As the Tories return from a difficult conference in Birmingham, Sheila Lawlor, Politeia’s Research Director, argues that their promise of marrying fiscal discipline and regulatory reform with tax cuts will, if fulfilled, lead to stability and, ultimately, prosperity.
Few pretend that the Conservatives have had a good fortnight. September’s mini-budget with its debt-funded tax cuts went down badly with the markets; ending the top rate for high earners did so with the public; while the fall out over dropping it went down badly with the party gathered in Birmingham, as another row on benefit rates smouldered in the wings.
Ground was retrieved by the PM’s closing speech with her promise of fiscal discipline and de-regulation, to which she and the Chancellor are committed along with tax cuts. But this will be a battle hard fought in a country with no shortage of bleeding hearts across the political divide, one where voters must filter a playbook of stereotypes, which too often commands the airwaves. These include the Left’s pious declarations that the tax cuts showed Conservatives have reverted to type, a party of the rich for the rich: potentially a toxic theme as the battle gains momentum over former Labour seats in the North and Midlands that defected to the Tories in 2019 after Brexit. For the voters, though, life is more complex, and they want to shape how they are governed to reflect their wishes and the instincts of what one Midlands voter referred to as ‘normal people’.
The BBC, which made much of the rumpus, found that out in Sutton Coldfield, a West Midlands constituency (albeit Tory voting since the war and even in the country’s dramatic switch to Labour in 1945). Hosting a focus group of people who had voted Conservative in 2019, they too were troubled by the economy, by debt, low wages and benefits which seem to make work pointless. The tax cut for very rich revealed to them poor judgement and poor handling. But, to the BBC presenter’s answer-begging question, ‘Do you feel you trust Liz Truss’, only one member answered ‘no’, another ‘not enough’ and a third said it was ‘too early’ – Truss had been ‘thrown into it’ at a difficult time. When the convener asked whether, if there were a gap to fill, was Labour ready to fill it, no one said ‘Yes’. Labour, we heard, lacked an ‘identity’. It no longer stood for something as it did 20 or 30 years ago. Despite Jeremy Corbyn’s removal, it was a party in the mould of the leftist intelligentsia and Corbyn-like cliques – ‘there [were] still many extreme left wingers [including the mayor of London], they’re too busy worrying about wokeism … pulling down statues.’ Things that don’t ‘matter to people…the normal people…’. And though the country was ‘in a mess now …’, another member added, Labour is not to be trusted with the economy: ‘if Labour came in it would be scary…. economically’.
In economics, as in the culture war, the Corbynista party inherited by Keir Starmer, is not to the taste of voters across the country. For most people in Britain having a say in how they are governed by people they send to Westminster to represent them matters. They believe they should have a say on whether statues should continue to adorn our public spaces (indeed a number were paid for by public subscription) and that they should determine the laws which govern their economic life. Labour, however, remains, an uncertain actor, hostile to the idea of a smaller state which takes less and makes fewer laws over the nooks and crannies of everyday life. On Brexit, by contrast with the government’s commitment to shed bad laws binding our economy with the fetters of Brussels hindering growth, we have heard little to reassure from Labour’s leader, the former ardent Europhile minister for Europe.
As Truss begins her leadership, therefore, there is much to tackle, much to play for – the economy being top of the country’s concern. Truss’s pledge to fiscal discipline and to cutting public debt levels is a good start. So too are the proposed market and regulatory reforms, the virtuous ‘triangle of stability’ for the, post-pandemic future, diagnosed by the German economist Ludger Schuknecht. Market-friendly domestic economies, open borders for trade, and healthy and sustainable finances are the triangle of stability needed to secure the future.
Over the past two decades Schuknecht and his colleagues have analysed the economic trends in western economies. Fiscal consolidation, along with market and regulatory reform are the means to prosperity. Countries that reduce bloated public spending, cut public debt levels, protect property rights and reform labour and product markets to remove protectionist and deadweight regulation see their economies grow. The more dramatically and rapidly they act, the more dramatic and rapid the results.1
 See Preparing for Economic Recovery: More Market, Better Government, Ludger Schuknecht (2020); Going for Growth: The best course for sustained economic recovery, Norbert Hoekstra, Ludger Schuknecht and Holger Zemanek (2012); More Gain Than Pain: Consolidating the public finances, Philipp Rother, Ludger Schuknecht and Jürgen Stark (2011); Reforming Public Spending: Great Gain, Little Pain, Ludger Schuknecht and Vito Tanzi (2005).