After the 2008 financial crisis, the Conservatives made an ideologically defining choice. Having pledged the previous year to match Labour’s public spending plans, the Tories announced that they would no longer do so. The alternative, David Cameron warned, was a “tax bombshell”. In 2009, the Tories unambiguously committed to an “age of austerity”.
Once in government, they imposed the largest cuts to public services since 1945 and dramatically rolled back the state. The civil service was reduced to its smallest size since the Second World War. Central funding for local authorities was cut by 49 per cent. Child benefit was means-tested and total household benefits were capped at £20,000 (£23,000 in London). The NHS, meanwhile, endured the longest period of austerity in its 70-year history: annual spending rose by just 1.3 per cent, compared to the historic average of 3.7 per cent.
Though Cameron and George Osborne presented this as pragmatic fiscal restraint, the mask routinely slipped. In his 2013 Lord Mayor’s Banquet Speech, Cameron declared: “It [austerity] means building a leaner, more efficient state. We need to do more with less. Not just now, but permanently.”
But the loss of the Conservatives’ majority in 2017 prevented the imposition of new cuts. Indeed, as the Tories had already learned through numerous defeats, there was no parliamentary appetite for continued austerity.
Now, faced with a decaying public realm (as charted in the New Statesman’s Crumbling Britain series), and the threat of Jeremy Corbyn’s Labour, the Conservatives, for the first time in a decade, are embracing higher spending.
Though overshadowed by the absurd claim of a “Brexit dividend”, Theresa May’s pledge to raise taxes to sustain the NHS (£25bn extra by 2023/24) was a significant concession to the Tories’ ideological opponents. Rather than espousing the traditional Thatcherite aim of shrinking the state, the Conservatives have acknowledged that the public favour a social democratic approach. Polls have repeatedly shown that voters are willing to pay higher taxes to sustain the NHS (“the closest thing the English people have to a religion” in former chancellor Nigel Lawson’s imperishable description) – as they did when Gordon Brown increased National Insurance in 2002.
The past Tory aim of achieving an overall budget surplus by 2019/20 has been entirely disregarded. And on the right, few now talk of cutting the top rate of income tax from 45p to 40p, still less of reducing the state to just 35 per cent of GDP (as was Osborne’s ambition). The May government, unlikely its predecessor, has borrowed to invest in council housing.
Though the Chancellor Philip Hammond has insisted that austerity will endure outside of the NHS – a battle he may yet lose – his successor is unlikely to be so dry. In the future, almost all accept, the government will spend more and tax more.
This shift reflects both public weariness with austerity and Corbyn’s rise. Such is the right’s fear of a left-wing Labour government (whose renationalisation programme, for instance, enjoys overwhelming support) that they are prepared to break with ideology in an attempt to appease voters. As a Tory MP told me in 2016, the Labour leader has “moved the Overton window” – the spectrum of policies deemed acceptable by voters and the political class.
But the UK’s leftwards trajectory also owes something to Brexit. Though many Tory Leavers, such as Daniel Hannan and Liam Fox, are small state libertarians, their campaign was a collectivist one. The promise of £350m extra a week for the NHS (now pledged by Theresa May) was an appeal, albeit cynical, to socialist instincts. Brexit was framed as a post-austerity project. The state would expand to better care for British citizens – and to keep others out.
The disruptive nature of EU withdrawal means the Tories can no longer grandstand as the party of “order” and “stability”. To accuse Corbyn of planning an “ideological gamble” is to invite the same charge against themselves.
In recent weeks, the Tory ambition of a “hard Brexit” – withdrawal from the single market and the customs union – has appeared ever less achievable. But equally notable is the rout of the small state Conservatives. Rather than heralding a libertarian age, as Tory Leavers hoped, Brexit is ushering in a statist one.