Oliver Letwin has laid the foundation for a Conservative victory at the next general election. We do not mean the Conservatives will necessarily win that election: that will require the recovery of great tracts of the political landscape from the Labour party. But the Conservatives are now in a position to campaign on the basis of a robust and pragmatic financial programme which is in harmony with the instincts of the British people.
When politicians are asked what they intend to do with our money, the question is generally posed in the following form: are you going to raise public spending or cut taxes? To this conundrum, the shadow Chancellor answers ‘both’. This would be mere wishful thinking, ready to be exploded in the first hostile interview, if Mr Letwin had not worked out in sober and convincing detail what he means by it, but his long-awaited speech on Monday shows that he has. He proposes to increase spending on health and education by 9 per cent in each of the first two years of a Conservative government, after which the rate of growth will be reduced to 5 per cent a year. But he also proposes, by freezing the amount spent by other departments and by cutting the cost of central government, to hold the rate of growth in public spending below the rate of growth in the economy as a whole, thereby reducing the proportion of national income spent by the government from 42 to 40 per cent and achieving savings of £35 billion by 2012. Hence the scope for tax cuts.
The figures will of course turn out to be wrong. The £35 billion is the difference between two sums of such magnitude that one can predict with absolute confidence that it will not turn out to be correct. But this in no way invalidates the force and political astuteness of Mr Letwin’s argument. By reconciling himself and his party to increases in spending on health and education, he has exploded the charge that the Tories are simply a group of manic ideologues who are determined to cut public spending regardless. Mr Letwin knows it would be catastrophic just to pour extra billions into the bureaucracies which at present run these services, and which struggle in vain, by diktat and target and regulation, to mimic the high standards and the flexibility which will come from allowing users to decide where funds can best be spent. But Mr Letwin also understands that serious reform in these areas — to make schools responsive to the demands of parents and hospitals to the demands of patients — cannot be achieved without spending money. The Conservatives still have much work to do before they can demonstrate that they have devised satisfactory ways of recreating this direct link between the public and the professionals who provide these services.
There is a kind of radical who finds what Mr Letwin has said despicably timid and unambitious. These radicals have noticed that low-tax economies grow much faster than high-tax economies, and they would like to carry out a grand experiment in this country, making deep cuts in the size of the state and the level of taxation and ushering us into a free-market paradise. As far as the Conservative party is concerned, there are two serious drawbacks to such proposals. One is that the British people show no sign of wishing to vote for them. The other is that it is thoroughly unConservative to expect to achieve heaven on earth by making violent and speculative changes. The Conservative genius is for incremental change, carried out with the closest respect for circumstance, with no expectation that the world can be transformed in the twinkling of an eye by implementing a brilliant idea or two.
The great merit of Mr Letwin’s programme is that he has turned his back on the ‘with one bound he was free’ mode of politics, which the public would have found incredible. He proposes a lot of hard work, to achieve modest but worthwhile ends. The public sector’s appetite for funds is so great that even to restrain it to the extent proposed by Mr Letwin will be extremely difficult. But his programme comes at an opportune moment. As Kenneth Clarke, the former Conservative chancellor, remarked on Monday: ‘Most departments in Whitehall have money coming out of their ears.’ The public sees this money sloshing about, and knows that much of it is wasted. Sir Peter Gershon, head of the government’s efficiency review, has estimated that £15 billion a year could be saved by getting rid of unnecessary civil servants. Since 1997 the Labour government has spent vast amounts on hiring extra people to do non-jobs, and taxpayers are fed up with paying for this self-indulgent bureaucracy. People know, as Mr Clarke observed, that you cannot continue, year in year out, to increase public spending faster than the economy is growing without doing damage. Gordon Brown has steered the ship for the rocks, and the task of his successor as chancellor, whoever that may be, will be to alter course sufficiently to avoid disaster. With his speech on Monday, Mr Letwin has established himself as the outstanding candidate for that task.