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Some thoughts on David Cameron's speech

    There’s something about the Manchester conference hall which makes all of the speeches seem much flatter than in Birmingham. Perhaps it’s the acoustics or the more tiered layout in Brum. Regardless, the speeches in the main conference all seemed more low-key than last year. And in terms of a piece of oratory, David Cameron’s offering was less impressive after the high standards he’d set 12 months ago.

    Nevertheless, it articulated its two key messages particularly clearly. First, that the job of fixing the public finances and the economy – the overriding task underpinning the Coalition government’s agreement – is not yet anywhere near complete (which is definitely true). Therefore, you should elect the Conservatives to complete the job they’ve started. Secondly, that David Cameron’s vision for Britain is much more than public accounting. His overriding reason for being in politics is to reform public services and welfare in order to create “a land of opportunity”.

    In this sense, David Cameron’s message was instinctively conservative but subtly different from Thatcherism. Unlike Mrs Thatcher, Cameron fails to articulate a case for liberty and freedom for individuals and families. Thatcherites instinctively believe that a receding role for government is in itself a policy which helps embolden individuals and families, and promotes individual responsibility. Cameron sometimes pays lip service to this, but gone in Cameron’s speech is this clear articulation of the case for a much smaller state and the idea liberty is a principle that underpins his political philosophy. Instead, the emphasis on social justice puts him more in the compassionate wing of the party – though not in the left-wing sense of compassion being shown through welfare checks and indulging those who are unwilling to put in an effort to better themselves or reject opportunities for self-help. Cameron does have a genuine desire to improve people’s lives but realises that “if you expect nothing of people, that does nothing for them” – hence his desire for welfare and school reform as centre-pieces of his vision. This has echoes of Alfred Sherman of this parish, who once said “if you take responsibility away from people, you make them irresponsible”. Yesterday’s speech was an attempt to sketch out a conservative approach for changes in the role of the welfare state, which has morphed into something far different than Beveridge imagined. These final sections on reforming schools and welfare were thus Thatcherite and conservative in terms of their self-help message, but with the emphasis on the state as the facilitator of opportunity rather than liberty providing opportunity itself.

    As we’ve written before, the financial crisis and subsequent surge in public borrowing and debt led to a profound re-think of Team Cameron’s previous views on the economy. Prior to the crash, they spoke of “sharing the proceeds of growth” and agreed to match Brown’s spending plans. That all seems so long ago, as this week the Chancellor outlined that it would essentially take the best part of until late in the decade to close the deficit completely and start running surpluses. This commitment to sound public finances, albeit over an exhausting time period, and the stated desire to cut taxes whilst doing it, was welcome in the speech. As was the defence of business, the profit motive and enterprise, which faced implicit attack in Ed Miliband’s speech last week.

    But the economic section of Cameron’s speech was too simplistic about where the real economic debate lies. First, Miliband’s speech last week was significant because it outlined a profound change in the way he wants us to think about what the role of the state should be in running the economy. While not advocating avert nationalisation of industry, his threats on land, minimum wages by sector, new taxes and the energy prize freeze show a man who believes the power of the state to correct most perceived injustices. Most Tories, including Cameron, oppose this vision and say so. Yet that’s not the same as articulating a consistent alternative. In a post-financial crisis world, there is a perception that certain markets are rigged. Miliband believes it’s due to unscrupulous capitalists. Free market types believe it’s due to overregulation stifling new entrants and cosy relationships between regulators and regulated. Miliband’s solutions then may be wrong, but they will be seen as doing something about a perceived injustice - and thus may well be popular. On the other hand, the Conservatives, while defending the market broadly risk seeming pro-business (producer interests) rather than pro-market (consumer interests). This distinction might be lost on the public, but it is a reflection of intellectual inconsistency within the party which articulates support for markets but then advocates industrial policies, green subsidies and taxes, and government guarantees for people seeking to acquire property. If it means the government can’t articulate pro-market alternatives to popular policies in areas like energy, then it may well suffer.

    Second, from a political perspective, the much more important critique from Miliband, that both Cameron and Osborne sought to respond to, was the debate about the cost of living. Miliband is essentially trying to stop talking about deficit reduction, and shift the debate onto living standards (which have fallen since the crisis, largely as a result of having a huge recession). He senses that if growth continues but not much is seen in real gains to lower and middle-income people, Labour can ask people whether they feel worse off under the Coalition. Cameron’s response was two-fold: to emphasise that certain taxes (council tax, fuel duty and raising the personal allowance) have been cut to alleviate cost of living pressures, whilst Labour would raise taxes and borrowing if elected. And secondly, that economic health and living standards are inextricably linked with the health of the economy, which is now getting stronger.

    My own hunch is that real wages will increase if the economy continues improving and that Cameron was right to reject calls from some for minimum wage hikes and other gimmicks or initiatives which would be eventually harmful to economic health to show he “gets” the cost of living crunch. Yes, he committed to cutting fuel duty, but only if the savings from spending could be found to do so. The dynamic gains from growth are much more significant than any static measures in terms of making people better off, and the PM is right that getting stable conditions helps facilitate this innovation and productivity growth. However, there are more pro-market things that can be done, both in certain industries like energy, childcare, and housing, and in terms of supply-side measures like tax reform and deregulation, to boost or improve our growth prospects or cut costs faced by the public. Though often this stuff is not exciting, the speech would have benefited from a line or so being unashamedly pro-growth in articulating the need for this on-going agenda, of which the Coalition have made useful but limited progress.

    Prior to the conference, the CPS suggested that the Conservatives should put “Growth, Liberty and Opportunity” at the heart of their offer to the British people. Whilst Cameron touched on the first, and largely ignored the second – the key bulk of the speech was about building the third. On schools he offered a robust defence of the free schools agenda, more rigorous examinations and innovation and choice in the school sector. Given that Miliband didn’t even mention education, this was significant, and built on a strong platform with the Education Secretary earlier in the week. But this support for choice does beg the question: why not allow profit making schools to further enhance the choices available to parents and bring in more new providers?

    It was on welfare that the speech really made the headlines, however, not least because it showed a potential future direction for welfare policy, not just a defence of current reforms. The particular policy mused that it might be better to remove the possibility for young people to go onto benefits rather than be “earning or learning”. Of course, this – like the workfare earlier in the week – was written about by many in a very static sense, as “cutting benefits from young people”. We had people saying “it won’t work”, and “why would young people vote for Conservatives now?” This would indeed be a big change in the welfare system, hence why it’s wise Conservatives seek to debate the principle in public before devising the specific terms of the policy. But what the knee-jerk critics miss is that is that for many people the status quo is not working. Acquiring human capital through training, education or work experience is absolutely vital in an ultra-competitive world economy where many middle-income jobs might be overtaken by technology in the coming years. So whilst, yes, there would undoubtedly by losers in the short-term from a shift to a policy like this, we shouldn’t put the status quo on a pedestal. One suspects that this will be a huge row going forwards though, with Labour seeking to create an intergenerational argument about how government policies hurt young people relative to the older generations (which is not entirely unjustified in relation to the maintenance of pensioner benefits).

    Overall, this was a solid speech which avoided gimmicks and quick fixes but instead sought to paint a picture of the sorts of frameworks a future Conservative government could offer: sound public finances, lower taxes, with a focus on education and welfare in order to boost “opportunity”. There’s enough there in principle to unite different strands of conservatism. And Cameron drew sharp distinctions between his vision and Ed Miliband's, putting himself firmly on the side of business. It would have been good to see more specific pro-market policies on the cost of living and a supply-side agenda, or a reiteration of liberty as a key Conservative principle.

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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