This is turning into a summer of extraordinary good luck for the Conservatives. First the Norwich North by-election victory, then the extraordinary success of the Totnes open primary. And all set against the background of what is, for Tories, the most mellifluous sound in politics: Harriet Harman’s voice. As David Cameron enjoys what will probably be his last real holiday for several years, he has a comfortable dilemma: now all this good fortune has arrived, what will he do with it?
A basic formula has governed British politics in the last 35 years: the more useless Labour becomes, the bolder the Conservatives can be. Mr Cameron is at his most active when facing disaster, as he demonstrated with radical welfare and education policies ahead of the election-that-never-was in 2007. But success seems to paralyse him, as if he is afraid any movement will break the charm. Given how murderous his job would be as Prime Minister, he cannot afford to let any opportunity for radicalism pass.
Policies forged only in fear of what Gordon Brown might say should be rethought. As the by-elections show, Labour’s class war attack lines are strikingly ineffective. It is time to reassess policy and ask not ‘what will work in the election’ but ‘what is best for the country’. Three policies are ripe for revision: the health budget, the 50p tax on the super-rich and profitmaking on proposed new schools.
The proposed 50p tax — due to be introduced four weeks before the likely May general election — is the most pernicious. In his heart, Mr Cameron knows this and fluently describes it as a ‘bad tax’ which is ‘wrong for Britain’ and will deter entrepreneurs. He normally follows this by saying he will keep it anyway, and (like Labour) promise to abolish it at a later date. The rich must be seen to be paying more tax, and must pay their fair share.
At present the richest 1 per cent contribute 24 per cent of all income tax collected. Mr Cameron has not yet clarified if he thinks this is a fair enough share. But if he wants this burden to rise, he knows what to do. Last week, figures from America showed that the top 1 per cent contributed an astonishing 40 per cent of all income tax — the highest in the history of the union. The share from the top 0.1 per cent rose from 16 to 20 per cent since George W. Bush was elected. The old rogue found a way to squeeze the rich until their pips burst with tax dollars. How? By reducing the top rate of income tax from 40 per cent to 35 per cent when America was in recession. Job-creators were incentivised to earn more, declare more and employ more. This was hardly an American experiment but a worldwide trend. From Egypt to Norway, Moscow to Mexico, governments realise the quickest way of raising revenue is to cut the top rate of tax. When California raised its top rate of tax, it witnessed a reverse gold rush: an exodus of millionaires and a collapse of its tax base.
High tax rates redistribute people rather than wealth. This is especially true in the globalised era, and is proven by reams of tax reforms from all over the developed word. So to hike Britain’s top rate from 40p to 50p, as Mr Brown intends to do, is nothing less than an act of sabotage. An intellectually self-confident Tory leader would abolish the 50p rate in his first budget and find his own ways to be seen to be taxing the rich. Failure to do so will show that, for all his words, Mr Cameron is still operating within parameters set by Mr Brown.
The Tory commitment to protect health spending has even less justification. Since Mr Cameron first made the promise, the public finance projections have deteriorated rapidly. If he is to honour his promise to reduce the deficit more quickly, then Labour talk of ‘10 per cent cuts’ are outdated. Cuts will have to be 15 per cent, perhaps 20 per cent, over three years. Protecting the wasteful NHS from expenditure reform would concentrate pain on other less deserving areas. Yet Mr Cameron can easily escape this. He has not yet said how long health spending will be protected for. He should make it a year (if that) and then begin the cuts. Better still, he can say he intends to protect ‘frontline’ health services and get to work rolling back the vast bureaucratic apparatus. He can justify this by citing the finest of Keynesian principles: when the facts change, it is excusable to change one’s mind.
Finally the most promising Tory proposal, school reform. It is now two years old yet its details (curriculum, funding, how to handle special needs pupils) have still not been decided. With valuable time lost in opposition, it is unlikely the first such schools will open until October 2011. To hit the strikingly ambitious aspiration of 3,000 such schools in the first term, rocket boosters need to be fitted to the project. And this means allowing the school providers to make a modest profit.
Initially Michael Gove regarded profit-making schools as too open to Labour attack. But provoking Mr Brown into using his beloved socialist attack lines is a shrewd tactical move. There is no surer way to repel voters from Labour. Anyway, all the evidence from Sweden shows that profit-seeking schools are the most socially equitable, and do best for poorest pupils. Such schools expand when facing demand, whereas the not-for-profit schools prefer waiting lists. Real life success versus outdated Labour ideology: a fine dividing line for an election.
These three policies can be changed quietly, without announcement. Mr Cameron can argue he needs a doctors’ mandate to do whatever necessary. He will have a short period of time with which to make unpopular reforms. Tony Blair’s failure to do so between 1997 and 1999 remains the former prime minister’s greatest regret. As he now says to friends, ‘I wish I listened to myself more.’
This summer, Mr Cameron should resolve to listen to himself more. His instincts are sound, yet he is still haunted — as Blair was — by the thought of a hung parliament. This is understandable, but the prospect of a wasted honeymoon period should scare him even more.