The Conservative party needs to rediscover its economic way

For most people, the Conservative’s 2015 “long-term economic plan” is now a distant memory.

But as someone who was deeply immersed in that election campaign, I still sometimes wake up at night reciting its contents.

Though much mocked for its repetition, the plan was more than just a catchphrase. From deficit reduction and tax cuts to welfare reform and immigration control, it was underpinned by meaningful policy.

The Conservatives have not developed a clear economic platform since.

Brexit is partly to blame, exemplified by the way this year’s Spring Statement on Wednesday will be overshadowed by more meaningful Brexit votes. But the real cause is deeper. The Conservative party has lost its way on the economy.

As a special adviser to both David Cameron and Theresa May, I watched as the economic plan was torn up, piece by piece. By the 2017 General Election, the party had no coherent economic message at all.

Since that disastrous campaign, the government has clarified its broad fiscal policy.

The Prime Minister and chancellor’s “balanced approach” of keeping debt falling and increasing public spending gives a clear anchor ahead of the next spending review. It also provides an important dividing line with a potential Labour government: debt down under the Conservatives, up under Jeremy Corbyn.

But there are two other big areas where the Conservatives need urgent clarity: tax and economic growth.

Long-promised cuts to corporation tax and increases in the personal allowance are now close to being delivered.

So what comes next?

After years of spending cuts, and with the country facing the rising costs of an ageing population, there is little scope for further large tax cuts given borrowing targets. But the 2017 election showed that if the Conservatives want to be seen as the low tax party, they must back up that assertion with specific measures.

One idea might be to put an overall limit on the tax take. Australia has a “tax speed limit”, a ceiling for tax as a percentage of GDP. The UK’s fiscal rules cover a number of borrowing measures; they could include tax too.

This would tie the government’s hands in some ways, but low taxes should be for life – not just Christmas and elections. This would also draw another political dividing line, with Corbyn’s tax hikes putting him above the speed limit.

An overall commitment to low taxes could be further bolstered with a specific tax cut. Increases to the personal allowance mean that people will soon be able to earn £12,500 a year without paying income tax. But National Insurance contributions still kick in for employees earning £162 a week, or under £8,500 a year.

A modest increase to that threshold would be a broad-based, progressive tax reduction, which would disproportionately help those earning the least.

The second big challenge is how to boost growth. Higher productivity growth means higher wages and healthier public finances. Yet sadly, the government’s pro-growth policy currently falls between two stools.

After the referendum, there was a deliberate effort to reduce the importance of the Treasury by giving the rebadged Department for Business, Energy and Industrial Strategy an enhanced role.

Whatever the merits of this idea, Number 10 now lacks the political capital to shift more power away from the Treasury. This leaves the government in a position where the Treasury – still Whitehall’s most powerful department – has limited engagement with or interest in the government’s headline growth plan.

There is much good in the industrial strategy, including the government taking a greater role in identifying the sectors where the UK is likely to succeed and consciously supporting them. But without the Treasury’s backing, the strategy will not fulfil its potential.

The government needs to reboot the agenda with the Treasury taking the lead role. This should include a return to the Osborne-era support for city regions outside London and the south east.

Clarifying economic policy in these areas isn’t just good economics, it is good politics too.

The thought of an election before 2022 no doubt terrifies Conservative MPs. But given the parliamentary arithmetic and Brexit difficulties, another election remains a strong possibility.

Labour enters it with a very clear economic message: masking a radical agenda with platitudes about asking those at the top to pay a bit more tax with no rises for the rest, investing in left-behind regions, and taking on a rigged system.

The Conservatives urgently need a clear economic agenda to counter that threat. Falling debt, more money for public services, low taxes, and a proper growth strategy could provide its building blocks.