We need a 21st century Thatcherism not more Heseltine or Brown

We need to recall conservative principles of independence, self-reliance, duty and patriotism, then frame them as a programme that makes government smaller but better and the economy bigger and faster

Back in 1993 Michael Heseltine gloried in the demise of what came to be called Thatcherism with a call to intervene in the economy “before breakfast,before lunch, before tea and before dinner”. The media and a whole bunch of conservatives who should have known better cheered him to the rafters. Today, after thirty years of active government intervention in the economy we should perhaps start thinking that perhaps it doesn’t work quite as well as we thought.

Michael Heseltine, because rank and file Tories loved his brash, confrontational style and business background, was allowed to run an entirely Keynesian operation within Thatcher’s supposedly Monetarist government. That Keynesian, big government, operation persisted (and still persists in the form of ‘levelling up’) through repeated iterations of regeneration strategies. The only exception, and it was a partial exception, was Gordon Brown’s ‘New Deal for Communities’ programme but even that had its well intentioned purpose subborned by that familiar Heseltine strategy.

Regeneration policy is, in its essence, a collection of government funded boondoggles. The theory - a good Keynesian theory - is that inserting dollops of government cash into poor places will act to stimulate the economy. Proponents of regeneration (and they still dominate the economic development profession) tell us that high profile events, buildings and institutions ‘lever in’ private money by raising property values. The trite part of the theory is that shifting an institution or dubbing a place ‘Capital of Culture’ will transform how people see that place resulting in a flood of investment from private property developers eager to have a slice of the exciting future that inevitably follows such projects. It is almost always an unrequited wish on behalf of the community as developers arrive, not because they see rising land values, but because they reckon regeneration funding or other state subsidy will pay their profit margins. This is the Heseltine model and we’ve tried it again and again since the early 1980s. It doesn’t work.

But people still believe it does. Here’s sports journalist Henry Winter talking about the possible redevelopment of Manchester United’s Old Trafford stadium:

“United not looking for handouts but could be opportunities for public-private partnership to unlock benefits for the community and make the stadium a driver for wider regeneration of area, housing, improved transport links etc.”

The obvious thing to say here is that Manchester United, one of the world’s biggest football brands, doesn’t need public money to develop its stadium so why on earth are they, and friendly journalists, hinting that some state funding might provide hard-to-measure benefits for “the community”? The cynic in me says that public money is a great place to find a bit of extra development margin but there’s also the view that signing up the local council and regional mayor makes the process through planning smoother. And, for the mayor, tagging onto the coat-tails of Manchester United is great for publicity and profile.

This sort of idea is, in microcosm, the problem with an interventionist industrial strategy whether it is bailing out a struggling industry, sticking up tariffs and quotas on ‘strategic’ industries, or giving billions in ‘seed money’ to universities for unspecified but groundbreaking new businesses. All industrial strategy and regeneration programmes do is give an illusion of something happening while funding the balance sheets and profit margins of developers, grant farmers and favoured industries. All this isn’t just on the taxpayer’s ticket but is also transferring costs to other, unfavoured, parts of the economy (usually the more creative and dynamic parts).

When I read that conservatives need to get away from failed ‘Thatcherism’, it strikes me that we’d dumped the great lady’s mission for free enterprise, free trade and sound money by 1993 preferring instead a programme of centralised largess funded by public borrowing. Blair’s programme, for all that he hinted at it being ‘Continuity Thatcher’, was in truth ‘Continuity Heseltine’. Britain, like France, Germany and other West European economies, decided to splurge huge amounts of government cash on programmes of regeneration and industrial renewal. A programme accelerated after the financial crash of 2007/8. The result of this extravagance is now clear to us all: a low growth, sclerotic economy and an institutionalised anti-enterprise culture. Innovation and invention, this culture tells us, can only take place with the backing of government agencies, universities and consultancies. Worse, this culture is one deeply infected with ‘not invented here syndrome’ where change driven by private initiative is to be discouraged since it disrupts important clients of government and its agents.

Although there are legitimate criticisms of Thatcher’s programme for government, it is still the case that the core of it - small government, sound money and a free society - provides the most effective route to economic development. The challenge for 21st century conservatives isn’t to ape the social democratic left by pretending government can, or should, ‘run the economy’ but to frame a new version of Thatcherism that reflects how government has become bigger, more intrusive and less efficient in the years since we dumped the ideas that lay behind Thatcher’s project. We somehow forgot Ronald Reagan’s words: “...the problem is not that people are taxed too little, the problem is that government spends too much.”

Instead of trying to answer this question given current levels of welfare spending and entitlement, what modern conservatives do is to treat the current scale of government as the thing to be conserved while trying to build a new wall against imagined demons seeking to destroy our supposedly civilised society and culture. We cannot win on this battleground except in somehow delaying the inevitable, so what we should do is tell people what ‘inevitable’ means. It means the continued decline of basic government services. It means power cuts and water shortages. It means more expensive housing and unaffordable transport. Not poverty but an altogether less pleasant world for all but the rich and powerful. The inevitable outcome of our current form of government is a new serfdom where you own nothing but a few chattels and work for large organisations - some government, some private - controlled by people who do own things and can afford those things your parents afforded but you can’t now.

Modern Thatcherism should begin by identifying the central principles of a strong society and to seek to keep only those institutions that act to maintain those principles. The rule of law is not the same as the rule of lawyers, so our judicial institutions need reform. Property ownership - a real stake in society - is fundamental to economic growth, we need to put making that ownership easier at the heart of any programme. The purpose of taxation isn’t to either manage the economy or to change people’s behaviour, we should reform tax to use it as the most efficient and effective means to fund the necessary work of government. The welfare system isn’t there as an alternative to working but as a support for those who struggle, we need to reset it as a safety net. Successful industries don’t need the oversight of a government regulator, we should abolish the expensive and intrusive regulatory state focusing just on those functions that keep people safe. And our relationships with the rest of the world are only harmed by trade wars and that Cameronian obsession with a fictional ‘global race’, we should embrace open trade and eschew protectionism.

Some wise people will, of course, tell you that these ideas aren’t popular. That opinion poll telling us only 7% of the population support ‘classical liberalism’. But somehow the conservatives won five general elections offering Thatcherism and only lost when we dumped it. We need to recall those essential conservative principles of independence, self-reliance, duty and patriotism, then frame them into a programme that makes government smaller but better and the economy bigger and faster. We should dump Heseltine not Thatcher, Keynes not Hayek, and Trump not Reagan.