Conservative economic policy: the emergence of a new consensus?
We learned a lot more about Conservative economic policy today in a detailed (and annoyingly thoughtful) speech by George Osborne. There’s a lot in it which I may return to in future posts. But what struck me is how the speech seems to presage the emergence of a new consensus between the main parties only a few months after the last one collapsed in a heap alongside Lehman Brothers.
Osborne says it is time for a new “British Economic Model” based on three priorities: fiscal soundness; shifting the economy away from excessive debt towards savings and investment; and a new emphasis on long term returns and productivity rather than the short-termism that characterises the UK economy.
Leaving aside whether this is good economics or not, it is striking how much closer this brings the Tories to Labour policy which itself has changed radically in recent weeks.
Admittedly there are still significant differences on the fiscal soundness priority, with Labour opting for slowing the overall growth of spending and raising taxes compared to the Tories’ probable plans to make real reductions in spending.
But on the other two priorities – the longer term vision for the economy – there are increasing similarities. Leaving aside the attacks on the Labour record and the attempt to blame Brown for every economic problem, there is really very little that Osborne says that Darling could not also say. The need to shift away from leverage to equity in corporate financing, the need to encourage savings for pensions, and the need to end reliance on personal debt to drive the economy are all things ministers have admitted in recent months.
What is particularly striking is the way Osborne seems to have accepted the shift initiated by Mandelson to industrial activism (something I suggested the Tories would do a few weeks ago). This quote from Osborne, for example, could have been lifted straight out of one of Mandelson’s speeches or a recent BERR paper:
Britain should be taking a longer term and more strategic attitude to investment in infrastructure, skills and new technologies. That’s why we are developing detailed plans for the next Conservative Government to invest in a new high speed rail network, for a smart electricity grid, and for investment in carbon capture and storage technology. These investments have the potential to generate hundreds of thousands of high quality jobs while simultaneously reducing our carbon emissions.
And it may be hard to credit, when the Tories have been attacking the Government for all the structural debt it has piled up, but Osborne even talks about using a “reformed” version of PFI (Brown’s brainchild) to pay for some of this. He also goes so far as to quote lefty columnist Will Hutton (his time cometh yet again!) on the need for longer term investment. If Blair and Brown never had the guts to take up Hutton’s challenge to end shareholder primacy in the UK, I can’t quite see Osborne facing down his Eton mates in the City but strange times …
The big question is, if there is a new consensus emerging about Britain’s long-term economic future, is it the right one and will the policies achieve that future? More on that later maybe.