Conservatives need to rethink the state

There was a time when reducing the size of government was a key Conservative ambition, almost an article of faith. During their 13 years in opposition until 2010, they had anticipated a decisive break with a trend that had seen the state become excessively intrusive, interfering, and a drain on the overall economy.

Between 1979 and 1997, the Tories had moved the state out of manufacturing and the delivery of utilities with a programme of privatisation. Although there was hardly any renationalisation under the Blair/brown governments, state provision still grew mightily in the social sector through the expansion of the NHS and welfarism.

The Conservative difficulty has been in trying to send out two different messages. They have been anxious to avoid accusations of seeking to “trash public services”, while wanting to give the impression of favouring smaller government. This dichotomy was starkly illustrated in the Budget on Wednesday. The Chancellor said: “We need a more productive state, not a bigger state.” This was an echo of what the Tories were saying 14 years ago – that it was possible to have a smaller state and better services. More for less, they called it.

But five prime ministers later and this aspiration has been tested to destruction. What is needed is not the same state run more efficiently, but a complete reimagining of what it does, why it does it, and who might do it better. This was the thinking behind the Thatcher era of denationalisation. Few today, even in the Labour Party, think the state should fly them to a holiday destination, provide their telephone, or deliver their gas. The railways are on the verge of being completely renationalised again, yet anyone who thinks they will improve as a consequence does not remember British Rail.

The old assumption that the centre knows best and has a monopoly on information has long been smashed by access to the internet. People can search out the cheapest or the best option for a hotel or estate agent in a matter of minutes. Yet when it comes to public services like health care, such choices are limited only to the well off.

In his Budget, Jeremy Hunt announced “a landmark Public Sector Productivity Plan that restarts public service reform and changes the Treasury’s traditional approach to public spending”. But it does nothing of the sort. It involves throwing another £6billion at the NHS in the belief it will improve its productivity, a triumph of hope over expectation. Apart from school reforms and a brief dalliance with a benefits overhaul since stymied by the pandemic, the Conservatives have failed to “roll back the frontiers of the state” as Mrs Thatcher put it.

In a speech to the Centre for Policy Studies on Wednesday, Rishi Sunak said Mrs Thatcher “knew that hard work should be rewarded, and any extra penny our country earns is better spent by businesses and individuals than by the state”.

But this is mere rhetoric. Practical and meaningful reform would redefine what the state does and turn over more public services to the private and voluntary sectors, where higher productivity and greater value for money are more likely to be found. We are further away from that than ever.