William Hague
The Conservatives must not forget successes of the Coalition
It is a pity that Sir Vince Cable was not in the room when we negotiated the creation of the coalition government in 2010. Instead, he was making a vain attempt to strike an alternative deal to keep Gordon Brown in power – an outcome that would have left the Liberal Democrats even more washed up and devoid of influence than they find themselves in Brighton this week.
If he had been there he might have recalled the atmosphere of urgency and economic crisis that hung over the proceedings, given the appalling record of the previous administration.
One of the reasons we stunned the country by coming up with a programme for a Conservative-liberal ministry in only five days was that the cabinet secretary was hovering outside the door and the governor of the Bank of England was offering to come in to stress the danger of any prolonged indecision in such a fragile economy.
Today Sir Vince is leading his party into multiple muddles: saying he will step down as leader but not when, which is a recipe for internal discord; ruling out a future deal with either Labour or the Conservatives, which raises the question of what is the point of his party existing at all; and not being sure whether they are proud of what they did in the coalition or ashamed of it.
Yet the economic turnaround that began under that government and has continued under its solely Conservative successor was an impressive achievement that the Lib Dem conference will be too confused to contemplate and the Conservative conference might well be too distracted to communicate.
Eight years on from those tense days, politics is dominated almost entirely by Brexit controversies, and as each set of favourable economic figures comes in, commentators scratch their heads and puzzle over how on earth the British economy keeps doing better than they expected. Last week, according to the Office for National Statistics, it became clear that our Gross Domestic Product jumped up faster in the three months to July – 0.6 per cent – than almost anyone anticipated, and that unemployment, already at a 42-year low, fell further.
Could it possibly be that the coalition took the right decisions, that George Osborne was a good chancellor, that so-called austerity was the correct path, and that the reason we are now more resilient than expected after the EU referendum is that we’ve spent eight years being fairly sensible? Isn’t it important that this is recognised, so that people don’t vote to throw it all away, and that the Conservatives point this out rather more energetically when they get to their conference in Birmingham at the end of the month?
I am not suggesting that we don’t have a mass of economic issues and challenges. One look at the problems now looming – an ageing population, huge uncertainty over Brexit, the high likelihood of a cyclical global recession after many years of growth, the lack of saving after a decade of low interest rates, the need to invest in infrastructure, the insecurity caused by accelerating technological change – shows there is no excuse for complacency or celebration.
The point is that, whatever happens next, this country is now in a better position to face up to it. One vastly important measure of that is the amount we need to borrow. At the moment we sat down opposite the Lib Dem negotiators and asked if they were serious, the UK government was borrowing 10 per cent of the entire nation’s income every year. This meant that every time the Treasury spent £4 it borrowed £1, an obviously unsustainable policy.
This year the amount of public sector borrowing is coming down to well under 2 per cent of national income. The Government borrows £1 for approximately every £25 it spends, which is not too bad if the economy keeps growing. Provided we don’t now relax and go on a spending spree, we will arrive at the next world recession or financial crisis with good credit and a bit of leeway.
At the same time, the amount invested in Britain has been going up every year. The trend of Gross Fixed Capital Formation – the amount businesses and the government invest minus what they divest – has been on an upward trend, reaching an increase of nearly 6 per cent in 2017. Of course, it would be great if the increase was much more, but it’s far better than it was. Partly this is because the tax rate on businesses has come down from 28 per cent to 19 per cent.
The truly spectacular success has been in the growth of employment – 3.3 million more people have a job than in 2010, and the great majority of those are full-time jobs. Literally millions of extra households have the dignity of work and are not trapped on benefits. When they start those jobs, they pay much less in income tax. Raising the tax threshold for lower paid workers was a Lib Dem policy that we Tories readily adopted. In 2010 you started paying income tax if you earned £6,475. Now that figure is £11,800, having gone up far faster than inflation. Such policies are one of the reasons that, in Britain, inequality of incomes has not been widening.
It is true that much more now needs to be done on so many fronts: to encourage innovation and research; to spread prosperity more widely; to protect people in the “gig” economy; to limit the power of new, giant companies, and ensure young people can buy homes. But what hope would there have been of doing any of these things if we hadn’t pulled out of the morass of borrowing and spending a Labour government left behind?
As the conference season gets going, this message matters. The Tories need a unifying platform at a time of splits over Brexit, and their economic record can provide it. Philip Hammond, approaching a Budget, should be supported in holding tight the purse strings but expected to be upbeat about what the UK can accomplish. A full week of Labour denunciations of recent years needs to be seen against the truth that they would never have got those millions into work. And the British economy can cope with leaving the EU provided there is an agreed plan rather than a political crisis.
Of the two parties that formed the coalition, one wants to forget what they helped achieve. It’s vital that the other one makes its case and shows how far we’ve come.