23 June 2015

Ten things Cameron needs to address if he’s serious about building “One Nation”


For a decade the Centre for Social Justice has been arguing that strong families, a good education and paid work are superior weapons against poverty than a large, unfocused welfare state. Opinion polling by YouGov for TheGoodRight.com found that the public agrees. This should be a double whammy win-win for the centre right. We have the best and only affordable approach to fighting poverty – and it’s also popular with the public. If the Conservative Party chose to wear its heart on its sleeve it could reach voters it has never reached before and become the natural party of government once again.

It is very encouraging that David Cameron’s big speech on one nation Conservatism yesterday put parents, educators and job creators in the front of the war on poverty. If you have a strong family, a good education and your own pay cheque you are not going to need a lot of government help. The road to a conservative understanding of social justice also takes us towards a smaller state, therefore.

I’ve noted before that the prime minister can claim many social justice accomplishments from his first term and I’m not going to repeat them here. The task I’ve set myself here is to bank the considerable progress that has been made and urge him to go a lot further – because the Conservatives still have a long way to go before they can truly claim to be a party for every person of every income, age group and background. And in some important respects the party is going in the wrong direction.

Here are ten weaknesses of the current Tory approach:

1. Wages aren’t growing fast enough to compensate for axeing £5 billion of tax credits

Last week’s news about 2.7% average wage growth was very welcome and long may the pickup continue but it only begins to compensate for the fact that the incomes of people at the bottom fell throughout the recession. If tax credits are removed on the scale that has been reported 3.7m households will lose an average of £1,400 per year. Households with children will lose most. The pain might be offset by a more aggressive increase in the minimum wage (tested annually for effects on employment) and also by government encouragement of the living wage (a cause absent from Mr Cameron’s remarks) but there are better and fairer ways to reduce the welfare bill – some set out below. There is also a huge political difference between cutting welfare bills in order to reduce the deficit or to increase investment in economy-enhancing infrastructure and cutting welfare bills to pay more money to wealthy pensioners and to provide tax cuts for those paying the 40p tax band. At the moment it’s cut-throat austerity for poor working households and the-recession-never-happened generosity for pensioners…

2. Borrowed money shouldn’t be going to wealthier pensioners

One of the great successes of the welfare state has been the way it has ended most pensioner poverty. Pensioners are now better off, on average, than people of working age. There are no good non-electoral reasons to continue to redistribute from the working population to retired people but that is what the Tories’ triple lock does. Even though inflation is only 0.1% the triple lock means that pensioners will get at least a 2.5% increase.

3. Raising the income tax threshold is not the best way of helping the low-paid

We need to be honest. Increasing the income tax threshold is a tax cut for the better off, not for the poor. 75% to 80% of the gain of raising the threshold further benefits the top half of earners – many of them two income households. The five million lowest-paid do not even pay income tax. If the government wanted to target help on the poor it would increase the National Insurance threshold, improve incentives within the Universal Credit system (which involves marginal withdrawal rates that the rich would squeal at) or reduce sin taxes (which tend to be regressive).

4. The failure to control immigration hurts the low-paid in two ways

David Cameron famously promised to bring net immigration down to the tens of thousands. It’s now up to over 300,000 and if the eurozone doesn’t get healthier that number could rise towards 400,000 or 500,000 a year. Immigration has two negative impacts on those already struggling to make ends meet: it depresses the wages and employability of those at the bottom and increases competition for scarce resources, notably houses. Immigration IS a social justice issue.

5. Without big plans to build Garden Cities the housing crisis will get worse

Home ownership slumped to a thirty year low at the end of the Coalition’s time in government. In Greg Clark MP, as the new Secretary of State, the housebuilding cause has a real believer but there’s too much emphasis on building a few houses in a few places – which maximises NIMBY problems and isn’t sufficient for the challenge. The crisis won’t be solved without a vision for a lot of houses in a small number of places. We need the same enthusiasm for Garden Cities (of the kind promoted by Simon Wolfson) that the post-war politicians had for new towns like Harlow and Welwyn. Key to sustaining more housebuilding is that it needs to be beautiful – a point repeatedly made by Nicholas Boys Smith of Create Streets. But build, build, build we must. Housebuilding is also the most important pro-family policy – as the PM acknowledged in his speech. Families don’t stay together in cramped, insecure accommodation or when they’re up to their eyeballs in mortgage debt. And let’s hear no nonsense talk about “leave this to the private sector”. Government is already involved because of the £25 billion housing benefit bill. If it helped to build more houses it could reduce that bill – and would probably make a profit. Reducing housing costs is only the most important way of reducing families’ bills. Scaling back government intervention in a range of areas would also help. Reform of CAP, less subsidy of immature renewable energy sources and deregulation of the childcare sector, for example, would all mean more families could make ends meet.

6. Retaining subsidy of Scotland hurts Wales, Cornwall, Lincolnshire and other poorer parts of Britain

I won’t labour this point as it was the subject of a previous piece I wrote for CapX but Tories should be calling the SNP’s bluff and phasing in full fiscal autonomy for Holyrood. That way Scottish politics becomes more responsible and the level of tax becomes a central election issue. Poorer parts of the UK that are currently disadvantaged by the distribution of resources across the nation would start to get a better deal from the Exchequer. Wales would benefit by at least £500 million each and every year, for example. At the moment it gets £9,709 per head of population while Scotland gets £10,152 – even though Wales is much poorer.

7. The money being wasted on HS2 could be better spent on northern infrastructure

HS2 will cost £40 billion? £50 billion? £75 billion? No one really knows. But we’ll have driverless cars by the time it’s completed for our north/south journeys. We shouldn’t be making this massive bet against technological advance. Money shouldn’t be spent speculatively on HS2 but invested now in surefire things we know the North needs. World-beating broadband for poorer rural areas would be top of my list.

8. Council tax is too low for the very rich

The Tory MP Mark Field made the case for council tax re-evaluations a few months before the election: “A Knightsbridge oligarch, for instance, is paying £1353.48 annual council tax for a £60 million home – exactly the same as properties worth one-thirtieth that sum.” If, as Mr Field suggested, local councils win the devolved discretion to set higher bands for those oligarchs those councils could cut taxes for people with smaller homes or – even better – relieve the burden on small, job-creating businesses struggling to pay business rates. There is a good economic case for taxing income less and wealth/property a bit more – especially when so much wealth is unearned because of the socialistic way we regulate land use in Britain.

9. Childcare policies discriminate against full-time parents and are regressive

The prime minister identified his childcare agenda as a pro-family policy in his speech today.  Iain Martin has already said all that needs to be said on this subject: “The policy of extending childcare is really a cheeky upper middle class subsidy cloaked in the rhetoric of concern for the poor. It means that higher earning parents can spend less on childcare and have more money left for other things such as good holidays.”  British Tories should follow the Canadian Conservatives and embrace income splitting – a policy that is fair to all family choices.

10. Spend more on early intervention

The prime minister boasted of his government’s £7.5 million spending on relationship support services today. But the cost of family breakdown runs into tens of BILLIONS of pounds. Nearly everyone is intellectually agreed that early intervention in children’s lives is the most humane and cost-effective way to help children avoid the conveyor belt to crime and underachievement but little money has been invested in schemes that Graham Allen MP believes have proven benefit. Labour’s Liz Kendall has promised to make early intervention a big theme of her leadership campaign. Given the Tories championed this cause in opposition it would be a shame to be outflanked by Labour. It could be funded by a tax on £30,000 handbags and other luxury goods. The tax once proposed by Ukip’s Patrick O’Flynn and immediately dubbed a WAG tax.


And one final thought. “One Nation Conservatism” might not be the right phrase for David Cameron to deploy. I know a good number of Scots who object because they see the UK as four nations. More importantly, in my view, he should be setting out a vision for Britain rather than a brand of Conservatism. “The British Fair Deal”? Perhaps CapX readers can suggest something via the Letters Page or via Twitter – to @CapX?

Tim Montgomerie is a columnist for the The Times, a Senior Fellow at Legatum Institute and co-founder of the new website The Good Right.