No joy for pebble-dash person

The Conservatives' hopes of winning the next election, already very faint, would be virtually extinct if it were not for two things: the brief poll lead they enjoyed in the autumn after the petrol-tax protests, and the success of George W Bush (we should refrain from calling it victory, since he did not actually win a majority of votes) in the US presidential elections. From these, the outlines of a winning campaign strategy emerge before William Hague's wondering eyes. This threat to Labour's second term is outlined in a chilling memo, which we reproduce on page 8 of this issue, written by Steve Morgan, the head of a public affairs consultancy, to Tony Blair and Gordon Brown. Put simply, it involves an appeal to the "little people" - those who, while not poor, live on modest incomes in modest pebble-dash houses, hold modest ambitions for themselves and their children, run modest cars and hold modest views to the effect that the country is being overrun by foreigners scrounging on social security and that gay men flaunt themselves rather too much these days. These people, or so the theory goes, resent the swish, promiscuous lifestyles of the metropolitan glitterati; equally, they resent the feckless, idle poor who benefit from state handouts.

The Tory proposal to abolish tax on dividends and savings income for those earning less than £32,785 a year is a perfect example of how Mr Hague intends to appeal to such people and of how he has learnt from the Bush campaign. The Republicans, as Mr Morgan explains, accepted many of the Democrats' social objectives, such as a better deal for pensioners, but proposed to achieve them in a different way. Mr Hague's proposal, too, is presented as of benefit to pensioners, as well as blue-collar workers, and to the thrifty ones particularly. The Tory leader and the shadow chancellor, Michael Portillo, conjure up the image of a special deal for the holders of piggy-banks (which, one feels, go with pebble-dash houses), who occasionally take a few pennies to the Halifax, being too unsophisticated to understand the stock market.

All this is nonsense. Even usually perceptive press commentators seem to have bought the line that the proposal represents a radical departure in Toryism in that it offers no benefit to the rich. On the contrary, non-pensioners in the top 10 per cent of earners will gain to the tune of an annual £1,500 each on average. Moreover, it would be perfectly possible for a non-working couple that had well over £1m in capital between them (not including the value of any property they owned) to pay no tax whatever. By contrast, the benefit to the middle 10 per cent of earners - pebble-dash people, presumably - amounts to an average of just £78 a year.

What can be said with great certainty is that the scheme benefits the poor hardly at all. Most poor people have no savings; of those in the bottom 10 per cent of earners who would benefit, the average gain is £18 a year. To be fair, appealing to the poor of working age is no part of Tory strategy. But even the majority of pensioners, who are supposed to be dancing round their Zimmer frames in celebration of Mr Portillo's largesse, will not benefit, since 60 per cent pay no tax as it is. And the richest tax-paying pensioners (who are already far richer than the vast majority of families with children) will gain 70 times as much as the poorest tax-paying pensioners.

This scheme, moreover, will cost at least £3bn, the same sum that Gordon Brown plans to spend on helping families with children. The question arises once more, as it so often arose in the past over Labour spending plans: where will the money come from? Here, the best verdict is that delivered recently by the Sunday Times economics editor: it is all "a dreadful muddle". Mr Portillo, committed to reducing public spending by £16bn, has come up with only £8bn of cuts. Many of them don't look like cuts at all (saving £200m from regional assemblies is difficult when Labour has no budget for them) but, among those that do, there is a clear theme. Cutting industrial injuries benefit and cutting support for lone parents are straightforward attempts to penalise the less well-off, while cutting welfare state "fraud" is merely code for making it harder for poor people to get benefits.

One can thus see Mr Hague's strategy, and it might just work. But it should not be hard to convince pebble-dash people, Mondeo men, Worcester women, and all the other categories conjured up in the imaginations of marketing folk, that the Tories have nothing to offer. The Tories were rumbled in 1997; they will be rumbled again.

This article first appeared in the 12 February 2001 issue of the New Statesman, Exclusive: how Labour could lose