‘You don’t win an argument by not having it. And I think that’s broadly what the Right did for a very long period of time. It was ashamed of its own shadow.’
This week’s episode is a little different. Instead of one of my usual interviews, we’re bringing you a conversation from the Conservative Party Conference in Birmingham. At a Centre for Policy Studies fringe event, its new Director Liam Halligan put the questions to Shadow Chancellor Andrew Griffith.
Griffith, a former FTSE 100 finance director, begins with why Britain’s growth rate never recovered after 2008. He points to a tax system that discourages risk, a state now spending 45p in every pound, an ageing population that governments tried to offset with high immigration and years of quantitative easing that rewarded owning assets over building businesses. He accepts that Conservative governments share the blame. In his view the party’s biggest failure was that it stopped making the case for markets, and by the end it was telling people how to heat their homes and regulating how fruit yogurt is advertised.
On the public finances, he compares Britain to Wile E. Coyote, clinging to the cliff edge while paying more for 30-year borrowing than Greece, Portugal, Morocco and Bulgaria. He insists the problem is political rather than economic: the Chancellor, John Healey, could find the savings ‘this afternoon’ if Labour were willing to reform welfare. He also explains why high energy costs are only one layer of ‘the whole stack’ holding British business back, and why he thinks handing power to arm’s-length regulators has been a disaster.
Below, you’ll find some longer excerpts from the conversation.
Marc Sidwell
Editor, CapX
On why Britain stopped growing:
‘I think there is an inflection point from 2008 onwards. Risk is incredibly important to a system. Attitudes towards risk-taking – that’s a function of society, culture, the incentives in a tax system. If you’ve got a state that is now at a high watermark, spending 45 pence in every pound, and let’s just say for the sake of argument that that 45% is less productive on average than that which is decided by the invisible hand of the market, then you are going to average down the level of growth in the economy. They tried to substitute for an ageing population with a rather open-door immigration policy, and that has not helped because of the mix of migration that on average we have seen.’
On where the Conservatives went wrong:
‘For too long we failed to engage in the battle of ideas. The nice version of that is maybe everyone thought it was won. In the Thatcherite era it was so transparently obvious that that was a better way to run an economy that you didn’t need to go and preach about it. Or the less charitable version is we ourselves lost our way in government. We were, by the end, telling people how they would heat their home, what type of car they would drive, and even micro-regulating the advertising of fruit yogurt. That is definitely not what I came into government and politics to do. If you don’t practise what you preach, then ultimately you leave that gap for others to come and fill.’
The UK as Wile E Coyote:
‘You remember those cartoons – Wile E. Coyote – they run over the edge of the cliff and they’re running in clear air. But then, miraculously, the cartoon character stretches out an arm and just about clings back onto the cliff. And I think that is where we are. We are the wonderful United Kingdom, with all of its heritage and pedigree, one of the first countries in the world to industrialise, and we are now paying more for our 30-year debt than Greece, Portugal, Morocco and Bulgaria. That is not the nation I want to hand on to our children and grandchildren.’
A political problem, not an economic one:
‘The UK should not be in a fiscal crisis. This is a country with great rule of law. It’s not that there is widescale tax evasion. It’s not that there’s some sort of societal anarchy. The issue is simply that the Government won’t make the spending decisions for the last £50 billion out of £1.6 trillion to get its public finances in order. It’s that order of magnitude. John Healey could do it this afternoon. He could identify even just part of the welfare reforms that we’ve identified. He could then fund defence. He could go to the capital markets and say, “Look, I’ve done this. I’ve got a credible plan.” So the issue we have is not a fundamental issue of economics. We’ve got an issue of politics.’
The disaster of Blairite regulation:
‘Charlie Munger, Warren Buffett’s business partner, said: “Show me the incentives and I’ll show you the outcome.” The incentive on the regulators is that if anything ever goes wrong, if you’re not summoned onto the Today programme, you’ll be in front of the select committee. You don’t own the upside. You do a good job, it just looks like a clean sheet after 20 years. The Blairite model of outsourcing regulation to third-party regulators has been a disaster. Whatever you might think of politicians, they are genuinely well-meaning. They want to live in a society that is more prosperous, and they want to take the credit for that as well. If you’re a regulator, you don’t even have that symmetry. All you’ve ever got is the blame if something goes wrong.’
Britain can do better than the G7:
‘The G7 is the club of other slow-growing, sclerotic Western economies, plus the US, which tends to be an outlier. There’s no point being the fastest-growing – it’s the veterans’ race. The peer group I worry about is, at worst, the G20. These are the countries that are coming up, becoming more prosperous, building industries that we once thought were our heritage. Many of them are aspiring to be Singapore, which was mud and malaria. Now it’s a biotech and financial services hub. If you want your children and grandchildren to have high-value jobs, prosperous lives, the world’s best infrastructure – the G7, my friend, is not your peer group.’
On the battle of ideas:
Liam Halligan: ‘It feels to me as if we are now on the cusp of a once in a generation battle for ideas. Labour, red in tooth and claw, want to make the state bigger. Your party now – not previously, but certainly now – wants to make it smaller.’
Andrew Griffith: ‘100%. And we’re ready and we’re up for it. And we need not just allies, but people in the Centre for Policy Studies and elsewhere making some of these arguments afresh. You don’t win an argument by not having it. And I think that’s broadly what the Right did for a very long period of time. It was ashamed of its own shadow. It didn’t have the intellectual confidence. And the Conservative Party had within it people who weren’t conservative. That is changing. We are back. We’re loud and proud.’
