24 April 2017

What should be in the Conservative manifesto?


Theresa May’s decision to call a snap election does not just give her the opportunity to gain a working majority. It frees her from the manifesto commitments made by David Cameron in 2015, and gives her the opportunity to set out an agenda of her own.

But what should that agenda be? We asked some of Westminster’s leading centre-Right think tanks for their verdict on which policies should make the cut – and which definitely shouldn’t.

If you could pick a single policy to go into the Tory manifesto – in bold, underlined, capital letters – what would it be?

Ben Southwood, head of research at the Adam Smith Institute (ASI): Abolish stamp duty land tax.

Alex Wild, research director at the TaxPayers’ Alliance (TPA): Bring down the cost of housing, via supply-side reform.

Daniel Mahoney, deputy director and head of economic research at the Centre for Policy Studies (CPS): Commit to a diversity of choice in the education system – including the promotion of new grammar schools with the explicit purpose of tackling selection by house price.

Julian Jessop, chief economist at the Institute of Economic Affairs (IEA, JJ): Commit to an industrial strategy that works with the market, not against it. The Government should abandon any attempt to pick winners or, worse still, prop up losers. Instead, it should prioritise the interests of consumers, not producers, and focus on deregulating the economy.

And a second one?

TPA: Eliminate the deficit.

CPS: Set out a clear blueprint for reducing household bills to help the “just about managing” – in particular, via a review of the punitive renewable energy policies that have hiked up electricity prices over the past few years.

ASI: Abolish corporation tax and replace it with a business cashflow tax.

IEA (JJ): Households, companies and public sector bodies should be free to source the best and cheapest goods and services from wherever they want – including overseas. The UK should be willing to lower trade barriers with the rest of the world unilaterally if necessary.

Is there a policy that has been mentioned by May or her ministers that you’re really hoping won’t make it in?

ASI: The energy market wasn’t broken, but repeated meddling threatens to break it now. A price cap – as has been bandied around recently – would be very damaging.

TPA: Yes, successive governments have destroyed the electricity market – and then blamed energy companies for rising bills. A crude price cap was a bad idea in 2013 and it’s still a bad idea today.

Kate Andrews, news editor at the Institute of Economic Affairs (IEA, KA): Re-committing to a migration cap of “tens of thousands” would be economically disastrous, disadvantaging the UK economy at just as much as the foreign workers it would exclude. The government is in no better position to plan immigration centrally than anything else – so scrap arbitrary targets and allow for migration that meets the needs of UK businesses.

CPS: Theresa May has talked about pursuing a more interventionist stance on foreign takeovers. But the UK’s attractiveness for foreign direct investment is vital post-Brexit. Similarly, while she is right to offer assurances that current employment protections will be protected, any moves to increase employment legislation could hamper the economy. The UK’s low unemployment rate is, in large part, attributed to its flexible labour market.

Obviously helping the “Just About Managings” will be a large part of the manifesto. What are the best ways of doing that?

IEA (KA): Housing and childcare costs in the UK are some of the highest in Europe, and soak up disposable incomes. On the former, liberalise the planning system and allow more homes to be built. On the latter, remove the strict child-to-staff ratios that keep costs high, and eliminate “free hours” that subside middle-income and affluent families.

TPA: Reduce taxes. Despite increases to the personal allowance, someone working full time on the minimum wage will still pay £1,400 in income tax and National Insurance.

ASI: Put money in their pocket by cutting their taxes, or scrapping regulations that raise their costs. As Kate says, the Tories should liberalise childcare regulations—eg by matching Danish or German staff ratio requirements. They should look to expand on the Housing White Paper to deliver more housing and cut rents and mortgage repayments. And they should raise the National Insurance threshold to £12,500, where income tax begins to bite.

CPS: A clear blueprint to reducing household bills. We also need policies that incentivise growth outside London and the South-East. That could include going all out for shale gas, or the creation of “Free Ports” where goods would be imported, manufactured or re-exported without incurring customs duties.

And equally obviously, Brexit will be a huge issue – it’s why we’re having an early election, after all. What should the Government promise the voters will be its red lines?

TPA: I think the Government has already been pretty up front about this. We’re leaving the single market, the customs union, ending free movement and will no longer be under the jurisdiction of the ECJ.

CPS: Yes, broadly what Theresa May has already outlined. Freedom of movement has to go, the UK will need the ability to strike its own trade deals going forward and the UK’s large contributions to the European Union will have to cease.

ASI: The government needs to have two goals: getting out of the customs union and the Common Agricultural and Fisheries Policies, so that we can strike trade deals with the rest of the world and lead on global trade. But it also needs to make sure Brexit doesn’t mean substantially less trade with Europe: that means the number one priority is a comprehensive deal with the EU which eliminates all tariffs and minimises regulatory barriers to trade.

IEA (JJ): Leaving the single market and the customs union. Otherwise it is impossible to see how the UK can make the most of the opportunities created by Brexit to deregulate and trade more freely with the rest of the world.

Another big issue is housing, especially for young people. What does the Government need to do to make the market work?

TPA: Planning liberalisation, including the declassification of some green belt land and allowing taller, denser construction in urban areas. Unless this happens May will fail to help the “just about managings” in any meaningful or sustainable way.

IEA (KA): The only way to bring the cost of housing and rent down is to build more homes. It’s time for politicians to stop getting dewy-eyed over the green belt, and consider liberalising the planning system. Now is the time to revisit what land is environmentally valuable, and what can be built upon to meet demand.

ASI: The situation is so bad that there really are are a huge range of reforms that would make massive differences. Right now housing is insufficient and in completely the wrong places. We need reforms that let developers respond to demand where it is highest. For example, we could remove green belt restrictions from intensively farmed land within 15 minutes’ walk of an existing tram station – in London that would be enough for a million homes. Or we could allow everyone to build as high as the highest house on their street.

CPS: The Housing White Paper, published earlier this year, was encouraging in the sense that it advocated some liberalising measures. Any incoming administration will need to build on this work. Encouragingly, NIMBYism is on the decline, with almost twice as many people in England now backing new homes in their local areas compared to 2010.

One advantage of an early election is that it allows the Government to unpick some Cameron-era pledges – like the triple lock on pensions, or the international aid target, or even the tax lock. What are the policies from the last manifesto you’d most like to see ditched?

IEA (JJ): End all departmental ring-fencing. Protecting the budgets of selected departments puts unfair pressure on others and delays much-needed reforms. Also ditch the triple-lock on the state pension, and handouts like free bus passes based solely on age rather than need.

CPS: The triple lock on pensions is simply not sustainable – it’s cost an extra £7.4 billion for 2016-17 alone. Evidence also suggests that the international aid target is leading to poor use of public money.

TPA: Yes, the triple lock and the aid spending target of 0.7 per cent of GDP are the most obvious candidates. Also, HS2 – it’s an Osborne-era vanity project that should also be scrapped in favour of less glamorous infrastructure schemes with higher benefit-cost ratios.

ASI: The triple lock must go. Pension spending has rocketed, even while the rest of the budget has (rightly) been slashed. The Government should also scrap the net immigration cap, which will increasingly keep out the high-skilled workers who provide us healthcare, pay taxes, start businesses, and power innovation.

And which ones do you think should be kept?

CPS: The commitment to raising the personal allowance to £12,500 and the top rate threshold to £50,000 by 2020. Increasing the personal allowance is an important part of ensuring that work pays, and the raising of the top rate is simply counteracting the problem of fiscal drag. The planned cuts to the headline corporation tax rate should also go ahead. Reversing these would damage UK competitiveness at a time when other developed economies have been slashing their rates.

IEA (JJ): The commitment not to raise income tax or National Insurance contributions should be retained, unless any changes are part of a package of measures that lowers the overall tax burden.

ASI: Reducing the deficit, and eventually eliminating it. Absent major crises, this should remain a commitment and priority. They should also keep the house building targets the previous government made – by taking real steps to liberalise the sclerotic and arbitrary planning system.

TPA: The commitment to eliminating the deficit by 2020. This is the 16th consecutive year in which the government has run a deficit and financial crisis was nearly 10 years ago. If a Conservative government in such a commanding position won’t get rid of it, who will?

I’m going to go through a few big policy areas – in each one, what’s the most important thing that should be done? First up, education.

CPS: As I said above, dealing with education selection by house price. It is a scandal that there is a 20 per cent premium near top comprehensives. A policy that prioritises new grammars in areas with few good or outstanding schools could spread opportunity to the disadvantaged, while raising standards.

ASI: The last government made some big strides in education. The next step is opening up free schools to proper competition, by letting profit-making players into the market if they can please parents, pupils, and teachers.

TPA: It’s important that the Government doesn’t gave into pressure and just throw money at schools. The UK spends considerably more per pupil than France, Sweden, Japan, New Zealand, Germany and many more, yet performs worse.

IEA (JJ): Greater diversity and choice, including the introduction of more new free schools, University Technical Colleges and grammar schools.

What about the NHS? And/or social care…

TPA: Eventually, we’ll have to a move towards a system with more co-payments and competition, but there’s little evidence the public is ready for this. In the meantime, the NHS will have to make the most of what it’s got. This means taking unpopular, but sensible decisions such as closing hospitals. Specialist care is better delivered at scale: stroke survival rates in London have increased significantly since 30 sites were consolidated into 8.

IEA (KA): It’s time to end ring-fencing around the NHS – no one area should be protected while other areas fight for resources. The dire state of the NHS also merits a serious conversation about its structure and efficiency, especially when social health insurance systems in other countries throughout Europe consistently do better.

CPS: An ageing population and the growing cost of medicines will place intolerable strains on the health service over the coming decades. But these long-term issues have been ducked by successive governments. A non-party-political Royal Commission, as proposed by our chairman Maurice Saatchi, is long overdue. If properly set up, it could be hugely effective in identifying the key challenges faced by the NHS – not to mention provide a great legacy for May herself.

ASI: After Brexit, we’ll have a huge deal of freedom in terms of drug regulation. The new system should automatically approve any procedures, treatments, devices and drugs that are approved by the FDA, EMA, or any other developed country body. The new immigration system should also fast-track visa applications for NHS staff.

What changes would you like made to the tax system, or to economic policy more generally?

TPA: A merger of national insurance and income tax, abolition of stamp duty.

ASI: In general, taxes and spending are both too high. But how we raise tax makes these problems even worse – we have some incredibly bad, wasteful taxes that lock capital into unproductive activities, deter investment and keep productivity and wages much lower than they need to be. We’d like to see a zero-based approach that shifts from the current “death by a thousand cuts” approach towards a small number of simple, efficient and broad-based taxes.

IEA (JJ): Make infrastructure spending work for the economy. Too often politicians like to prioritise high-profile projects such as HS2, even though the economic justification is very weak. And wherever possible, the private sector should lead. In particular, the Government should clear the way for more house-building by simplifying the planning system, and allow much-needed airport expansion.

CPS: This election offers a chance to address long-running issues with the UK’s enormous and complex tax code. In particular, the merging of National Insurance and income tax has long been discussed yet repeatedly avoided. Lowering and combining the two – perhaps funded by neutralising pensions tax relief for higher rate taxpayers – would be a transformative move.

Are there any policies from the other parties that the Tories could or should steal?

TPA: Scrapping HS2 from the Greens, abolishing inheritance tax from Ukip.

IEA (KA): The Tories have been missing the mark on drug policy for years – crackdowns on legal highs have only served to push new, and often more dangerous, drugs to the surface. Both the Greens and Lib Dems offer more pragmatic policies based on the decriminalisation/legalisation of certain drugs.

ASI: The Lib Dems have been bold to call for a more liberal policy on drugs, but their preferred policy would not solve the major problems associated with the drugs trade. The Tories should steal a march by promising a Royal Commission on Drugs to examine the Canadian and American experience, to give us a model for legalisation and regulation that minimises harm to users and takes drugs out of the hands of criminal gangs.

CPS: After reviewing the Labour and Lib Dem manifestos from 2015, nothing in particular comes to mind!

Are there any other policies you’d fight to include?

ASI: The UK’s biggest problem is the legacy of poor planning and urbanism. There are a million policies that would help, but one side that is rarely considered is private provision of mass transit. Public transport of the past was built with private capital, to service private demand, often financed by speculating on nearby property. Plenty of London would benefit hugely from a tram or monorail, but governments – local and national – have strangeholds over transport provision and road development.

TPA: An assessment of the role of every public sector body, and the privatisation or abolition of those that are better placed in the private sector or no longer needed. There should also be increased scrutiny of departmental budgets – which should be approved by the relevant select committees.

CPS: Getting rid of the Fixed Term Parliaments Act would be no bad thing. It arguably helped ensure the Coalition remained in office for five years, but it’s now effectively defunct.

IEA (KA): Although new arrivals should no longer qualify automatically for state benefits, the Government should guarantee the rights of citizens from the rest of EU already living here. As well as abandoning its arbitrary migration cap, as I said above.

Finally, if you had to offer a one-sentence summary of what the Tories should be offering, what would it be?

CPS: “Grasping the benefits of Brexit, turbo-charging UK competitiveness, and taking on the long-term challenges ducked by successive administrations.”

IEA (JJ): “Making the most of Brexit.”

ASI: “Corbyn – In your guts, you know he’s nuts.”

Alex Wild (TPA), Ben Southwood (ASI), Julian Jessop & Kate Andrews (IEA) and Daniel Mahoney (CPS) were interviewed via email by Robert Colvile, Editor of CapX