Conservative ideas must not be sacrificed

The next few weeks will be difficult for David Cameron. Any hope that he could call an EU referendum and hold the Tory party together – even as he campaigned for Britain to stay in – has been exposed as wishful thinking by Iain Duncan Smith’s resignation. The Tories are now fighting each other in the open, with Europe as the casus belli in a broader, necessary argument about what it means to be a Conservative. We sincerely hope that sound, necessary policies do not become casualties of that conflict.

It seemed for a while that everything was going to plan for Mr Cameron and George Osborne. The surprise Conservative victory in 2015 was a personal triumph for the Prime Minister and his policies. Unfortunately, the new Government contained structural weaknesses. It seemed politically strong in part because the Labour Party favours unelectable leaders, the fact that the SNP terrified Middle England and because offering a free vote in an EU referendum appeared to be a clever way of papering over ancient Conservative divisions.

Mr Cameron assumed that the establishment would back him, or else that Eurosceptic ministers would avoid rocking the boat in order to keep their jobs. Things did not work out that way. Six Cabinet members immediately announced their support for Brexit, quickly joined by Boris Johnson. Mr Duncan Smith soon complained that Mr Cameron was not letting Cabinet Eurosceptics speak their minds. Now he has resigned over the fate of his welfare reforms, which he claims were taken by the Treasury and repackaged as cost-cutting exercises, thus undermining their moral purpose.

Ordinarily, Mr Duncan Smith would just be retiring to the back benches. Thanks to the EU referendum, he now has a campaign to help lead and a spotlight to fill. And, whatever the outcome of the plebiscite, there is very likely to be a change to the front bench after June 23. Suddenly everything seems to be up for grabs. The party and the country is entering uncharted political territory. Even Mr Osborne’s position as Chancellor no longer looks as guaranteed as it once was: last week’s Budget has been torn apart by critics.

Labour has no reason to gloat: they are still saddled with the hapless Jeremy Corbyn and a shadow chancellor who wants to tax and spend his way to socialism – the agenda that cost them the last election. Nevertheless, Labour knows that the Tory majority is small and vulnerable to parliamentary coalitions of convenience – or byelection defeats. They also believe that Mr Duncan Smith’s resignation has given them ammunition in their effort to define the welfare reform narrative.

We admire Mr Duncan Smith for displaying principle: oh, for more politicians with the courage to follow his long example. He is right that cuts, which are sorely needed given the still huge size of our deficit, should affect all groups in society. But he risked affirming a Left-wing myth when he also said that one should not offer tax relief to higher earners while simultaneously reforming benefits. He was referring, of course, to cuts in capital gains tax within the Budget.

No Right-winger worth their salt should encourage the fallacy that businesses or wealthier citizens have been pampered by Mr Osborne. The opposite is true. Businesses have been hit by a rising minimum wage, additional regulations, a higher dividend tax, the pension auto-enrolment system and, in this Budget alone, a fresh tax assault that will cost them at least £9bn over the next few years. Yes, the highest earners long ago saw their income tax rate cut from 50p to 45p, which, incidentally, led to them paying more – proving the supply side theory that lower rates of taxes generate wealth and thus higher rates of return. But the middle and prosperous classes have also endured rises in sales taxes, severe stamp duty increases, drastic reductions in pension relief, endless antiavoidance campaigns and the spectre of fiscal drag. Last week the Chancellor, rightly, promised to increase the higher rate tax threshold to £45,000. But during the coalition, hundreds of thousands found themselves slipping into that band – so he was only undoing some of his own damage.

The Right has to explain to people that a smaller state is necessary to let the private sector grow, that lighter taxes will encourage hard work and investment – and that welfare must be reformed so that it becomes a hand up rather than a hand out. Without investment, there is no growth. And if there is no growth then there are no jobs for people on welfare to fill, or tax revenue to finance social programmes for those that need them.

While Conservatives can agree to disagree on whatever matter of principle divides them, they would do well to try to maintain a united front on philosophical essentials. Last week’s Budget drew criticism in part because the work of explaining its goals and methods was not done and because it was so narrowly political. That made it easier for the Left to provide an explanation of its own: that Tories are heartless.

And now, on top of that, the decades-old time bomb of division over Europe has gone off. Mr Cameron will doubtless welcome the conciliatory words of Priti Patel and Michael Gove, the latter writing on this page that he believes unity can be re-established. Nevertheless, the Prime Minister has to find a way of limiting the damage – and reconstructing his project with a fresh, compelling and Conservative narrative.