July 12, 2022

Harry, a 32-year-old Good Middle Class Graduate from a Good Middle Class Family™ looks up from his phone. His eyes move across the cramped rental flat to Fiona, his girlfriend of five years. He’s been thinking about starting a family for a while.

Later that evening, he tells her: “I’ve done some maths — we can just about afford to buy a gardenless 1.5 bed flat in Catford and have a baby, if we reduce our food budget.” And they’re the lucky ones. And yet, is that all his country has to offer them? Britain’s answer to anyone who isn’t a home-owning pensioner today is, unfortunately, yes. The formerly normal aspiration to settle and start a family is out of reach for swathes of young people. A fundamental compact between conservative principles, and the party that is supposed to represent them, has been broken.

The next leader of the Conservative Party faces an economic emergency with few obvious solutions. Public finances remain in a dire state following an almost continuous stream of crises. The Office for Budget Responsibility (OBR) estimates that the government has already spent as much as it did during the Financial Crash to support households through the current squeeze on living standards. House prices are a national disgrace, far exceeding historical trends on affordability and requiring decades of saving for average couples to even afford a deposit for a first home. Homeownership among the young has dwindled.

Britain tends to think of itself as an equal partner to countries such as France, the Netherlands and Germany in terms of incomes and living standards. This is a collective fantasy, which hasn’t been true for well over a decade. The reality shouldn’t be shocking, yet it remains so: Britain’s incomes and living standards have fallen far behind what were its peer nations only 15 years ago. “Across European countries, only households in Greece and Cyprus saw a worse performance between 2007 and 2018 than the UK,” found the Resolution Foundation. On its third consecutive Tory prime minister, and about to select its fourth, Britain isn’t working.

Does this seem like the time for a middle of the road party leadership candidate offering more of the same, a contest in which candidates simply take turns to outbid each other with Boomer-pleasing tax cuts? Or does a radical programme with a fresh-faced advocate need to step forward? The Tory party no longer has the theatrics of Brexit or a disruptive global pandemic to distract from these systemic, structural failings. The tide has gone out, the party isn’t wearing any knickers, and nobody is impressed by what there is to see.

Because the reality is that Britain’s national religion is no longer Anglican Christianity. It isn’t even the NHS. It is Pensionerism. Britain is a care home with a navy. And as the Baby Boomer cohort of voters ages, it is vital for the party’s long-term survival, not to mention morally just, for the party to begin mending the structural underpinnings of society that enable people to establish themselves and build families.

Brexit aside, if British conservatism is defined by anything, it is its reverence for community and continuity over radicalism and state interventionism. Asset ownership is vital for the maintenance of these values — increasing the country’s housing stock is a means to a conservative end. People who own houses invest in them for the long run and want them protected. These values express themselves in everything from taking care of a front garden, seeing it as a community as much as a personal asset, to favouring low levels of asset taxation on something “earned”.

Graduates face a marginal tax rate of at least 50%. They are expected by Bank of England governor Andrew Bailey to exercise restraint when looking for pay rises, even in the face of nearly two decades of pay stagnation. Family homes are completely out of their reach. Ask yourself, how does this look compared to the comfort of homeownership and the 10% growth in the state pension, under the triple-lock policy, that shields pensioners from the same fate? Are we really all in this together?

Yet all attempts to reform this growth-killing inequity end in failure, such is the strength of the homeowner-pensioner lobby. Despite free enterprise fitting hand-in-glove with Conservative ideological orthodoxy, housing remains a market throttled by the state, with severe supply restriction enforced via irreformable planning forcing prices up. This has deleterious effects across swathes of public policy, from living standards, to fertility, to climate change.

Is it any surprise that productivity and post-housing cost income growth doesn’t exist in a market where any wage rises go straight to existing landowners in higher rents and prices, rather than resulting in an increased supply of houses? If increases in productivity don’t raise living standards, where is the incentive to increase productivity? Scaling this huge challenge must be the immediate, urgent priority of the next Conservative leader.

It’s been done before — look back to Margaret Thatcher’s reforming governments. But while Thatcher wielded the sword and cut through the Gordian knot of Britain’s public sector businesses and unions in the Eighties, she did this with the tailwinds of North Sea oil and gas revenues and entering government afresh, not 12 years into Conservative rule.

Thatcher could even be said to have redistributed — a word we associate solely with the Left of politics — housing towards council housing tenants. She recognised that without homeownership, the facts of life ceased to be conservative. Nobody could imagine a Conservative government today redistributing housing wealth towards the young, regardless that much of it was ‘earned’ through planning restriction and loose monetary policy. It seems unlikely that any of today’s leadership candidates would — or could — wield such a sword as she did.

There is an obvious solution to all these structural problems: growth.

It is encouraging to see Sajid Javid identify growth as one of the key planks of his campaign for leader and for him to state that housing is a supply side issue, but less so to see Jeremy Hunt reflexively spouting a ludicrous unfunded promise to “cut all taxes”. Yet another demand-side reform. But Hunt’s reasoning is tragically logical: the next leader will not win the votes of members by attacking the party’s own base — which has become substantially older in recent years — over the lack of planning reform, the biggest cause of Britain’s anaemic growth record. What is required therefore is a dose of the dryly titled ‘policy entrepreneurialism’.

To win — and win properly, not just squeak into office just to prepare for election defeat in two years’ time — the next leader must shout from the rooftops about growth, while investing in clever innovative policy solutions. Seek softer community buy-in with policies that could encourage development while benefiting residents like Street Votes. Be radical. Call for the permanent abolition of Stamp Duty. The Treasury will fight you, but a universally-hated tax that increases market friction by preventing the elderly moving out of large family homes is a politically feasible housing policy reform. There’s £3.31bn in annual economic growth up for grabs!

Build more houses, but be smart about it. Building is impossible in Chesham and Amersham? You’re a Conservative government with sky high prices in Labour-dominated, youthful cities! Ignore Chesham and Amersham. Build in the cities with the strongest price signals and if current residents don’t like it, let them vote even more Labour, or move away. Enabling growth in the productive cities will give you tax revenues to spend on public services, or enable you to cut taxes responsibly from their current postwar high.

The UK has some of the highest childcare costs in Europe according to the OECD. The cost of subsidising childcare to a level closer to the European average could bring more women into the labour force, thereby increasing economic growth while solving sex-based social inequality. Isn’t this win-win?

But already in this contest we see Suella Braverman open her candidacy with cheap promises to leave the European Court of Human Rights. This kind of policymaking would neatly follow on from the return of voluntary imperial measurements, and the probably unworkable Rwanda refugee policy. Meanwhile Sajid Javid, Penny Mordaunt and Liz Truss have all pledged to lower fuel taxes, an astonishingly regressive proposal that benefits the richest first while ignoring the pressing need for climate action. The party must learn: throwing red meat to the crowd doesn’t put red meat on the table.

Without Brexit to focus on, the Government has lost its sense of purpose. The next leader must be a strategist, cerebral, and yet still a salesman. Someone who recognises that there’s more to winning than winning itself, and declinist managerialism — that a far greater prize is changing peoples’ lives and your country, for the better.

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