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Laura Round: Capitalism has delivered demonstrable successes, yet people seem to be losing the faith in the ability of capitalism to make their lives better. Why do you think this is the case, and how should conservatives respond?

Jesse Norman MP: Capitalism is really a combination of two things. It’s a combination of free markets, or more or less free markets, and the activity of private corporations and companies. We had markets before we had corporations, and so capitalism only properly starts getting going towards the middle and end of the nineteenth century. If you look at a lot of the problems that people have with capitalism now you get several different strands of critique. One is ‘crony capitalism’, which includes corporate misbehaviour: for example, CEOs paying themselves egregiously large amounts of money unrelated to stock market performance or to profitability, while the average working man and woman has stagnant real wages. I don’t see any reason at all why the centre-right and Conservatives shouldn’t be really strong in calling out that kind of behaviour. Another strand of critique is about globalisation, where it seems there have been great gains in economic value through international trade, yet they have been shared out in disproportionate ways. This is largely a political problem. Especially in the Blair years, politicians did little to prepare for globalisation or understand its likely consequences, or support those who were negatively affected. The third strand is the feeling that markets are dominating our culture, a sense that corporate values have taken over, and a cultural or moral panic about what that means. The problem here is that we aren’t having a genuine discussion about what we really care about, and therefore there’s a danger that the values of big business become absorbed and normalised by default. Those are three strands of public concern. I think all of them can addressed; the challenge for politicians of all stripes is to continue to bear down on them.

Laura Round: Many regions outside London lack adequate physical and digital infrastructure. Theresa May has launched the modern industrial strategy to tackle regional economic imbalances. How will this Government improve Britain’s infrastructure?

Jesse Norman MP: There is an enormous amount being spent to improve our infrastructure within my own department. And that’s not just on motorways. More investment is going into roads of every kind than we’ve ever had, certainly in living memory. There’s also a lot of investment in railways, HS2, and soon on Heathrow and greater international interconnectivity as well. Certainly, much more could be done about broadband, but there an awful lot of the slack comes from underperforming corporates, in particular BT. When I was chair of the Culture, Media and Sport Committee two years ago we commissioned a big expert study which concluded that BT was structurally underinvesting in broadband, potentially by hundreds of millions of pounds a year, to the detriment of customers and shareholders, and of course the UK as a whole.

Laura Round: Your book Compassionate Economics urged policymakers to put compassion back into economics by recognising the wider social context in which people operate, and to move away from what you call “rigour mortis economics”. An example you provided where policy had gone wrong was tax credits. Do you believe government has become better at taking into account that people aren’t perfectly rational utility maximisers? And would you say that Universal Credit, for example, has taken this on board?

Jesse Norman MP: Well, that’s a very interesting question. My point was really about compassion as fellow-feeling, not compassion as pity. It’s about the kind of economics you get if you take Adam Smith seriously, rather than just through the usual caricatures. The point I was making about tax credits was that the way in which they were introduced by the Brown government didn’t take account of an absolutely basic fact of behavioural economics called ‘loss aversion’, which is that – very broadly speaking – people are twice as angry about having something that they have taken away from them than they are pleased to be given something they don’t have. So, if you have a tax credit system which overpays people, and then reclaims the overpayments, this is a guaranteed recipe for social anger and discord. And that was the result. In the Brown case, it was also a catastrophic waste of public money, which cost us two or three billion pounds in the first year alone. There is some evidence that government is getting smarter about these decisions. When I first arrived at the Department for Transport, the first thing I did – albeit a bit wonkish – was to ask for a detailed brief on investment appraisal. The Department for Transport has some of the best economists in government and it sets the benchmark for investment appraisal. I wanted to see exactly how they did it and whether or not I was happy with it. It’s a much more sophisticated process than just looking at benefit-cost ratios you might expect from a traditional ‘rigor mortis’ economics point of view.

Laura Round: At the time of your book, you argued that the Labour government was in the grip of an outdated 1970s textbook of economics. What are your current views, considering the Labour Party seems to have moved even farther to the left since then?

Jesse Norman MP: Well, the Labour Party has massively benefited from the fact that, if I may put it that way, no one took the leadership seriously enough to interrogate their policies particularly closely. If they had, then they would have asked more searching questions before the general election about the Labour Party than they did. A lot of ink has been spilled on the election and I don’t propose to revisit that. However, it is generally agreed that we should have pressed harder and for more detail on the issues ourselves. For example, my voters would have discovered that one of the proposals that was being offered by my local Labour candidate was over and above all the nationalisations that the Labour leadership was proposing, that they should nationalise BT. Now, whatever you feel about BT, and I’ve just been quite tough on them, to nationalise BT would cost £40 billion, and would replace a set of managers with a set of officials. Now, it is by no means clear that would be an improvement, to put it mildly. And it would cost £40 billion, which is very roughly the amount of money we spend on defence every year. So it just felt that none of those economic policies, if taken at all seriously, could stand up to public scrutiny for a second. And we’re discovering this because as it starts to become framed by voters as a potential party of government, the Labour Party is now beginning to come under more scrutiny. You’re seeing the effect, for example, in the roll-back on tuition fees that we’ve just seen by Labour. Their bigger problem, I think, is compounded of two things, really. One is that the leadership of the Labour Party is in the grip of a set of economic ideas that are potentially catastrophic, which they are one successful general election away from being able to put into place. The second is that I think there is a kind of unwillingness there, generally, to understand that we are in the world of markets, whether we like it or not. We can’t duck that, we can’t pretend to step out of it by nationalising industries or setting prices and income policies in the way they would have done in the 1970s. The challenge for us is to understand that we’re in a world of markets and make those markets work better for us, and be really intelligent about interrogating them: what they are, how they work, and what they are for. Rather than, as it were, throwing our hands up and running away to a certain kind of crypto-Marxism.

Laura Round: Many Conservatives are instinctively sceptical of an industrial strategy, and I suppose many of them remember the lessons of the 1970s, when governments tried to essentially plan the country’s economy to support ‘winners’. Can you reassure Conservatives that the Prime Minister’s new industrial strategy is different and in line with conservative principles?

Jesse Norman MP: Often the first question is to check whether they have actually read the strategy. My general rule is that if you think you haven’t got an industrial strategy or it’s a bad idea, then you have an industrial strategy without knowing it. We have always had some form of tacit or explicit industrial strategy in this country, and this is an attempt to be more self-aware of what that strategy is, what the different trade-offs are, and what we’re trying to achieve, and then try to build some consensus around that. I think that’s a thoroughly worthwhile thing. What I don’t think it means is throwing the baby out with the bathwater. It’s not about saying we’re retreating from the benefits of free markets, but rather that in some cases these markets aren’t working very well at the moment, that great markets and companies need great infrastructure, and that we need to think harder about how the world is changing, where this country has competitive advantages, and how we can make the most of them.

Laura Round: During the election, the Conservative Party didn’t really play to its strength: the economy. And the Labour Party was very successful in playing towards its values. Do you think this was a mistake?

Jesse Norman MP: What many people forget and what we need to state and keep restating, is that conservatism is a philosophy of social value. To put the matter at its most general, conservatism is about keeping what is of value, and getting rid of what is not. So, it can never be a view that tolerates serious social injustice, and great conservatives from Burke to Disraeli to the modern day have always fought injustice. But conservatism is also about taking what is of value, acting as trustees, nurturing it, building it up, and passing it on to the next generation. That’s the conserving part of conservatism. And that doesn’t mean saying no to the new, because the new is often about ways of improving what we have and what we care about. But it does mean being very reluctant to throw away things that work. Which is where its pragmatism comes from.

Laura Round: But the Conservative Party hasn’t been talking about that much.

Jesse Norman MP: We do, but maybe not enough, and maybe not enough about some of the aspects of social value that people care most about. An example is the arts, which are all about understanding a tradition which are all about understanding a tradition, a practice, a discipline, immersing oneself in it and achieving excellence and self-fulfilment through it. I think about places like the Roundhouse in London, which my father created. People know the Roundhouse for the iTunes festival and the Electric Proms, but its main purpose is a world-class centre for young people in the performing arts. The idea of allowing a young person to find what it is of value in their lives and pursue it with aspiration and energy and entrepreneurship, and share the love and the joy, that’s a very beautiful thing, and a rather conservative one. You know, it’s entirely something that we should be welcoming and promoting. That’s also why I really support all of the work on civil society and independent institutions that has been done by the Conservative Party.

Laura Round: Was Nick Timothy right to describe the manifesto as consciously Burkean?

Jesse Norman MP: Many people have had a field day in analysing the manifesto. What I think was Burkean about it was that it made a real attempt to say something about social value, and about crony capitalism, as we have already discussed. These are very Burkean themes. So, I think that’s a very worthwhile thing, and that aspect of it has to be applauded

Laura Round: How can the Conservative Party get back on track and reach out to the under-40s that it appears to be losing?

Jesse Norman MP: I think that the lessons for the future of all our campaigns is you have to go back and start from key conservative ideas about social value, responsible stewardship of the public finances, a strong nationstate and strong defence. Those are core conservative principles. The Party also has to be willing to look hard at how to tackle injustice. And it needs to be willing to talk about areas that people don’t regard as traditionally conservative, such as healthcare, the environment and the arts, on which conservatism in fact has some very useful things to say. There are no areas of policy and of public discussion that lie outside a strong, warm and intelligent conservatism, if it’s properly focused.

Laura Round: Will another Etonian ever be Prime Minister?

Jesse Norman MP: I think Jacob Rees-Mogg would be an outstanding candidate. I can only admire the Moggmentum that’s already underway!

Laura Round is Communications Manager for Bright Blue.
Jesse Norman MP is the Parliamentary Under Secretary of State for Transport.