A revolution of consumer choice is the simple answer to folly of Corbyn

Tories must drive home power of free markets to counter dangerous allure of Labour’s welfare statism

Today, the most Left-wing Labour leader in British political history will stand before the “comrades” and tell them just how red he wants to paint the front door of No 10. The fact that he’s able to do this, and people are taking him seriously, is a searing indictment of the complete failure of the Conservatives to articulate a positive vision of freedom and free markets.

Jeremy Corbyn is right about one thing. If this country is to stick with its current model of welfare statism, taxes and spending will inevitably have to rise dramatically. This is despite the fact that, as a proportion of national income, the tax take is already higher than it has been in 30 years and, in real terms, public spending has never been greater.

We know what Mr Corbyn wants to do about this. He wants to grab dramatically more of the wealth generated by businesses and private citizens, and thus seriously damage the economy. And his prescription is resonating with a generation which has no experience of the three-day week, 97 per cent tax rates, Red Robbo and state-owned everything.

In the face of this, the Tories have no coherent answer. Over the past seven years, they have sought to balance the books through “austerity”, but “austerity” isn’t that austere. In 2010 the deficit was going to be gone by 2015. In 2015 it was going to be gone by 2020. And now we’re told it will be gone by 2025. This is painful to watch and will be all the more so if comrade Corbyn ever gets his hands on the levers of power.

The simple truth is that our current welfare state is unsustainable. And it’s going to get worse. To cope with the costs of an ageing population, already high public spending will have to rise higher and higher. Some estimates put the cost in the hundreds of billions. Even Corbyn would struggle to put up your taxes enough to pay for all that.

In the past 40 years, we have witnessed two political revolutions. The first was the Thatcher revolution, which unleashed the power of free markets and individual responsibility. The second was the Blair revolution, which paid lip service to the principles of a free economy while rolling out a big expansion of the state.

Nearly 40 years on from Thatcher and 20 years on from Blair, it is time for the Conservatives to find a radical new political vision to address the unprecedented challenges ahead. They need to counter Corbyn’s revolutionary appeal with a “choice revolution” of their own. What should it include?

To begin with it needs to restate the power of free markets. Every generation has to fight this battle, and we’re having to learn that lesson all over again. The American Nobel laureate, James Buchanan, has argued that the biggest threat to free markets in the 21st century is the paternal nature of socialism. He contends that people are afraid to be free and want to have values imposed on them.

So the battle for free markets starts with the battle of ideas. We must make the case that the freedom people aspire to in virtually every other area of their lives – to buy whatever they want, to apply for whichever job suits them, to fall in love with whoever they please – should be extended.

Yet as things stand the Prime Minister doesn’t seem to get this. Her economic views and philosophy lack any coherent framework of reference. Thatcher viewed every policy through the prism of freedom and free markets. That world-view needs to be rediscovered.

The battle must also be practical. We need a revolution in choice. We have it in almost every area of our lives, up and down the high street. But in two of the most fundamental areas – our children’s future and our health – we are wedded to public sector monopolies. This is surely unsustainable in the 21st century.

In the years to come, consumer demand for improved choice and better services will inevitably lead to two questions. Why do hospitals and schools have to be in the public sector in the first place? And if they are, why must the state deliver their services as well as pay for them? Health and education could be huge potential growth markets in the 21st century, but that potential will never be fully realised in the public sector, which will never be the home of innovation and agility.

We need schools that cater for a large cross-section of interests and abilities. (Maybe children would then want to go to school.) We need hospitals that compete with each other to provide the best service, just as in any other part of the economy.

The private sector shouldn’t get off lightly either. There needs to be hyper-competition to accelerate the entry and exit of firms and the death of crony capitalism. Competition is king. We should welcome Uber, instead of pandering to vested interests.

Every socialist government in history has been an economic failure when it stuck to its core beliefs. Given the future costs of an ageing population, that lesson needs to be hammered home time and again.

As the electorate ages, people will be tempted to vote for all manner of entitlements on the basis that “somebody else” will be paying for it. The somebody else is our children.

The Thatcher revolution never truly reached public services like health and education. There was glasnost and perestroika, with some restructuring, but real market forces were never introduced. Tony Blair eventually realised that genuine consumer choice was the solution to public services. Unsurprisingly, nobody else in the Labour Party agreed with him. But if we want greater wealth and wellbeing, it is what we need in the most critical parts of the public sector.

The Office for National Statistics is expected to announce this week that British households are saving more than we thought. In uncertain times, households are acting prudently. What a contrast with a Labour Party committed to nationalising anything that moves, with money from it knows where not.

Graeme Leach is founder and chief economist of Macronomics, a macroeconomic, geopolitical and future megatrends research consultancy