12 June 2019

The real meaning of capital

By Nicky Morgan MP

There will come a time when not every political conversation is dominated by Brexit. And if we are not very careful, the receding Brexit tide will reveal our Conservative philosophy (small government, believing in the power of individuals and entrepreneurs, having a welfare safety net, strong economic and national security) have been overtaken by an Opposition which has positioned itself as the champions of a fairer country.

We cannot let that happen. First, because Corbyn’s socialism is, in reality, fair to no one (just look at Venezuela) and, second, because the capitalism and democracy we have has made people wealthier, healthier and freer – which is why it has been repeatedly copied around the world. Yet at the moment, it just doesn’t always feel like that is the case – and Conservatives need to tackle the reasons why.

The 2008 financial crisis was a shock in all sorts of ways. The response by the UK Government and the Bank of England propped up our economy and then sought to address the irresponsible financial behaviour that led to the crisis. But the longer-term cultural damage and root causes have not really been addressed in a convincing way.

Wages have taken a long time to recover, our productivity is still too low and quantitative easing, while necessary, has meant that those who owned property and assets have done better than those who didn’t. In fact, for many the dream of owning a major asset such as a home has become almost impossible to realise. Property prices in already expensive areas have, until recently, risen relentlessly, while people’s wages didn’t (unless you were at the top of the tree). Confidence in our banks was shaken to the core. The mis-selling of financial products, and the pushing of business owners towards insolvency by the very institutions they hoped were on their side, have tarnished a whole sector.

This creates a gap for a narrative about an unjust and unfair economic system to take hold. A variety of factors cement this view: a lack of social mobility, continuing inequalities in areas such as housing and education, and the failure to deliver a British dream where the next generation does better than the last. I believe it must be our mission, as Conservatives, between now and whenever the next election is, to find a compelling counter-narrative.

That means acknowledging mistakes made in the past, explaining why we believe the state should not own the means of production and setting out how we envisage enabling our country and our fellow citizens to flourish.

Different types of capital

I deliberately use the word ‘flourish’. I believe that at this point in our history and our politics a flourishing and successful country is not all about money and GDP numbers.

Quality of life, having shared values, building strong communities, looking after the less fortunate, tackling the dark parts of the online world, working for organisations with clear missions, being fit and healthy and free to make the choices that work best for us and our loved ones have much greater resonance than ever before.

Some of our older citizens feel they remember a time when at least some of these things did happen and they want to go back to what they feel was a simpler age. Meanwhile, our younger citizens think that those who are a bit older than them have lost sight of what truly matters and makes a life worth living.

Capital these days isn’t just about financial capital. It is about human capital, social capital and cultural capital too. If 21st-century Conservatism can show that it gets all of these things and wants to support them, then we will demonstrate that we have a truly broad capitalist agenda which leads to a flourishing country.

That isn’t to say that financial capital isn’t important too. It is too easy for those with secure (or at least fairly secure) finances to say that money isn’t everything. It is everything if you don’t have any and every day is a struggle.

In its July 2018 report on household finances, the House of Commons Treasury Select Committee, which I chair, found that for many households just a few hundred pounds in savings would make a massive difference to their financial security and ability to deal with unexpected life events.

The debt charity StepChange told the Committee that ‘if every household in the UK had at least £1,000 in accessible savings, the number of households in problem debt could be reduced by 500,000. The Conservative Government has taken steps to enable people on low incomes and on some benefits to start to save. The Committee found, though, that rewards such as tax relief mean very little to many people and so bonus payments and matching their savings offer greater incentives.


If the Conservative Party wants to build people’s financial capital, then we have to think of ways to encourage people to own capital.

For many owning a home is their main stake in society – it’s a long-term commitment.

But because we all know that owning a home has become something that takes longer to achieve these days – a problem which will take some time to remedy – we need to think of other ways to encourage people to feel they have that stake.

Many people who don’t own a home will have a pension. Where does their money go? Who really understands or thinks about the fact that their pension fund is making long-term investments on their behalf in our infrastructure, for example? Could pension funds invest in more of our smaller companies? Could we do more to make the link more transparent – to make it clear that a pension isn’t just a preparation for old age, it’s enabling the UK to be ready for the future too?

Many of us with pensions receive annual impenetrable documents telling us how our pension pot has risen or fallen in value. It might also tell us the name of the funds that our pension is invested in. But what and who are those funds really investing in? If the funds are investing in the share capital of companies, then who are those companies and what are they doing to advance a fairer and flourishing society?

At present the pension owner feels absolutely no connection with their investments and therefore has no ‘stake’ in the parts of our country that those funds are investing in – and yet their capital is helping the UK (and probably overseas investments too) to grow.


Our people are our best assets. That is as true for a country as it is for any organisation or institution. Our education system and then our workplaces should be driven by wanting the human capital within them to flourish and be as skilled and knowledgeable as possible. Instead, our workforces and employees have in many cases become too much like commodities to be bought and sold through mergers and acquisitions, redundancies and casual contracts. And worked relentlessly hard through the introduction of never-ending email inboxes on our phones and tablets 24/7. The time regarded as ‘outside working hours’ is reducing not expanding.

As Edward Luce says in the ‘The Retreat of Western Liberalism’: “In survey after survey the biggest employee complaint is being treated with a lack of respect. Whether they work in an Amazon warehouse, serve fast food or sit in a BT customer-cubicle, they feel diminished by how they are treated. People must request permission for bathroom breaks from supervisors who are clocking every minute of their time. Yet wage theft – the systematic undercounting of overtime work – has shot through the roof.”

People don’t feel valued and they don’t feel invested in. Our industrial strategy talks a lot about technology and places, but people seem way down the list. Yet how can we attract a business to a new area or expect new ideas to take root and be turned into new and often ground-breaking technologies without the people to sustain them?

Equally, we want people to look after our children and our older relatives or to work in huge warehouses so we receive our online orders speedily, and yet we accord them little value, based solely on their salary. There will always be salary differentials, but while people are working for an organisation they are part of a whole team. And a team works because each member plays their part. And they will play their part better, and the whole team will do better, if their skills and knowledge are invested in.

Education and in-work poverty

Proper and systematic investment in our human capital will also drive greater productivity, which should result in greater wage growth. The startlingly successful creation of jobs since 2010 in the UK is to be welcomed. But it isn’t right that many of our fellow citizens have done what was asked of them, by working perhaps for the first time or taking on longer hours, and they then find that in spite of that they are still struggling to make ends meet or subject to fluctuating and unpredictable contractual hours.

Policies such as the National Minimum Wage and National Living Wage have certainly helped, but it is hard to sell the benefits of employment when in-work poverty remains. I was often asked as Education Secretary why we had changed the curriculum and made public exams harder. The answer is that today’s pupils will have to compete not just with the best in the UK but the best in the world. Higher levels of literacy and numeracy are just basic  requirements now as the workplace of the future changes and more processes are automated.

Education is about the future – not just in terms of future employment but also about each student’s future. We do nobody any favours by somehow allowing for lower levels of achievement or setting lower expectations of them because of background or geography. In fact, by doing so, we create the conditions for stalling social mobility. Yet the acquisition of knowledge has, for too long, stopped for most of us once we leave full-time education. Compulsory professional development occurs in some sectors, but how career-enhancing is it really?

Once the path of our working lives is set, how many of us really ever have the chance to take a step back and do something very different? Even if we do, it has to be self-organised and self-funded. As workplaces change, that model won’t be able to continue. Nor should it, if we want to make the most of all available talent. Years ago, night school offered the opportunity to study for new qualifications.

The National Retraining Scheme may well be the 21st-century equivalent, but otherwise our further education colleges are a ready-made engine for turbo-charging our human capital. The power of community We are social beings and most of us, bar the odd hermit, can’t exist in isolation. Our social networks are important and help to foster a sense of belonging. It is probably for other contributors to highlight the need for a much greater focus on community cohesion.

But the sense of shared endeavour that comes from living in a strong and vibrant community or taking part in a joint project is significant. Supporting strong communities should be a natural thing for Conservatives. We believe in the power of individuals – that doesn’t mean, in spite of what our opponents say, a culture of selfish individualism. It does mean supporting individuals, families, groups and communities to set their own goals and visions and then to offer support.

It can mean Government creating the conditions for communities to flourish and social capital to grow and being quite explicit about this – in the same way that we often talk about creating the right conditions for businesses to grow.

And it means setting expectations that others, including the private sector, will do their bit too. Many companies already have a strong sense of corporate social responsibility which manifests itself in all sorts of ways. Large national brands have a particular role to play – including through supporting business improvement districts, recruiting school governors, supporting local charities and offering work experience placements to those often furthest from the workplace. And that is just for starters.


Being more explicit about building social capital, including creating a shared sense of identity, will help in other ways, particularly in healing some of the divisions revealed across the UK in recent years. Capitalism is easy to demonise. And Conservatives always have to be wary of knowing the cost of everything and the value of nothing. In our 2020 vision we need to be clear that capitalism has many facets, not all financial, and that as Conservatives we value all of them.

This article first appeared in ‘Britain Beyond Brexit’, a collection of essays published by the Centre for Policy Studies. You can purchase a copy of the book HERE.

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Nicky Morgan is MP for Loughborough and chair of the Treasury Select Committee