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What’s killing the Conservatives?

Credit: Matt Cardy/Getty Images

September 29, 2018   8 mins

The British autumn is beginning as it always does. Leaves are falling, mists are forming and Conservatives are meeting in turmoil. What will Boris say? Will Theresa May make it through her speech? Will the ERG declare all out-war? Will Chequers give way to Canada?

I have no idea and frankly I’m not really interested. Nor, if they had any sense, would Conservatives at their conference in Birmingham worry much about these things. They have even bigger problems to worry about.

Never mind a plan for Brexit, the Tories are painfully short of ideas for Britain. The failure of Conservatives, Leavers and Remainers alike, to see beyond European questions and think properly about the sort of economy, society and state Britain will have in the next decade is a far greater threat to the party than a botched Brexit or Jeremy Corbyn.

The continued success of the Corbyn Labour project still leaves some Conservatives baffled and scared. Why can’t voters see that the professed socialism on offer in Liverpool this past week would doom the UK economy? Why don’t they understand that a market economy (where goods, services and labour are traded at prices decided by buyers and sellers and the means of production is mostly in private hands, its ownership protected in law) is the best way to deliver more wealth and happiness?

If there’s one thing the Conservatives should want to conserve right now, it’s that economic settlement. But they’re failing to do that because they’ve forgotten their history. That history starts with Edmund Burke, who said that a state without the means of some change is without the means of its conservation. Sometimes preserving something means changing it.

That’s certainly the case for the UK’s market economy, which just isn’t working properly for a lot of the people in it. If you want to preserve markets, you have to make them work better. Sermons about the evils of socialism and the glories of capitalism are meaningless to most voters, who are more likely to be worried about how far their wages stretch each month and the persistent sense that the businesses which sell them things are out to rip them off.

A pragmatic Conservative Party would consider those views – and the feelings that led 52% of the electorate to put two fingers up to the entire British political and economic settlement – and conclude that old arguments about free markets and shrinking the state aren’t going to generate or sustain the policies Britain will need in the years after we leave the EU.

Yet instead of remembering their pragmatic heritage, some Conservatives seem intent on (mis)remembering Margaret Thatcher, whose libertarian tendencies were not entirely Conservative, and have in any case been exaggerated by some of her later devotees.

Devotion to a caricatured Thatcherite doctrine leads to some almost comical misreadings of the contemporary political scene.

More than two years on from the EU referendum vote, there are still Conservatives intent on constructing the Leave vote as a demand for deregulation and the dismantlement of social and economic protections. The disconnect between ‘Singapore’ Brexiteers in London and Sunderland Leavers has always been striking, but has never jarred more than in reports that Sajid Javid is arguing in Cabinet that a no-deal Brexit should be followed by the suspension of employment rights and the auto-enrolment rules that have given three million people their first private pension savings.

Really, Home Secretary? Do you really believe that 17.4 million people voted for a longer working week, voted to make it easier for their boss to fire them and to stop paying into their pension? The fact that such an agenda is (plausibly) seen as part of potential leadership pitch speaks volumes about how far some Conservatives need to travel to start engaging with the interests of the people they aspire to represent.

Some Conservatives insist that their party must reject the option of offering ‘Corbyn Lite’ positions on the economy. Yet that fails to differentiate between diagnosis and prescription. It’s possible to see merit in the Corbyn analysis of markets without endorsing the remedies he proposes. Indeed, I’d argue that enduring support for the Corbyn Labour Party makes it all the more important for Tories to offer their own answers to the questions he asks.

The Labour leader does have a point about the state of markets in the UK. They don’t work well for everyone in them, because not everyone behaves in the way today’s free marketeers imagine they do.

‘Loyalty penalties’ are a case in point. Customers who stick with their energy firm, their broadband supplier or their mortgage lender are almost certain to be paying more than they should. Many don’t even know it: millions have been paying for mobile phone handsets they already own. Citizens Advice reckon some people are paying almost £1,000 a year too much for their loyalty.

‘Poverty premiums’ also defy free-market orthodoxy and produce unfair outcomes that undermine faith in markets. In a perfect market, low-income consumers would generally pay less for things, as suppliers cut their prices to ensure their products were affordable. But in our imperfect markets for essentials like energy, the poor pay higher prices than the rich – for exactly the same product.

Markets aren’t working. Loyal penalties and poverty premiums prove it. That doesn’t mean that the only or indeed correct response is to do away with those markets and replace them with control by the state or politicians: as regulators have candidly told ministers, fixing prices rarely ends well for anyone. The Conservatives need better answers to these failures.

Part of a better answer is surely in more assertive regulators; give economic referees the legal, financial and political support they need to ensure fair play and let them take real action on incomprehensible contracts and Byzantine pricing structures.

Empowering consumers is also essential. Giving households proper ownership of the hoards of valuable data companies hold about them and their spending patterns would allow customers to really navigate the market and secure better deals.

The ultimate answer however is simply to deliver more competition in markets, by intervening more if necessary. Reluctance to do so arises from the common Conservative error of confusing support for business with support for markets. Competition makes businesses work harder and erodes profit margins, so why should business want more of it?

Peter Thiel, the billionaire founder of PayPal, argues that the dream for any business is become a monopoly that can exclude potential rivals. “Competition is for losers”, he says.

Warren Buffett has become the world’s richest investor by only putting money into a company if it has a ‘moat’, meaning enough dominance of its market to protect it against competitive challenge by rivals. Lack of competition is good for owners but not for customers or workers.

Firms that don’t have to fight for business can offer poor service and high prices. They can also skimp on the investment that makes their business (and workers) more productive. And driving up productivity is the only real way to drive up wages and start to answer those questions Corbyn asks.

Conservatives, so quick to warn against the problems of state monopoly, should be much keener to tackle the concentration of economic power in private hands: too many British consumer markets are dominated by a handful of big incumbents. Tories should support the challengers who would disrupt that dominance and deliver better for consumers.

The fact that markets aren’t perfect is just one thing Tories have failed to learn from Corbyn and his party. Another is that organisation matters. Ultimately Corbyn doesn’t dominate Labour by philosophy or charisma. He rules by numbers. By bringing in at least 250,000 new members – his own people – he changed his party and remade it in his own image, just as Tony Blair did after 1994. And the 2017 general election campaign proves that even in the digital era, old-fashioned party machinery, built on members, still matters.

Where is the Conservative movement to match the Labour organisation that was on display in Liverpool this week? Birmingham will once again demonstrate that the Tory faithful are a small, old, rich and southern congregation. Anyone opening the CCHQ parcel containing their conference pass was first confronted with a leaflet exhorting them to leave the party money in their will. The Tories know their membership is dying but seem more interested in profiting from that decline than addressing it.

David Cameron’s scorn for the Tory grassroots was almost Freudian, but May’s failure to recruit new ground troops is a curious failure from a party leader who has spent much time among the voluntary party. Even more striking is that none of her would-be successors talks much about building a mass-membership party.

Equally curious is the party’s apparent indifference to new ideas. Many younger Tories keen to make a name for themselves are playing safe by avoiding anything that looks like “the vision thing”. Bolder thinkers – George Freeman, Nick Boles – struggle to find traction among colleagues addled by Brexit.

Meanwhile, Jesse Norman’s recent book about Adam Smith would have provoked a more thoughtful party into a full-scale re-evaluation of its history, purpose and – most of all – its view of markets and the people in them. Norman demonstrates that the idea of Smith (and thus, the market) that many Tories hold is shallow and wrong; far from championing amoral laissez-faire “neoliberalism”, Smith saw people as moral beings, and markets as imperfect and prone to capture. Both require a different, more active role for the state than the one advocated by many Tories today. Norman discreetly avoids saying it explicitly, but it is the Tory failure to accept this reality that makes Corbyn’s job that much easier.

A Conservative Party willing to think boldly would put Norman on the main stage in Birmingham and give him a job imagining the political economy of Brexit Britain. Instead he gets to look after bypasses as roads minister, and to discuss his book at fringe events with non-Tories like me. (8.30am on Monday in the Hyatt, if you’re up early.)

Another original Tory thinker is an outcast. Nick Timothy, author of last year’s “consciously Burkean” manifesto, remains exiled, even though many of that document’s ideas – “fair” markets; real corporate governance reform; a proper rebalancing of higher and further education; the progressive taxation of accrued wealth to fund social care – are exactly what the party now needs to answer Corbynism. (It’s worth noting that a manifesto often accused of lacking retail-friendly offers actually raised issues like the mobile handset rip-off more than a year before Citizens Advice produced its recent influential report on the topic.)

Whether jettisoning Timothy himself was the right thing to do is a question for another day, but ditching his ideas simply because they were his looks increasingly like an act of self-harming folly that left the party blinking in the headlights of Corbyn’s low-emission bandwagon.

Nick isn’t right about everything, of course. On some things, he’s dead wrong, and nowhere more so than on immigration. Tory attitudes to immigration have long baffled me. Shouldn’t a party that celebrates hard work and enterprise embrace people who have got on their proverbial bikes and gone looking for opportunities far from their own homes? Shouldn’t a party that celebrates the idea of British nationhood and patriotism offer an idea of a nation big and strong and confident enough to encompass all-comers, wherever they were born or raised?

At a Social Market Foundation fringe meeting in Liverpool this week, Professor Rob Ford of Manchester University pointed out that both sides of British politics had missed a huge strategic opportunity after 2004 when the UK opened its labour market to hundreds of thousands of industrious easterners. They should have overhauled citizenship requirements and made those new EU members into new Brits, and thus new voters.

Previous waves of immigration have been happily absorbed into the shared idea of the nation that Conservatives say they cherish. Britain is more, not less, British for the fact that some Brits are black or Asian, something that sensible Conservatives know is a fundamentally conservative outcome, an embodiment of Burkean acceptance of preserving by changing.

What if the Conservatives had rejected the nativism conjured up by a defensive Michael Howard in 2005 and instead sought to put blue rosettes on people who came to Britain to work, to earn for their families, and to advance themselves? What if British Tories had learned from their Canadian cousins how to weave immigration and its advantages into their story?

And if they can’t be bothered to look that far, they could just listen to their own Ruth Davidson when she says, rightly, that her party “should have the confidence to recognise that people from other nations wanting to come to our country is a sign of our success as a vibrant, prosperous culture”.

Sooner or later, Conservatives must walk back from nativism and accept that the widespread movement of people and demographic change are inevitable parts of modern life and modern Britain. Until the Conservative idea of Britain better matches the reality of Britain, they will always struggle to capture what Disraeli called the “spirit of conservation and optimism” they need to win decisively in this century.

James Kirkup is Director of the London-based Social Market Foundation


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