David Cameron delivers a speech on welfare in Hove, East Sussex, on February 17, 2015. Photograph: Getty Images.
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It may take defeat to an “unelectable” Labour Party to force the Tories to modernise

The shock of losing to Miliband could awake the Conservatives from their dogmatic slumber.

The Conservatives are struggling to win this election because they failed to win the last one. Most governments endure by managing decline, rather than gaining support. Both John Major and Barack Obama, two leaders whose electoral success Tory strategists study obsessively, retained power with reduced majorities. Because of David Cameron’s failure to win outright in 2010, he will almost certainly fail to do so on 7 May. Indeed, the Tories face a fight to remain the single largest party: Labour needs to make net gains of just 24 seats to supplant them. There is increasing confidence among Ed Miliband’s inner circle that it will.

To win again, the Tories must understand why they fell short in 2010. Their problem is that many still do not. It was a dearth, not a surfeit, of modernisation that denied them outright victory. This is not an ideological assertion but a matter of empirical record. The Conservative pollster Lord Ashcroft’s audit of that election, Minority Verdict, found that too few voters trusted them to manage public services and to govern in the interests of all. In the months that followed, the myth developed that the Tories’ failure derived from the insufficient toughness of their policies on immigration, welfare and Europe. It was one that the party’s becalmed modernisers struggled to contest. After this, the Tories’ rightwards trajectory became inevitable. The “backfire effect”, the term coined by the US political scientist Brendan Nyhan to describe how individuals’ convictions grow stronger in the face of contradictory evidence, took hold.

After failing to decontaminate their brand in opposition, the Tories poisoned it in office. The abolition of the 50p tax rate, the reorganisation of the NHS and the bedroom tax were self-inflicted wounds that have yet to heal. More recent missteps have displayed a remarkable lack of self-awareness for a party that has had 18 years to reflect on its inability to win a majority. For example, this month’s announcement of further welfare cuts was masochistically scheduled to follow an opulent black-and-white ball, a sequence of events more suited to an Evelyn Waugh satire than the campaign of a modern political party.

It is in this context that Tim Montgom­erie, the founder of ConservativeHome, and Stephan Shakespeare, the chief executive of YouGov, have launched “the Good Right”, a new project to regenerate conservatism. They prescribe 12 initial policies for a “One-Nation Conservative Party”, including higher taxes on expensive properties and luxury goods, increased housebuilding, above-inflation rises in the minimum wage, greater infrastructure investment and limits on political donations. It is a programme of precisely the kind that the Tories need to embrace if they are to attract new supporters, most notably the blue-collar voters who have gravitated towards Ukip and who enabled their past majorities. Through a combination of ignorance and arrogance, too many Conservatives have convinced themselves that the economically insecure, interventionist-minded groups attracted to the “people’s army” will be appeased by the promise of an EU referendum, restrictions on migrant benefits and a relentless focus on austerity.

The Good Right has emerged too late in the political cycle to have much influence on the Conservative manifesto currently being assembled by Jo Johnson, Boris’s younger brother and the head of the No 10 policy unit. If its vision is ever adopted, it will more likely follow defeat than victory for the Tories. Referring to Labour’s poll deficit on leadership and economic management, George Osborne has declared that “water would have to start flowing uphill” for the opposition to win. Should the supposedly “unelectable” Miliband nevertheless enter Downing Street, the Conservatives may finally be forced to confront the question of why they are so disliked.

Alternatively, should they scrape over the line, many Tories will greet their victory as a vindication of their ideological prejudices. They will draw comfort from the rejection of Labour’s “socialist” programme, disregarding the individual popularity of many of Miliband’s policies. By again making too little effort to dispel their reputation as the party of the privileged, they will expose themselves to attack from a revived opposition and an economically populist Ukip.

The Conservatives’ historic strength has been their willingness to change according to circumstance. After their landslide defeat to Labour in 1945, they embraced the NHS, the mixed economy and the welfare state and were rewarded with 13 years in office from 1951. Confronted by the exhaustion of the postwar consensus at the end of the 1970s, they produced the transformative philosophy of Thatcherism.

It was in the 1990s that their beliefs ossified into dogma. The doctrine of free-market economics, one not inevitably tied to conservatism, was elevated to the status of a secular religion. Intelligent and practical policies of the kind advocated by the Good Right are now rejected as ideologically impure. A more politically adroit Conservative Party would harness the public discontent against the corporate sector, championing the “little man” in the manner of the trust-busting Republican president Theodore Roosevelt. The current one has rejected a “mansion tax” on the grounds that: “Our donors will never put up with it.”

Should they lose in May, the Tories may yet again draw the wrong conclusions, marching even further into the wilderness of Europhobia. But the party’s economic modernisers would at least have a window of opportunity to shape its future. Defeat to Miliband, a man they will remorselessly ridicule between now and polling day, could be the jolt the Tories need to awake from their dogmatic slumber.

George Eaton is political editor of the New Statesman.

This article first appeared in the 20 February 2015 issue of the New Statesman, Still hanging

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.