The Tories are still the Nasty Party

David Cameron came to power as a moderniser, but the Budget shows that the spirit of Thatcher lives

Remember the scene? The then Tory chairwoman, Theresa May, striding on to the party's conference platform in Bournemouth in October 2002 in her leopard-skin kitten heels. Those memorable words: "There's a lot we need to do in this party of ours. Our base is too narrow and so, occasionally, are our sympathies. You know what some people call us -- the Nasty Party." The Nasty Party, indeed.

Recall the record: two recessions in the space of 18 years. Three million unemployed. Five hundred thousand home repossessions. Fifteen per cent interest rates. Poll tax riots. The toxic legacy of the Thatcher era consigned the Conservatives to 13 years in opposition and three consecutive general election defeats.

But David Cameron arrived in 2005 with a new plan: modernisation. He was the self-professed "heir to Blair". He hugged hoodies and huskies. He apologised to the gay community for Section 28 and appointed a Muslim woman to his shadow cabinet. Cameron and his trusty sidekick George Osborne were dazzled by Tony Blair's triangulations and New Labour's colonisation of the centre ground. Philip Gould's Unfinished Revolution had pride of place on the then shadow chancellor's bookshelf. The duo toiled hard to shed the image of the Nasty Party. Or, in that tiresome cliché, to "decontaminate the brand". (Never forget that the only real job our Prime Minister has ever held before this one was as the head of public relations for Carlton Communications.)

The big gamble

So it was surprising to see David Cameron welcome the Iron Lady herself, Margaret Thatcher, to No 10 so early on in his premiership. Or to hear of Osborne's pre-Budget lunch with four former Tory chancellors -- Geoffrey Howe, Nigel Lawson, Norman Lamont and Kenneth Clarke -- who presided over those record rises in unemployment and interest rates, as well as child poverty and income inequality.

In fact, in the space of just six weeks in office, Tory nastiness has returned. Even before Osborne emerged from No 11 into the sunlight of Downing Street to hold aloft the battered old Gladstone Budget box, he and his Lib Dem Chief Secretary, Danny Alexander, had announced the scrapping of free school meals for 500,000 low-income families, the free swimming scheme for children and pensioners, 10,000 university places, the Future Jobs Fund and the Child Trust Fund. The Budget itself, a masterclass in fiscal sadism, will slash 25 per cent from departmental budgets (excluding health and international development) over the next four years. But it's the more emotive issues -- the freezing of child benefit, the cut in housing benefit, the VAT rise, the targeting of single mothers -- that have evoked memories of the privations of the early 1980s.

Supporters of the coalition point to a Treasury document that shows the Budget's effects on the population by income group, with the highest earners hit hardest. It's a nice touch. But the document only takes into account short-term tax and benefit changes, and not the full impact of cuts in public services. As the Financial Times has revealed, the coalition's cuts will hit the poorer areas of Britain hardest.

Cameron and Osborne have taken a huge political and economic gamble. First, can they take the country with them? Polls suggest the British public has not yet psychologically reconciled itself to an age of austerity and is not clamouring for cuts. Much has been said by the Chancellor about the need to emulate Canada's fiscal retrenchment in the 1990s, but it is often forgotten that it took about a decade for the Canadian public to accept the need for those cuts, and that the first round of austerity led to the worst election defeat ever suffered by a governing party -- with Brian Mulroney's Progressive Conservatives left with only two seats in parliament.

Second, can Cameron and Osborne keep the Liberal Democrats on board? This Budget will only widen the growing fissures in the "progressive alliance" between the Tories and the Lib Dems. The Chancellor stood at the despatch box, flanked on both sides by his Lib Dem human shields: Alexander and the Deputy Prime Minister, Nick Clegg, both nodding along. (David Cameron, out of camera shot, sat directly behind Osborne.) The disquiet on Clegg's back benches continues to build. Listen to the Lib Dem MP for Colchester, Bob Russell: "Just because my party has formed a coalition with the Conservatives, [it] does not mean that my conscience and principles can be parked elsewhere." Listen to the party's former leader Menzies Campbell, who said he was "nervous" about the VAT rise to 20 per cent "because it's a regressive tax".

Thatcherite dream

Third, can this government avoid tipping Britain back into recession? Eminent economists -- including our own David Blanchflower, writing on page 16 -- have expressed fears about the government's hawkish plans to rely more heavily on spending cuts than tax rises to curb the deficit. So, too, has the Obama administration in the United States. "Our highest priority . . . must be to safeguard and strengthen the recovery," President Obama wrote in a letter to the G20 on 16 June. Forget BP. Cameron and Obama are more likely to fall out over spending cuts than oil spills. Meanwhile, Osborne's own Office for Budget Responsibility says that the deficit will be lower than the level predicted by his Labour predecessor. So why the insistence on savage cuts?

The Tories' war on the public sector has never been about cutting the deficit or promoting growth. The economic vandalism unveiled in the Budget is part of a political project to roll back the state. It is the fulfilment of a Thatcherite dream, which Cameron has never renounced. "But isn't that just a left-wing conspiracy theory?" one radio presenter asked me, live on air. On the contrary: conspiracy theories are based on secrets unknown.

Yet in his speech to the Tory party conference in October 2009, David Cameron very publicly announced that his aim was to tear down big government. In fact, the phrase "big government" appeared 14 times in that single speech. Commenting on the crash caused by the bankers, the then leader of the opposition claimed: "It is more government that got us into this mess."

The unpalatable truth is that the Nasty Party never really went away. Rebranded, yes. Reborn, no.