To succeed in the marketplace for ideas, grounding policies in economic analysis is more important than making them distinctively partisan.
Good policies should be effective and durable. While some may argue that Conservative policies should be distinctive, former Labour adviser John McTernan says that recent Conservative policies have been essentially bipartisan. He asserts that present day Conservatives have not had “ideologically transformative ideas for public policy” in the way that Margaret Thatcher’s government did in the 1980s. While not denying that some later Tory-initiated policies have been a lasting success, he claims these have all been bipartisan.
There is of course nothing wrong with policies having cross-party support. Indeed, this may be desirable as such policies are more likely to endure in the long-term, a key example being auto-enrolment in pensions.
Bipartisan policies were familiar territory to New Labour. Tony Blair writes in his book A Journey that “the credibility of the whole New Labour project rested on accepting that much of what [Margaret Thatcher] wanted to do in the 1980s was inevitable, a consequence not of ideology but of social and economic change… Britain needed the industrial and economic reforms of the Thatcher period.”
McTernan sees the characteristic Thatcher policies as being “the trifecta of right to buy, privatisation and ending union power”. These, he says, were fundamental in impact and irreversible. We might also note Thatcher’s emphasis on entrepreneurship, deregulation and monetary discipline.
These policies were mostly based on economic analyses provided by an ecosystem of market oriented scholars and think-tanks, notably the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. Since those times, policymaking by Conservative governments has appeared less single-minded, if not intellectually rudderless or downright opportunistic.
What is lacking in much current Conservative policy debate is a core of economic analysis on which policies can be built. Typically in the past there was an expectation that if markets were able to function properly, this would deliver efficient and desirable outcomes in many areas. Where markets didn’t work, the job of government was to identify and rectify or bypass market failures, whether these were based on lack of competition or the existence of externalities.
Stian Westlake dates this phenomenon more recently, to the change of leadership in 2016. In The Strange Death of Tory Economic Thinking he argues that since Theresa May became prime minister, the Conservatives seem to have stopped talking and thinking about economics. As a result, “policy areas that would traditionally have been seen through an economic prism are discussed from a social or national perspective instead.” He sees “a government that shies away from economic thinking, that tends to see issues that others might see as economic through other lenses, and that has made little attempt to tell an economic story about the UK.”
Clearly, focussing on long term productivity growth should be central. Only by fostering income growth can we expect to deliver benefits across the nation. Without growth and prosperity, redistribution will not work electorally, since robbing Peter to pay Paul is not just zero sum; it involves, in economists’ parlance, deadweight losses that potentially make everyone worse off.
Bowman and Westlake suggest in Reviving Economic Thinking on the Right that the principles – markets and free enterprise, strong institutions and a government that creates such conditions – are the easy bit. But going beyond principles, we need answers to the challenges our communities face. This means producing solutions which recognise self-interest while respecting the needs of those less able to support themselves. The challenges include reinstating economic growth to boost incomes and employment, especially outside London and the South East, properly funding public services, ensuring decent housing for all, fighting widening inequality and discrimination, tackling climate change, and more.
Policy approaches founded on economic analysis will aim to rectify market failures wherever possible (whether addressing skill shortages or CO2 releases), to work with the grain of markets to avoid costly distortions (e.g. minimising impacts on behaviour unless that is a target variable), and to make redistributional measures incentive compatible (i.e. encouraging people to follow the rules).
While the challenges facing government are generally understood, original but workable policy solutions are valuable currency. We now have a new government with a yet to be articulated version of one-nation Conservatism and little ideological baggage beyond taking the UK out of the European Union. There is plenty of scope for ambitious think tanks to seed the agenda.
A flourishing economy will always facilitate many of the things governments want to do and so is a high priority. Beyond that, deploying economic analysis to support proposals in any field will enhance their credibility, their effectiveness and probably their durability. We need to dig deep and trawl widely to find analytically sound policy packages to offer the new government.
Andrew Gibbons is a former UK government economist. Views expressed in this article are those of the author, not necessarily those of Bright Blue.
