Crisis in Conference: Tories cannot decide whether to tack left or right

The decision by the Chancellor, Philip Hammond, to defend free market capitalism at the Conservative Party conference on the day that Monarch Airlines went bust proves — again — that in this modern age satire is redundant.

At a time when citizens are increasingly looking to regulation to protect them from the downsides of the free market economy, the Tories decided to embrace capitalism, red in tooth and claw.

The very fact that both Hammond and the Prime Minister felt the need to laud the benefits of open markets and accuse Labour as “a party taken hostage by a clique of hard-left extremist infiltrators”, show a debate over core economic policy not seen since the 1970s and 1980s is back on.

Since Tony Blair led New Labour back to government in 1997 there has been a consensus between the two main parties — largely echoed by the voting public — that the best economic model for the UK was a free market system with a greater or lesser degree of fiddling at the edges to lessen its worst side-effects. Cutting taxes was a shared goal as was getting more “efficiency” out of public services.

This year’s Labour and Conservative party conferences have clearly changed that. On the back of a manifesto offering free university education, mass housebuilding, steeper taxes on business and nationalisation of the water and mail industries, Jeremy Corbyn was unafraid to use the word “socialism” and felt able to tell his conference Labour would take “a more active role in restructuring our economy.”

a reflection of a hardening of opposing groups within the population

In turn, the Conservatives used their conference to ramp up the personal attacks on Corbyn, warning of a “Cuban-style food shortage” if he were elected.

The reason is not a rush by the Conservatives and Labour to dust off their respective copies of Freidrich August Hayek’s and John Maynard Keynes’ texts, but a sign of two very opposite reactions to a shift in the views of the voting population. Or perhaps more accurately, a reflection of a hardening of opposing groups within the population.

A large segment of the population that have found themselves getting the wrong end of the stick in many areas of life have decided that the current system is letting them down.

They point to soaring house prices and rents, falling wages, expensive and unreliable trains, increasingly insecure jobs, and rising household bill prices. They then notice that it has taken the diasater at Grenfell Tower to “start a rebirth of council housing” after overseeing a fall in the provision of social housing since 2010. Many still wonder whether partial privatisation and under-investment was to blame for the fire.

They see that rail privatisation has replaced a state-owned company with a fragmented system made up largely of European state-owned companies and wonder whether overcrowded trains and bonuses for executives were part of the plan.

Oh yes and Monarch Airline, the travel operator owned by private equity firm Greybull Capital that went bust, leaving the government with a £60m bill to bring home the 110,000 holidaymakers stranded overseas.

the Conservatives do not know whether to chase the centre or forge their own right-wing brand

This is not to say the country has had a conversion to socialism as it did briefly in the wake of the Second World War. But the terms of the debate have changed; people challenging whether private is always better than public, whether taxes can rise as well as fall, and whether public sector workers should receive a pay rise rather than a cap will get a fairer hearing than in any time in the past 40 years.

The Conservatives are aware that there is a debate over Britain’s political economy but do not know which way to turn. Their much-derided election manifesto published just four months ago said: “We do not believe in untrammelled free markets.” Instead, it said the Conservatives believed that “regulation [was] necessary for the proper ordering of any economy”.

Contrast that with the bullish message from Boris Johnson that an open free-trading and thriving market economy is the only sustainable way to create the wealth we will always need to help the poorest.

Perhaps the tension between the need to match Labour and the desire to put clear blue water between the two parties explains why Boris listed the three day week, which happened during Ted Heath’s premiership, as a Labour failing.

The party conferences have shown that Labour is united — admittedly after two years of bloodletting — while the Conservatives do not know whether to chase the centre or forge their own right-wing brand.

Labour faced the equivalent choice in the early 1980s, took the latter choice and turned a harder left than anything Corbyn was offering, and were out of power for 17 years. The Tories have four more years to make that choice — unless BoJo forces their hands in his inimitable way.

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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