Fiscal responsibility is at the heart of conservatism, grounded as it is in sound economic management, support for entrepreneurial investment and a concern for future generations. But prudence is not the exclusive preserve of any one political tradition. The US dealt with its budget deficit in the 1990s under a Democratic President and a Republican Congress while left of centre parties were achieving the same in Sweden and Canada. And a coalition between the Conservatives and the Liberal Democrats is now embarking on a similar path here in the UK. But in an age of economic imbalances and large deficits, fiscal responsibility is now more vital than ever.
Of course every country faces a different mix of challenges. In the US, the President has set up the fiscal commission that is set to report at the beginning of next month. Here in Britain we have taken decisive steps to set out one of the most credible and comprehensive consolidation plan of any western economy. At the time of our general election back in May the UK faced a dangerous combination of circumstances. The previous Labour Government had allowed a structural budget deficit to emerge in the middle of the decade, so that when the crisis hit Britain was particularly exposed. When we came to office our budget deficit was projected to be the largest in the G20. For the first time in our history our AAA credit rating was under threat. And on our doorstep, a European sovereign debt crisis was raging. Britain needed strong economic leadership.
Formed in the ferment of those days in May, the Coalition Government has provided exactly that and taken Britain out of the financial danger zone. We decided to demonstrate to the world that Britain would pay her way and live within her means. Within days of forming a Government we identified and cancelled over £6bn of wasteful spending in this current year. Within a month we had set up an independent Office for Budget Responsibility to restore confidence in official forecasts for the budget and the economy. Within 50 days I delivered an Emergency Budget setting out a clear plan to eliminate the structural deficit over a Parliament. And in the Spending Review last month I set out a detailed four-year plan to bring government spending under control.
Since we set out our plans we have received the support of the international community: the IMF said that our deficit reduction plan is “essential”, and the OECD that “acting decisively now is the best way to secure better public finances and bolster future growth”. The British economy now seems to be recovering and our nation’s credit rating, which had been put at risk, has been reaffirmed. The fiscal credibility that we have earned is crucial for supporting the growth our economy needs in order to create jobs – helping to deliver lower interest rates, restoring confidence in our future, and freeing businesses from the fear of higher tax rates.
Crucially, we have also shown that fiscal responsibility doesn’t mean having to abandon our other priorities. In fact they go hand in hand. For example, at the same time as cutting our deficit we have set out plans to deliver the lowest corporate tax rate in the G7 in order to attract international investment and promote growth.
We have also embarked on major structural reforms of our public services in order to make them more responsive to users and more productive as a result. In our schools we are harnessing the power of parental choice. In health we are putting patients in charge with the help of their local doctor to guide them. And in welfare we have announced the most radical reform of our modern welfare state since its creation, with plans to merge a complex morass of different benefits into a universal credit that ensures that work always pays.
And throughout we have sought to make a reality of my promise that we are all in this together. Our plans ensure that the richest bear the greatest burden and the most vulnerable are protected. So for example we are investing more money in our poorest school pupils, extending early years provision for the most disadvantaged, and increasing the generosity of our basic state pension in order to ensure dignity in retirement for all.
For modern Conservatives, fiscal responsibility is not just an end in itself, it is the foundation of a strong economy and a fair society. It need not and must not come at the expense of other Conservative values. So at the same time as setting out to rescue our economy, we have championed the concept of the Big Society, where individuals come together through local associations, charities and the private sector to take more control of their lives, instead of becoming ever more dependent on the state. And we have proposed practical solutions to our environmental problems, because a sustainable environment is a fundamentally Conservative goal.
In all these ways the British Conservatives are addressing the question that one of my great predecessors as Chancellor, Benjamin Disraeli, set out in 1867, ‘in a progressive country change is constant; and the question is not whether you should resist change which is inevitable, but whether that change should be carried out in deference to the manners, the customs, the laws, and the traditions of a people”. Conservatives throughout the world could do worse than to provide compelling answers to that question.
> THIS IS THE FIRST PART OF A CONHOME SERIES ON WHAT REPUBLICANS MIGHT LEARN FROM BRITAIN'S CONSERVATIVE PARTY.