13 SEPTEMBER 1975, Page 6

Political Commentary

Bourbon on the rocks

Patrick Cosgrave

In Scotland last week Mr Heath and Mrs Thatcher clashed yet again. There was, it is clear, no more than fortune in the fact that both of them were in the same place at the same time. But, since they were, and since Mr Heath was continuing in his current Bourbon role of demonstrating that he has forgotten nothing and learned nothing, while Mrs Thatcher was inching herself and her party another step or two forward towards a clear economic policy, it was inevitable that both their speeches would be full of interest. They were not — fortunately for the Conservative Party, unfortunately for the political journalist — talking about the same subject; but their subjects, unemployment for him, taxation for her, were ones which have been central to the evolution of Tory policy since the war.

Let us take unemployment first. It is, of course, a cant statement of both major parties that they find ' 'full employment' the most desirable of all socio-economic objectives. Not long after Mr Heath fell from power I appeared on a TV programme with Mr Michael Heseltine and, along with other contributors to the programme, argued that the Heath government had abandoned its 1970 pledges on economic policies in a silly panic, and before the Selsdon programme had been given a chance to work. We were, I am pretty sure, rather wild-eyed about it all, and Mr Heseltine had a smooth comeback. In effect what he said was, not that the government of which he had been a member had not panicked, but that they had done so in a good cause. What had happened, said Mr Heseltine, was that ministers had looked at rising unemployment figures, found them intolerable (or, in Heathspeak, unacceptable) and therefore abandoned all the major precepts of the 1970 policy in order to provide the classical remedy — greatly increased public spending. The fact that that spending outran government income and therefore helped considerably to increase inflation meant nothing, Mr Heseltine indicated, when weighed in the balance against the clear proof that the Tory Party had a heart.

And his judgement was undoubtedly well within a long-established Conservative tradition. When the Conservatives lost the 1945 election they were convinced — probably rightly — that one of the reasons was the folk memory that identified them with the unemployment of the 'thirties, As part, therefore, of their attempts to get with it through such facesaving documents as the Industrial Charter (the whole Butler policy re-think after 1945 was much more a matter of cosmetics than of serious thinking) they committed themselves to the shibboleth of full employment (achieved, if necessary, through deficit financing) which had been established by Keynes. Throughout 1957, when there was considerable tension between Mr Macmillan and his Treasury ministers on the general question .of public expenditure, a tension which led to the resignation of Messrs Thorneycroft, Birch and Powell, the Prime Minister's main fear was that any deflation would lead to increased unemployment; and it was that fear — bred into his bones because of his 'thirties experience at Stockton — that prevented Mr Macmillan from taking measures necessary to restore the balance of the economy. Following in the tradition i Mr Heath in 1969 made a particular point of berating the Wilson government on rising unemployment. • Mrs Thatcher has so far been wise beyond expectation in refusing to chide the government on rising unemployment figures. For one thing, nobody quite understands what the phrase 'full employment' means. Keynes, who invented the commitment, certainly included in his definition a much higher unemployment figure than we have at the moment. Since Mr Heath has steadfastly refused to learn anything new since February 1974, he is probably unaware of the great body of criticism — which Sir Keith Joseph merely reflects; he did not invent it — which suggests that our official statistics exaggerate long-term unemployment figures considerably. Further, inflation has gone so far in Britain that the choice we face is between a fair amount of unemployment now, if we take the measures to tackle inflation, and disastrous levels later if we do not: there is no possibility of any British government achieving what has traditionally been called "full employment'. Moreover, as the failure of Mr Heath's industrial relations policy demonstrated, the only method of curbing trade union monopoly power is through increasing unemployment, for this demonstrates clearly to workers that the power of union . leaders is almost invariably used through excessive wage demands, in the interests of more established members — the devil can take the hindmost. Mr Wilson and Mr Healey have been avoiding the subject simply because they realise perfectly well that there is no way out of the inflationary trap without substantial increases in the officially determined level of unemployment.

Then there is taxation. Labout governments quite simply do not care about taxation levels, and have no appreciation of the extent to which high personal taxation destroys initiative, hope and enterprise, not just for the well-off, but for the poor and the ordinary working man as well. Again, levels of personal taxation have preoccupied the Tories since about 1950, and Mrs Thatcher — like Mr Heseltine — was well within the party's tradition when, also in Scotland, she committed herself to its reduction. The 1951 Churchill government took less in personal taxation from its citizens than any post-war government; and it is hardly accidental that it was also the most successful government in terms of achieving economic and social stability since the war. At one stage of his career Mr Heath, too, gave a very high priority to reducing taxation, and the public expenditure cuts of October 1970 were designed, very largely, to make room for such cuts. The first nail in the coffin of Mr Heath's quiet revolution was driven in by Mr Tony Newton — now a Tory backbencher and then head of the economics section of the Conservative Research Department — in 1971 when he produced figures demonstrating that the Heath government's cuts in taxation benefited scarcely at all those on average and just above average incomes, in other words the married and ambitious rising working class traditionally inclined to Toryism. Mr Heath did nothing to remedy this state of affairs and so, when the crunch of 1974 came it was not merely that the electorate preferred peace with Mr Wilson to war with Mr Heath, but that the large number of working class people whom the Tory Party need to win elections simply could not see any advantage they had gained from three and a half years of Tory revolution.

When a democratic nation is in severe difficulties it is exceptionally hard for a government, let alone an opposition, to raise its eyes from the search for immediate resolutions. Because, even in our present fraught circumstances, Mrs Thatcher has had the courage to point the way ahead towards reduced taxation, she deserves congratulations. But, nonetheless, the agonising dilemmas which faced Mr Heath, and which he failed to resolve for all his energy, goodwill and application, will face her if she wins the next general election; and they are dilemmas particularly trying for the Conservative Party.

They may be summarised thus. Since 1945 the Tories have been running hard to demonstrate that they are at least as full of welfare goodwill as the Labour Party, and more efficient at administering the Welfare State to boot. They find themselves in this position partly because of the huge success of the Attlee government, partly because of their own decision, between 1945 and 1950, to adopt for their own manifesto as much of the Attlee heritage as possible. As Britain's international economic position has declined there has arisen a tension between the desire of the electorate, not so much for a continually rising standard of living as for a continuing expansion of services provided by the state, and the economic necessities of the hour, which dictated that the country could not indefinitely go on living beyond its means; and hence that taxation would have to be reduced. This equation of problems has been consistently avoided by every major Conservative figure, except Mr Powell, since 1955. If her silence on unemployment, and her commitment to reduced taxation, indicates that Mrs Thatcher has understood it then she is the first Conservative leader for ten years who offers some long term hope to the party and the country.