Brian Monteith: PM needs a Joseph to keep him right

Only two years into his first term as Prime Minister, David Cameron has undoubtedly arrived at that tipping point where it could all begin to go badly wrong.

He has the summer to resolve how to mollify the Liberal Democrats, who set themselves up for a fall with demands for Lords reform that went further than the coalition agreement had promised. Cameron must concoct a face-saving proposition that might still be rebuffed by his own backbenchers – or call Nick Clegg’s bluff about breaking the coalition but then see the recommended boundary changes that would help him towards a second term dissolve in the acid of bitterness and recrimination.

More importantly for everyone else – but crucial for Cameron in the longer term – his Chancellor George Osborne has to find a way out of the morass that is the double-dip recession so that a sustained recovery is clearly identifiable before the planned election in 2015. That is by no means certain as the further injection by the Bank of England of £50 billion of what Samuel Brittan first called “funny money” betrays the desperation of the Treasury team about what to do.

Then there is the mess over Europe with the agenda being set by backbenchers that have consistently been one step ahead of the Prime Minister in being vocal and frank about the consequences of the eurozone economies.

There have also been so many u-turns that I had lost count were it not for blogger Paul Staines, aka Guido Fawkes, compiling a list that started with twenty examples and has continued to grow since publication. The media is almost inured to the flip-flopping policies except when they are memorable, such as the so-called “Pasty Tax”, but the dangerous effect is undoubtedly the aura of incompetence that such vacillation delivers.

Thus, for members of his party, Cameron’s tenure might have more in common with the unlamented Edward Heath rather than the revered Margaret Thatcher. It is, however, not so much an Iron Lady that the Conservatives lack as her philosophical soulmate, Sir Keith Joseph; for it is in the failure of Cameron’s coterie, first in opposition and then in government, to correctly analyse the economic morass that it faced and then lay the foundations for economic recovery, that threaten its survival.

David Cameron and George Osborne – and for that matter the Governor of the Bank of England, Sir Mervyn King – could do worse than take out for their summer reading a copy of Sir Keith Joseph’s pamphlet “Monetarism is not enough”. If they want, I can lend them my well-thumbed copy.

Published by the Centre for Policy Studies that Thatcher and Joseph established, it is the text of Keith Joseph’s Stockton Lecture of 1976 that was possibly his greatest contribution to post-war Conservative thinking. It challenged the Labour government of the time with arguments they ultimately were forced to accept, influenced the four future Conservative administrations by giving them a credo from which they deviated at their peril – and provided the foundations for economic recovery that determined the opposition parties’ own transformation in the nineties.

That is not to say that everyone fully understood Sir Keith’s lessons or faithfully applied his teachings. For the monetary boom of the last decade through easy credit under the watch of the Bank of England, that both Labour and even many Conservatives failed to appreciate, would surely have been the target of his forensic and rational expositions. Indeed it is fair to say Joseph was one of the most misunderstood of Thatcher’s cabinet.

Firstly, he was no ideologue certain of his own omnipotence or infallibility. Once thought of as a potential replacement for Heath, he knew his limitations and preferred the idea of the strong-willed Thatcher to himself, later saying, “It would have been a disaster for the party, the country and me.” He was undoubtedly right about all three.

Secondly, he valued manufacturing industry, having been chairman of Bovis Construction in the late 1950s, and feared for it being crowded out by unproductive sectors of the economy be they public or private.

Thirdly, he recognised the damage that politicians could do despite the best of intentions – something the current Cabinet appear to have forgotten.

As first a housing minister under Macmillan who encouraged the building of high-rise flats as an end to the slums, and then as a social services secretary under Heath who introduced an extra tier of bureaucracy to the NHS, Joseph undertook a courageous reassessment of his work and concluded he had been seduced into believing politicians could solve social problems simply by the force of their actions. This resulted in great self-doubt about making similar mistakes again that, for instance, stopped him from introducing the education vouchers he believed would revolutionise the futures of children whose prospects were determined to some extent by their school catchment areas.

Fortunately for him and his party, he felt far more sure on economic policy and there is much in his lecture-come-pamphlet that makes a great deal of sense today.

“We are over-governed, over-spent, over-taxed, over-borrowed and over-manned. If we shirk the cure, the after-effects of over-taxation will be worse than anything we have endured hitherto. Our ability to distinguish between economic reality and make-believe will decline further. We shall experience accelerated worsening of job prospects, the growing flight of those with professional skills, talent and ability to other countries and an increase in shabbiness and squalor of everyday lives” was his prognosis.

Joseph’s critics misunderstood him, often intentionally, accusing him of being simply a monetarist that wanted to rely solely on cutting back on public expenditure. Instead his policy was to establish the foundations for the productive sector to grow and flourish so that the consumption of the public sector could be afforded.

I cannot believe he would be agreeable to a Conservative-led government claiming an austerity programme that is nothing of the sort and that has consented to monetary inflation of £375bn through quantitative easing. Instead he would have been asking how George Osborne would fund tax reductions to deliver “bold incentives and encouragements to the wealth creators, without whose renewed efforts we all grow poorer” while reducing our dependency on credit and questioning the failure of politicians who believe they can create economic wellbeing through public demand.

Where is Cameron’s Keith Joseph when he needs him? 

• Brian Monteith is policy director of ThinkScotland.org