Conservatives must argue again for the market economy

PM should ditch the social democratic ideology of her adviser Nick Timothy and focus solely on Brexit

This election was a gamble – as all elections are gambles. You can never take them for granted. But you can run a good campaign. Unfortunately this was a most appalling Conservative campaign – thoroughly inept.

There were two principal problems: personality and policy. It was far too personal a campaign, and Theresa May couldn’t carry that off. Worse, there were too many things in the manifesto that hadn’t been thought through, with social care being the most obvious. Not that the social care proposals were in themselves stupid, but it is dangerous to do these things before elections if you don’t have to; better to introduce the legislation later, once elected. In this the two problems combined, because colleagues could have alerted her to the danger, had she consulted them. But she did not.

She has always been a loner. She was a loner in the Home Office, and from day one as Prime Minister. By contrast Margaret Thatcher, with whom Mrs May has sometimes been compared, was extremely collegiate. She enjoyed argument and dialogue. She always wanted to win the debate, of course, but she enjoyed it. It was only towards the end of her very long premiership that she felt she was completely self-sufficient.

Moreover, Margaret Thatcher had a considerable interest in economic policy, which Mrs May does not. I remain an unrepentant Thatcherite, believing in the virtues of the free market, deregulation, fiscal discipline and low tax rates. When this approach was pursued during the 1980s it was a conspicuous success, and recognised as such throughout the world.

It is worrying that Theresa May’s Conservative Party, judging by its manifesto, seems almost to see belief in the market economy as an ideological fixation from which we need to free ourselves. Certainly, there is an idea which animates it: the value of freedom within the rule of law. But the overriding practical reason for making it the guiding principle of economic policy is that history has shown, over and over again and throughout the world, that it is the only sure route to economic success and rising living standards.

There may be some who feel that this approach to economic policy has been discredited by the appalling behaviour of all too many bankers, which led to the great banking crash of 2008, from which we have still not fully recovered. But in fact the lesson of that disaster is precisely the reverse. With banks allowed to get so large, and so complex, that they were seen by the authorities as too big to be allowed to fail, market discipline, an essential part of the free market system, was conspicuous by its absence.

It is essential now that the new government pursues the sort of economic policies that were so successful during the Thatcher era. So far, Mrs May seems to have relied on the social democratic ideology of her adviser Nick Timothy. This ideology is not only objectively wrong, it was also tactically wrong. It was meant to attract many Labour voters, but clearly failed. Once you move the Conservative Party to the Left you will be outflanked by the Left itself.

In consequence, Mrs May has been immeasurably weakened, and were there a powerful figure in the Cabinet who had a lot of support in the party, she would be vulnerable. But who is the alternative? There is no obvious successor. Yet even though she has got to plough on, the unpalatable truth is that she will be living day by day.

Still, there are two great positives for her to take. The first is that this election has, in effect, demonstrated that the Union is safe. This is hugely important. The second is that the other party she is relying on – the DUP – is absolutely solid on Brexit.

That leaves the question of where to go from here. The answer is that Mrs May now has to drop everything and focus solely on getting Brexit right. This is more possible than it sounds. Only economic policy is essential in government, and the conduct of most economic policy doesn’t require parliamentary approval – so she can focus purely on the forthcoming negotiations.

These are due to start very soon, though in the circumstances she can start them later, particularly given German elections later this year. Serious negotiations were only going to begin after those elections anyway.

When talks do start, however, there is no denying that they will be considerably tougher. Brussels was hardly inclined to make any concessions to Britain before this disaster. Now very much less so. The EU 27, frequently divided among themselves, are constantly looking for a unifying force, and doing down Mrs May and the UK will now be a wonderful thing on which they can all agree.

Still, there is in principle no reason why Mrs May cannot, as she says, form a reasonably stable and enduring government. I was in the House of Commons in 1977 when Jim Callaghan formed the Lib/lab pact – the closest precursor to this situation – after losing his majority. There were occasions when we Conservatives, in opposition, defeated the government. But that did not automatically lead to the collapse of the government. Indeed, Callaghan remained PM for two more years.

Mrs May, too, will be attempting to carry on regardless. She will be helped by the fact that there is great nervousness in her party, and little appetite for the unknowns of a leadership election. She will have to ditch Mr Timothy’s ideological baggage. But, as unlikely as it may seem, she may be able to come back from this position. It won’t be easy. The Conservative Party has many fewer options today than it did before this election.