Paul Hunter, Head of Research, The Smith Institute
In the week that Margaret Thatcher died it is instructive to observe how she won both the argument and power with populist policies and what this might tell us about the upcoming election – not least what the downturn means for conservatism.
All governments are inextricably linked to the environment and times in which they come to power. When Thatcher fought her first successful campaign as leader of the Tory party, Labour and the left were divided with the breakaway of the SDP; the 1979 election was fought against the backdrop of the ‘Winter of Discontent’; the Labour government received a loan from the IMF; much of industry was state owned and subsidised; and the cold war continued.
None of this is true today. However, parallels exist and issues are being exploited in a similar fashion to permanently roll back the state. The financial crash was not caused by trade unions – even the most imaginative of spin doctors couldn’t credibly pin it on them. Instead, the enemy within has been welfare scroungers. The argument goes, Labour featherbedded them and as a result government spending spiralled out of control and debt levels became unsustainable. In so doing, the Conservatives have managed to blame the big state (eg Labour) and not big banks. And from without Europe is blamed for both immigration (taking British jobs) and the profligacy of Eurozone countries, which like Labour, have got Britain into ‘this mess’.
This narrative has been incredibly effective for the Conservatives – most still blame Labour for our current economic ills two and an half years after Cameron came to power. However despite the strategy of blame and division (and related policies such as welfare reform), the Conservatives have yet to offer any truly populist policies, similar to what Thatcher did, which seek to materially improve, at least in the short term, the lives of some traditional Labour voters.
The most obvious example of such a policy in the 80s was promoting homeownership through right to buy – Thatcher wanted a home owning, share owning democracy. It was one of Thatcher’s most popular policies however it has run its course. Attempts to re-stimulate right to buy have ended in failure for several reasons most of which have their roots in Thatcherite polices. First, we saw a rapid growth in income and wage inequality in the 1980s (in part due to Thatcher’s attack on the institutions of predistribution) meaning that those who once could take advantage of cut price homes no longer can afford to pay for a mortgage or save for a deposit. Second, the best properties have largely gone. Third, the decision to stop building social housing alongside policy changes in the Wilson/Callaghan government means that new lets largely go to those most in need (or at least in high demand areas) who are least likely to be able to buy a home. Fifth, the lack of social house building has resulted in the under supply of housing which has increased house values, which has priced out social tenants from buying their home whilst in low demand areas the economy and wages remain depressed impacting affordability in a different way. Seventh, the big bang saw the expansion of easy credit (for those at bottom) which is no longer an option with banks fearful of lending and many households over indebted.
Of course this is just one policy but it touches on many other policy areas not least credit, employment and wages. The selling off of other state assets (including share give-a-ways of privatised utilities) can’t happen again because there is little left apart perhaps from hospitals and schools which the Conservatives have been doing by stealth are controversial and don’t benefit people materially.
The other problem for Cameron in a downturn is that the Tories seem tied to fiscal conservatism. Given the stated aim of cutting the deficit (in many respects their number one priority) there is little to offer by way of populist tax cuts – especially after cuts to business taxes. Moreover, as already mentioned, another big bang to encourage what Colin Crouch describes as ‘private Keynesianism’ is an very unlikely option.
So if tax cuts, more personal debt and asset sell offs aren’t an option and the negative propaganda war takes you only so far the only other strategy surely lies on returning to growth before 2015 which would help to reduce the deficit – ‘we have dealt with Labour’s mess and the pain is working’. However, growth could be too little, too late and what’s more it is abstract concept and might not feed into the pay and living standards of workers. After all, much of the growth in recent years has not trickled down into people’s pay packets.
So without a split on the left and few policy options open it remains unclear how the Conservatives can attract a majority of voters. Of course, Labour has its own difficulties. Large increases in public expenditure are also unlikely, not least because Labour are wary of being portrayed as profligate. All of which means that with low growth both parties have as yet struggled to find populist policies to improve the living standards of the electorate.