The Rt Hon David Davis MP delivered The Fifth Margaret Thatcher Lecture & Dinner on Monday 10th December 2018 at The Carlton Club in London. The text of his address is below:
I first met Margaret Thatcher when I was in my early 20s. She was Secretary of State for Education, and I was a Conservative student leader.
They were very different times. The country was in a parlous state. At home industrial unrest was rife, and strikes were common. Economic growth was weak and inflation was high. Abroad there was an existential nuclear threat from a powerful communist bloc led by the Soviet Union.
The intellectual framework of those times was a sort of Keynesian collectivism.
The Zeitgeist of the day was, to put it mildly, defeatist. The presumption was that capitalism was flawed and that the ideas of socialism would eventually prevail. The British ruling class was particularly defeatist, and thought that its job was the management of decline.
Well perhaps not so different times, in that case.
And that prevailing presumption of failure seemed to have an iron grip.
President Kennedy once said “the great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth – persistent, persuasive, and unrealistic. Too often we hold fast to the clichés of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought.”
The conventional wisdom of those days was too often a comfortable and convenient apathy. But that was set to change.
Margaret Thatcher took the leadership of the Conservative Party in 1975.
And she saw what everybody else saw, but she thought what nobody else thought.
She took a country that was the sick man of Europe, and turned it into the envy of the world.
To do that she used an amalgam of her formidable intellect, with both scientific and legal training, a strategic boldness and a tactical caution, and a courage and conviction seldom seen in modern politics.
So when looking at modern problems I often apply what I call the WWMD test. “What Would Margaret Do?”
It is a useful test even today. And I am not here talking about Brexit. I know exactly what her response would be to the Prime Minister’s proposed European deal. To coin a phrase “No, no, no!”
If she ever had to choose between the British establishment and the British people she would always choose the people.
What people forget is that Margaret was a formidable election winner. She fought three general elections, and won three general elections. She did that because she understood the wants and desires of the people of this country.
She was a meritocrat. She believed people should be able to get on based on their talent, their hard work, and their courage. She absolutely believed in Churchill’s description of the society “in which there should be no limit to which any man might rise, but a limit beneath which no man might fall.”
And with that formidable insight she would have looked at the result of the last election and asked herself “why did we lose a 21% poll lead?!”.
She would have ignored the fashionable explanations and looked at the hard facts. In particular she would observe that we lost the votes not just of the youngest voters, but also of the 30 to 45-year-olds. And she would have asked why?
To her, the answer would have leapt out.
We did not offer a compelling vision to that generation, let alone one that dealt with the problems and disappointments that they face.
As Conservatives we believe in meritocracy. We believe in social mobility. We believe in opportunity for everybody, no matter where they come from. We believe in a property owning democracy.
When I was a student it was widely accepted that Britain offered exactly that. Large numbers of working class boys and girls grew up to fill roles at the top of society. One boy from my grammar school in working-class South London became the head of the civil service and another the English rugby captain. Oh, and one became a cabinet minister. Everything was possible.
At a more day-to-day level every council house tenant could buy his or her own home. And every family was encouraged to buy and own shares.
At every level individual opportunity and social mobility was a reality.
Today that is certainly not true.
Whether you take reports from the OECD, the Brookings Institute or the Sutton Trust the story is the same. Britain has the lowest levels of social mobility across the OECD. Social mobility in Australia and Canada is about twice that in the United Kingdom. In Europe we come at the bottom of the league alongside Portugal.
This is not just a statistic; for the 21 to 45 age group it has real and practical meaning. They know what the hurdles to social mobility are; they know the barriers to their own aspirations.
It starts young of course. The first barriers to making your own way in life are chaotic early lives – whether it is growing up in a home in a dependency environment engendered by a poorly designed welfare system, or whether it is unruly streets dominated by crime. It goes on with an education system that still does a poor job of delivering opportunities to the poorest in our society. It continues with starting work – sometimes carrying the burden of a student loan in a non-graduate job – and struggling to buy a home or meeting spectacularly high rents.
It is little wonder these voters looked elsewhere at the General Election, when in addition to all this we threatened to take away their free school meals and confiscate their inheritances.
Let me start with what the answer is not. The way we help the young is not by punishing the old. That is the most common response to many of these problems. That somehow we should intervene as a state by increasing the taxation on the elderly to redistribute it somehow to the young. This is the instinctive reaction of people who think the role of the state is to take the economic pie and re- divide it to suit the political imperative of the day. As Conservatives we should worry about how to make the pie bigger, not about how to cut it up.
Let me briefly touch on some of the answers that a Conservative government ought to consider.
First, I will start with the one that we are actually doing, which is the introduction of Universal Credit. That policy, pioneered almost single-handedly by Iain Duncan Smith, is the right answer because it sets out to make it always worthwhile getting a job, no matter how low on the income scale you are. My one comment is that the government should fund it properly, and not sacrifice the greatest reform of the welfare system of modern times on short-term financial constraints.
Similarly with respect to crime, we should not penny pinch our police forces. I remember vividly talking to a Labour Member of Parliament for a Midlands seat. He was telling me about the circumstances on some of his poorer estates. He recounted how boys and girls as young as 12 could make £30 a day delivering drugs on their bikes.
Today we see the story repeated with criminal gangs recruiting at even younger ages. The disruption this visits on young lives is beyond belief. If you start your life running drugs, you are probably going to finish it taking them. The Treasury’s approach to cutting police numbers is in my judgement a very serious error of judgement.
Even from a purely economic viewpoint it is wrong. The most low-level criminal will probably do at least £1 million of damage in a lifetime of time. The fact that this is not measured in government accounts does not mean it does not exist.
Putting that to one side, the damage to individual and community, and the destruction of people’s life opportunities are distinctly un-Conservative things to do.
Law and order was always important to Margaret Thatcher. She knew if we can deter young people from turning to crime in the first place, their opportunities are boundless.
Once we have decent homes and crime free estates, we still have to provide decent schooling for everybody. Today by the age of 15 children from disadvantaged homes are on average 2 1/2 years behind their peers.
This does not have to happen. Countries as culturally diverse as Estonia, Vietnam and Hong Kong achieve remarkably strong learning outcomes for children of all backgrounds. We can do the same.
This is too brief a lecture me to talk about Grammar schools, which had they been retained in their original numbers would have continued to be a motor for social mobility. Today their numbers have been cut back so much that they have in many areas become a monopoly of the middle class, doing exactly the opposite of what they were intended to do.
If I were to design the classrooms of today, I wouldn’t start with where we are now. With the availability of tablets and modern-day database systems, with easy access to online media, we can have lessons from the best teachers in the world a mere tap of the finger away. This can be bolstered with assistance, guidance and aid from our eminently qualified classroom teachers. The grammar schools of tomorrow will be virtual grammar schools. The academic selective education of tomorrow will transcend location. But that is a lecture for another day.
Which brings me to universities. In the last couple of decades we have persuaded whole generations of young people that their only future is via a university education. We have expanded the universities dramatically, and to fund that expansion introduced tuition fees and student loans. We persuaded ourselves that this was a market solution to the provision of higher education. It was anything but.
Virtually all universities charge the maximum fee, irrespective of value, quality, or cost. We charge the same for historical and philosophical studies as we do for medicine and the physical sciences, even though the latter requires twice the lecture time and many times the resources in terms of laboratories and equipment. We charge the same for Oxford and Cambridge courses as we do for the least competitive universities. We charge the same for universities that deliver very high levels of employment and salary as we do for universities and courses that lead to a high proportion of non-graduate employment.
This is not a marketplace; it is an oppressive monopoly.
Its consequence is that students are leaving university burdened with £50,000 in debt and uncertain prospects, for the privilege of paying vice chancellors at comparatively modest colleges more than £400,000 a year.
This policy is also a financial deceit. In 2017 the Institute for Fiscal Studies estimated 83% of graduates would not fully repay their loans. Every year tens of millions of pounds student loans are written off. Nevertheless graduates carry the psychological burden of these loans through their 20s and 30s.
If the government were a company, its auditors would require it is to write off a large proportion of its loans because they will never be repaid. Frankly the government should do the same, and convert to a graduate contribution system that does not bite until the graduate qualifies to pay higher rate tax.
Perhaps more importantly we should require universities to demonstrate and apply some value for money criterion in the level of fees they charge.
It is too expensive to abolish the system, as Corbyn would do. But it is long past time we made it fairer, better value for money, and a better method for getting on in life.
The next big stages in life used to be getting a job, and buying a house. I will return to employment in a moment. However, at least 65% of my generation were able to buy their own home.
Today that number is about 25%. In London, it is much lower still.
Those who cannot buy their own homes can easily spend more than half their salaries on rent.
For ordinary people, we have a completely broken housing market. Our planning structures and decisions have failed to keep up with the sharp increase in our population, driven in part by immigration. House prices have grown about seven times as fast as net family incomes. This has encouraged speculative behaviour on the part of house builders, and a strong suspicion that they manage their land banks to maximise their capital gains by creating artificial shortages.
The current planning and building regulation mechanisms have left us with homes are smaller than almost anywhere else in Europe, and half the size they were in the 1920s. Fewer houses than ever are built with gardens.
The shortfall in homes is enormous, and we need a radical a change in policy.
What we need is a New Towns Act that empowers local authorities to develop garden villages between 1500 and 5000 homes. This range of size would justify at least one primary school, local centre, shops, a bus service, and would justify connection to fibre-optic links and other services. At the upper end it would justify a secondary school and leisure facilities.
The designation of such villages would lead to massive increases in nominal land value. An acre of farmland worth £12,000 would become worth £1 million. There is no reason all of this windfall value to accrue to the lucky farmer. If all he made was half a million an acre, the remaining value could be channelled into reducing the price and increasing the quality (and size) of the houses. This can be achieved by suitable auction arrangements with the house builders. Affordable homes could be provided without making them tiny boxes.
If every rural English authority built a garden village along these lines it would amount to around 1 million new homes.
This is just one idea. There are many others we should consider to return to our Conservative model of a property owning democracy.
We should certainly extend right to buy to housing associations. We should allow the housing associations to build new houses with the money that comes in from such a scheme. The Party has from time to time played with this idea, and this time we should make it front and centre to appeal to less well off families. We should also create flexible or transferable right to buy schemes.
A property owning democracy is the best way to ensure that everyone has a stake in Society. It is the best way to see off the next wave of Corbyn promises.
Of course to buy a house you have to have a job. One of the great successes of the last eight years has been employment creation. We have more people in work than ever before, and the lowest unemployment for a generation.
Unfortunately a large number of these jobs are not as well paid as we would wish. Some of this is the natural outcome of very large immigration numbers. When employers have the choice of an almost infinite supply of highly motivated labour, the incentive to spend money on either training or capital investment is much lower. That is one of the reasons that our productivity numbers are so low. So one of the long-term answers is a more managed migration policy, with an eye on the interests of the whole population, not just the big corporations.
But our productivity policy has to be much more than that. We are a hugely innovative nation, and we need to be ready for what is effectively a second industrial revolution in terms of massive changes in technology and huge opportunities in a global market. This is of course what Brexit is all about, but it also has enormous domestic implications
I am optimistic for the future. We are a great country and our best days are ahead of us. Once we pioneered the industrial revolution and cottage industries were transformed into factories. Now we are almost seeing the opposite effect. Technology is seeing the advance of new state of the art small enterprises. Modern distribution mechanisms, modern production processes and modern markets all mean that small businesses can be more successful.
We are seeing the rise of the “long tail.” This is a strategy that allows businesses to realise significant profit out of selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. More and more smaller enterprises will develop niche and bespoke products. The economy of the future will see mega-corporations co-existing with microbusinesses, and conventional labour with the gig economy.
It is these young, innovative, disruptive companies that have brought us driverless cars, artificial intelligence and cleaner energy. Exciting new technologies will continue to transform the world and improve human welfare.
We need a new economic ecosystem that nurtures the innovative and the enterprising; we need to aid the young companies stepping up to becoming the new Googles and Amazons of this world.
This does not just mean smarter regulation, but a fairer tax system too. The UK’s tax burden is higher than the G7 average and many of our global competitors. We know from history that lower taxes lead to higher revenues and a stronger economy. That is how a Conservative government ought to be funding its commitments.
Margaret Thatcher would have encouraged the rise of the small entrepreneurs and enterprises. She would have used the power of the state to enable capitalism to flourish, which is what we should do in the coming years.
The good news for us is that in this fast changing and ultra-complex world, Conservative policies are the ones that work. Low tax and light regulation. Enabling action, rather than intervention. Not an overbearing state, but an optimal one.
Today, the world faces challenges on many fronts; from threats to free trade, to financial stability, to security and to our borders in the form of mass, unchecked migration. Margaret Thatcher would have relished these challenges and that is the mentality I want us to take. We still have the ability to determine our own futures.
The world is changing rapidly, and the UK must keep up. We have to look beyond Europe and seize the opportunities Brexit presents for us to be a truly Global Britain.
But then we need to take Margaret Thatcher’s lead and be relentless in our pursuit of opening up freedoms, markets and opportunity. We need to regain the self-confidence to give leadership and a vision. Our principles are the right ones. Our values are those of the British people. Let’s utilise our strength to deliver a better future for all.