‘Reject Thatcher liberalism to win back millennials from Labour’

Chancellor will use major speech to argue case for a new type of capitalism that embraces digital economy

THE Conservative Party must reform Thatcherite capitalism to win over millennials who have flocked to Labour, Philip Hammond is to tell Theresa May.

The Chancellor believes the free market liberalism introduced by Margaret Thatcher is no longer fit for purpose, because it has failed to keep pace with the rapid changes of the digital economy.

He will use a major speech to make the case for a new type of capitalism that takes advantage of the digital age, artificial intelligence and robotics to make sure the economy “works for our society”.

Among the more radical ideas he is considering is greater state intervention in companies at the cutting edge of technology, to ensure they cannot build up the near monopolies enjoyed by the likes of Google and Facebook.

He will refer to a “new market economy” which harnesses the potential of new business models rather than allowing them to mushroom with little regulation or taxation.

He will also argue for changes in the way the workers of the future are trained, with the ultimate aim of increasing productivity, which has stalled in recent years.

Mr Hammond’s calls echo those made in recent weeks by Michael Gove, the Environment Secretary, who said the Tories need to find new economic arguments to win over young voters and not rely on the memory of Mrs Thatcher’s reforms in the 1980s.

He told a meeting in the Commons the Conservatives needed to move on from relying on tired arguments about recapturing the 1980s, adding: “The world has changed, capitalism has changed.”

Mr Hammond is frustrated that young voters are sticking with Labour despite John Mcdonnell, the shadow chancellor, saying his mission is to “overthrow capitalism”. He is insistent that most young voters are “natural members of our tribe”, but concedes that the Tories have done a poor job of convincing them that capitalism holds the key to their future prosperity.

An ally of Mr Hammond said: “Philip believes it is up to the Conservative Party to be able to articulate a market economy model that we are proud to defend because we know it is working in the best way for the most people.

“This is about the future of Conservatism and the nature of our economy in the digital age.”

Mrs May is understood to be receptive to Mr Hammond’s arguments, which he will set out in detail before the Conservative Party conference in October. They are likely to form a key part of the autumn budget statement he is expected to deliver in November.

The Chancellor is working with officials to explore reforming the tax system to make sure online retailers pay their fair share, following widespread public outrage at the tiny amounts of UK tax paid by companies including Amazon and Google.

He has already introduced measures to claw back royalties on UK sales from companies that channel their profits through low-tax countries, but wants to go much further.

Mr Hammond regards the reforms as his “legacy”, suggesting he is preparing for the day he is replaced as Chancellor, which could come next year once Britain has left the EU.

His speech will counter Labour’s narrative about “fixing the broken system” and he will instead argue that the components of the system are changing so rapidly that the economy must adapt, rather than needing to be mended.

A Whitehall source said: “Labour is proposing something that would be a disaster for our country, but we are allowing people to wander into Labour’s tent nonetheless.

“The onus is on us to make sure we are offering people a modern economic model that is right for our country.”