responsible, she tried to provide more choice and competition in childcare, with higher paid staff offering better standards at lower cost. The way to achieve this was greater flexibility over how many children an adult can be responsible for. She proposed easing the ratio for children aged one and under from 1:3 to 1:4 (in France it’s 1:5 and in Italy 1:8) and moving two-year-olds from 1:4 to 1:6 (compared to 1:8 in Norway and 1:11 in Portugal). The Lib Dems did not agree to the changes and they have still not been made.

Lots of other regulation was challenged. Why does it take 13 days to start a business in Britain? “This compares to only a day in New Zealand, and two days in Australia, countries that are comparatively similar to us.” Apparently, it is down to six days for us now.

Another complaint is that “the fear of unemployment and unfair dismissal has led to a system of employment law that discourages small business from taking a risk and hiring new staff. This lack of flexibility in staffing arrangements can be overcome by a large corporation, but for a small business, it is crippling. Over the last 30 years, employment regulation has gone up by 502%.”

I don’t think anyone would claim any great subsequent liberation. There is very little mention of the European Union in Britannia Unchained but the relevance of our departure and the scope that gives us to reduce red tape is clear.

Another grievance was the trend for “non-courses” or “Mickey Mouse” degrees funded, in large part, by the taxpayer: “Such courses included specialist make-up design at the University of Bedfordshire, fiction and culture at the University of Glamorgan, aromatherapy and therapeutic bodywork at the University of Greenwich and martial arts and adventure tourism at the University of Derby.” Would it be so hard to offer a contemporary equivalent list?

Looking forward, to suggest, as Sylvester does, that the vision laid out in Britannia Unchained conflicts with the levelling up agenda misses the point. Lifting bureaucratic obstruction is itself a vital mechanism for boosting growth across the country.

This was one of the key insights in last year’s Centre for Policy Studies report, ‘A Rising Tide: Levelling up Left-Behind Britain’. As it’s authors wrote, deprived areas need to be more competitive to catch up:

“It is business and enterprise which will make the most fundamental difference to a place’s economic fortunes. What the success of places like London, Lancashire, Cambridge and Bristol has demonstrated over the centuries is that economic performance comes through the dynamism of, and opportunities created by, the private sector.”

The Freeports policy – very much in the Thatcherite tradition of Enterprise Zones – which this paper promoted, is an example of how lower taxes and better regulation are key to spreading prosperity across the country.

Indeed, it’s noteworthy that the very term “levelling up” comes from the Thatcher era. The Right Approach, published by the Conservative Party in 1976 stated:

“Conservatives are not egalitarians. We believe in levelling up, in enhancing opportunities, not in levelling down, which dries up the springs of enterprise and endeavour and ultimately means that there are fewer resources for helping the disadvantaged. Hostility to success, because success brings inequality, is often indistinguishable from envy and greed, especially when, as Alexander Solzhenitsyn has pointed out, it is dressed up in the language of the ‘class struggle’.”

Returning to Britannia Unchained, the relentless theme pulsating throughout the volume is to rigorously demand why if some countries do well, in a particular respect, others should not follow. ‘Levelling Up’ could very well have been an alternative title for the same vision.

Its analysis is unsparing and written in an exasperated and impatient style, and it’s a shame that so many of its complaints remain relevant eight years on. But I am heartened that its authors – with such trenchant ambition for our country – now find themselves occupying senior offices of state.

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Harry Phibbs is a freelance journalist.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.