Working on the assumption that oppositions do not win elections but that governments lose them, the Tories are hoping that if they are unremittingly nice, if they cycle to work, discard their ties and promise to match Labour's spending plans, then the swing of the pendulum will sweep them back into office.
They are not fully wrong. Ever since David Cameron was elected on the nice ticket, he has done a terrific job in restoring Tory fortunes. He has learnt from the last three elections that if the Tories threaten tax cuts or make rude noises over Europe, the electorate will opt for the nice parties: New Labour or the Lib Dems.
Danny Kruger recently described in Prospect this new Cameron agenda, giving it a name—fraternity—which represents a triangulation of the fraternity, equality and liberty of the French republic. The idea is that while the Tories have traditionally emphasised liberty and Labour equality, Cameron now offers fraternity. But this agenda has little substance because a) it is transparently a PR exercise, b) the Lib Dems have long claimed it anyway, and c) it is intellectually flawed: rather than the party of liberty, the Tories have generally been the party of social conservatism, business interests and the middle classes.
In any case, niceness may not be enough: the last two changes of government were not won solely on the swing of the pendulum. They were won on the back of a Big Idea. Margaret Thatcher's big idea in 1979 was, of course, the market. At the time, Jim Callaghan said, "There is now a sea change and it is for Mrs Thatcher." The Tories under Thatcher did not just wait for an electoral swing; they won the debate over the management of the economy.
Tony Blair was elected in more benign times, but he also had his own Big Idea—the third way. By 1997 Blair had recognised that the British people were losing patience with the state provision of health, education, welfare and transport. The third way was his solution. I never understood why people sneered at the third way, because it was not obviously stupid. Inspired by books such as David Osborne and Ted Gaebler's Reinventing Government (1992) and championed by men such as Tony Giddens, director of the LSE, the third way case was that while the public services were too important to abandon to the private sector, civil servants—for reasons of accountability and democratic governance—could not deliver them efficiently. Therefore governments should employ free market tools to deliver public services, though under the auspices of, and funded by, the state.
In practice, though, third way methods will always lead to disaster. Osborne and Gaebler's book was full of examples of entrepreneurial government, often drawn from small American towns under the influence of unusual mayors, but experience shows that when practiced systematically, free market tools work only in response to free market incentives, and that in the absence of those incentives a third way calls forth Soviet-like horrors, such as Gordon Brown's centrally planned targets.
The full reckoning of the disaster that New Labour's third way has wrought on our public services has yet to be written but it is now recognised that Gordon Brown's centralised targets have damaged the professional esprit and staff morale of the public services, leading to falling productivity, the scandal of the PFIs, poorly contracted outsourcing, meretricious consultancies, computer failures, endless bureaucratic reorganisations and vast waste.
The NHS, for example, receives twice as much income, in real terms, than a decade ago, but is nevertheless making thousands of people redundant. As for education, no one knows what is the greater scandal—the failure of the city academies, the continuing decline of the comprehensives, the grade inflation that disguises those failures, or the 1,750 regulations, targets and guidance notes the department has vomited over schools since 1997.
But David Cameron cannot easily criticise these failures. What would he do instead? Privatise them further? Boo hiss! Nor can he revert to traditional civil service executive practices because those have long been discredited. Nor can he claim that he will manage the public services better than Labour, because no one will believe him. He might offer devolution and greater autonomy, but local authorities lack credibility, and in any case Gordon Brown has recently adopted those policies himself. And Cameron can hardly hope to ape Brown and disguise the failings by ever-increasing subsidies.
The public services are the now the battleground of political debate, and Cameron will need a Big Idea if he is to win the debate. Fraternity will not be enough—but "crowding out" could be. Crowding out happens when the state pays for a public service: its money crowds out private money. Take the market in cars. If the state provided every one of us with a free car, we would buy fewer ourselves: cars being free, we would instead spend our money on houses or holidays. And with cars being free, we would accept lower quality than if we bought our own. The state provision of cars would, therefore, lower the quality of motoring.
Empirical evidence confirms that public services operate in the same way, and that the state's provision of public services has impoverished them and, moreover, rendered them less equitable. Consider elementary education. Before 1891, there was a brisk market in elementary education in England and Wales. The 12,000 independent church schools and the 3,000 state board schools competed on near-equal terms. Both sets of schools charged fees of about 10s a year, and both sets of schools offered free education to the children of the poor, the subsidies coming from private endowments and taxes.
But in 1891 the Tories introduced the Free Elementary Education Act, to provide free education for all at the state board schools. And to pay for these places, the Tories raised the most regressive tax in the country, the domestic rates, to encourage ordinary people to transfer their children from the fee-paying church schools. The Tories did all this because their board schools were undersubscribed (there was an overprovision of about a million elementary school places in the country) which they determined to reverse by destroying the independent competition. And by 1902 enough parents had transferred their children to force the church schools to sue for nationalisation under the act of that year.
The educational economist EG West chronicled the consequences of this nationalisation in two great books, Education and the State (1965) and Education and the Industrial Revolution (1975). He found that during the 19th century, the share of GDP spent on education had risen inexorably, but that once the state had nationalised the schools and crowded out their sources of private money, their share of GDP stagnated. Moreover, their administrative costs rose sharply and their productivity fell. This terrible story led to the poor literacy and numeracy of Britain today.
It was to be matched in health. The myth is that the ordinary people of Britain enjoyed no healthcare before the NHS was created in 1948, but there were then already 1,334 voluntary hospitals, offering free care for the poor (provided by endowments, gifts and grants) and receiving 59 per cent of their income from patients' fees. The private sector was then buoyant, and in his famous report of 1942, Beveridge applauded the "phenomenal growth of voluntary insurance against sickness" and he recommended that a future NHS be funded by a combination of private insurance and government underpinning (similar to the continental European models of today, the best in the world).
So market-orientated was Beveridge that the Tory MP Chips Cannon wrote in his diary that the report "surprisingly enough irritates the Socialists more than it does us. I think it should be adopted." But Nye Bevan hated the voluntary sector, and overruled Beveridge to create a service funded solely by taxes. With private money having been crowded out, the NHS has since lurched from funding crisis to funding crisis, culminating in this year's redundancies.
Similar stories can be told about welfare (three quarters of all working men were covered by the friendly societies before Lloyd George neutered them in 1911) and other public services. Most people, if allowed their taxes back, could fund their own schemes for health, education and welfare. Of course, there will always be some people who cannot, and there will always be exceptional costs that cannot be accommodated by ordinary people—a heart transplant, for example, or the long-term support of mentally disabled children—and these should be met by the state, but the costs of ordinary so-called public services can ordinarily be met by ordinary people, tax remissions permitting.
And the studies of economists such as EG West show that when ordinary people pay for their own services, they spend more than the state. The state, therefore, by crowding out private income, impoverishes public services. Moreover, evidence shows that when autonomous services are allowed to seek funding from various sources (including the state) they provide the poor with better services than when services are run as state monopolies. State monopolies preferentially serve the articulate middle classes over the working classes.
So there may be a strategy here for Cameron. He should provoke a debate over crowding out. If he's clever, he'll get the debate started by ideological friends outside parliament—journalists and think tanks—to create a climate such that, when a politician on the Today programme calls for more government money, John Humphrys's natural response will be to ask about crowding out. Only when government spenders are put on the defensive will Cameron have created his own sea change.
Gordon Brown is likely to win the next election as a result of the "bounce" he will get when he finally takes over the premiership from Tony Blair. So Cameron will be best off focusing on the medium term, effecting his sea change and adopting crowding out. Once the nation understands crowding out, Cameron's policies will emerge naturally if only because, once ordinary people are paying for their services again, they will demand real local autonomy and real devolution, and thus ensure better management. In the process, they will re-empower the professionals.
Ted Heath and John Major followed no ideological compass, and they sank uselessly. Let Cameron learn from the masters, Thatcher and Blair. Let him adopt the Big Idea of crowding out, let him convert the electorate, let him win in 2015, and let him retire in 2025, having altered Britain for good. And let him quote from Karl Marx's 1878 Critique of the Gotha Programme—"Education by the state is altogether objectionable."
