Adam Hawksbee: An electoral pitch based on passive economic policy is a path to defeat in 2024
4 min read
The Conservative leadership contest has been notable not for what the candidates have said, but for what they haven't.
Britain is 10 years into a low growth trap, facing a recession, approaching an inflationary storm, and no one has a clear economic vision for how to fix it.
What has emerged from the debates and hustings is familiar. Tax cuts, free markets, and slashed regulation will – candidates claim – put pounds back in people’s pockets, boost growth and tackle the cost of living crisis. Different wings of the party are distinguished by how much or how little of this platform they embrace.
This exposes a big gap in the Conservative party’s economic vision. The most globally successful economic hubs – think Silicon Valley or Tel Aviv – are competitive on tax and regulation but also make big interventions in infrastructure, R&D and skills. And countries with more spatially balanced economies, like Germany, invest heavily in struggling areas to make sure all their citizens have opportunities.
Today’s economic challenges won’t be solved by the state simply stepping back
This approach is grounded in a recognition of where growth comes from in today’s knowledge economy. Across all sectors, successful firms rapidly and iteratively apply new ideas to goods and services. This often doesn’t require big, fixed costs or tangible capital – the modern industrialist deploys the line of code not the assembly line. It relies on the sharing of tacit knowledge between high skilled workers, who crowd together in globally competitive cities. And firms that win can win big, often gaining huge market power in short periods of time by leveraging digital platforms.
All of these characteristics point to a reimagined role for the state to address market failure – supporting urban densification through new housing and public transport systems, bringing together universities and businesses to translate discoveries into products, leveraging government procurement to support industrial strategy, and tackling dominant tech firms to make sure markets are open and competitive. This is a role only the state can play. No individual firm has the incentive or ability to make these sorts of investments and interventions. And around the world, it is mayors and city leaders who have had most success in deploying this form of economic strategy.
This is the real debate the Conservative party should be having, obscured by talk of high taxes or low taxes. On one side, a passive economic policy that says the state needs to get out of the way. On the other, an intentional economic policy that believes the state has a key role in both boosting and better distributing economic growth in the 21st century. And this debate can’t wait – on the United Kingdom’s current economic growth trajectory, we will be overtaken by Poland in 12 years.
The passive model has vocal advocates amongst columnists and commentators, chief amongst them figures like Lord Frost. Supporters of a more intentional economic policy are either absent or muted, fearful of being dubbed “un-Conservative”.
The madness of this position is that the Conservatives had the beginnings of a more intentional approach to the economy. Levelling up was sparked by political opportunity, but it has sound economic roots. The Levelling Up White Paper, part authored by former Bank of England chief economist Andy Haldane, set out the modern day limits of an economic policy that places too much faith in the ability of markets to naturally generate or distribute growth. Some ministers in the last government, like George Freeman on science and Alex Burghart on technical education, were taking steps to target government interventions in places that had fallen behind.
This isn’t just a problem in terms of economics - it leaves the government politically vulnerable as well. The new Conservative electoral coalition are slightly to the left on economics and slightly to the right on culture. They have a greater tolerance for higher taxes if it means investment in public services. They want to ban zero hours contracts and improve protections for workers. An electoral pitch based on passive economic policy is a path to defeat in 2024.
Advocates of a more intentional approach to economic policy need to find their voice again. The fundamental Conservative principle is pragmatism - dealing with the country as you find it, not as you want it to be. And today’s economic challenges won’t be solved by the state simply stepping back.
Adam Hawksbee is deputy director of Onward and former head of policy to Andy Street, Conservative mayor for the West Midlands.
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