Tories must not be the party of the big state

Since the election of Tony Blair in 1997, a misguided economic consensus has transformed Britain from a free market capitalist economy to a corporatist social democracy. This is the argument The Sunday Telegraphreveals Liz Truss will be making on Monday in a speech to the Institute for Government. 

The former prime minister will maintain that it was her paramount ambition to reverse this; under her, Ms Truss argues, public spending would have been £35.5 billion lower over two years than it is under Rishi Sunak’s government. 

Ms Truss had planned to increase welfare benefits in line with wages, rather than inflation – but was thwarted in this by opposition within her own Cabinet. In addition, Mr Sunak has made extra spending commitments on the NHS, schools, childcare and defence. 

In part, Ms Truss is attempting to combat a mischaracterisation of her time in office: that she was not seeking significant reductions in public spending. Her political enemies argue that her tax cuts were “unfunded”, and therefore reckless by definition. It is a view of her government that has been influential in the current administration, which seems reticent to discuss any reductions in taxation at all. 

But reducing the tax burden is one of the few surefire ways the Conservatives have of increasing the economic growth rate. It is also a political necessity. 

Indeed, the Conservatives cannot afford to be the party of the big state. For the Tories to have any chance at the next general election, they will need to show that their vision is different from that of Sir Keir Starmer’s Labour Party. 

A flat tax, which was also considered by some members of the Truss government, may be off the agenda for now, but Mr Sunak will need to cut taxes before the election and convincingly hold out the promise that there will be more to come if the Tories are returned to office. It is a pledge that Labour’s other commitments mean they cannot match. 

Mr Sunak’s rule necessitates that tax reductions are only possible alongside cuts in public spending. This should not frighten the Tories. It ought to be possible to reduce spending without economic or political cost. Indeed, it may well be popular. The welfare budget remains ripe for pruning. The HS2 rail link is set to cost £100 billion or more. Scrapping it would reap political dividends as well as being the right thing to do.

Mr Sunak still has the chance to show that his vision for Britain is radically different from that of Sir Keir. But he needs to grasp that opportunity before it is too late.