Agenda for the new Conservative Leader

Kemi Badenoch needs to drive for growth

The new leader of the Conservative Party (image: www.kemibadenoch.org.uk)

So, Kemi Badenoch has been elected as the new leader of the Conservative and Unionist Party, by some 57% of the votes of the membership. Whilst a decisive win this is not a landslide by any means and, in her acceptance speech, she has sensibly thrown a bone to her rival, Robert Jenrick.

The Armchair General knew Kemi slightly, well over a decade ago, when we were hanging around the same free market think-tank events (such organisations always being equally free with the booze), and generally found her to be both erudite and agreeable — and possessed of strong opinions. Kemi also seems to have the idealised view of what the British motherland should be (one that I happen to agree with) that appears to be shared by many of those who grew up abroad (and especially in former colonies) — I think, for instance, of the articulate and freedom-loving duo of Daniel Hannan (Peru) and Douglas Carswell (Uganda).

My one reservation was that, being a software engineer, instead of espousing liberty or slashing laws and regulations, Kemi might reach for more tinkering technocratic solutions — and your humble General is surely not alone in his opinion that we have had quite enough, thank you, of technocratic governments.

However, the more that I consider the severe problems that afflict this country, the more I believe that a process-driven leader, who can focus on the details, might make the biggest difference in the short to medium term.

The immigration issue

As we know, uncontrolled immigration has seized the public imagination greatly — and, indeed, Jenrick centred his campaign around leaving the European Convention on Human Rights (ECHR). We should almost certainly do this anyway — simply because, like the Americans, we should refuse to sign any treaties that raises foreign courts above our own Parliament.

But leaving that aside, the stated problems with mass immigration can largely be divided into two halves:

• cultural differences — these are not insignificant, and it is claimed that they lead to an increase in crime (especially sexual crimes) and an undermining of our high-trust society;

• economic issues — the evidence shows that a massive nett influx of low-skilled immigrants depresses wages at the lower end, puts a strain on public services (which cannot expand swiftly enough to accommodate the increase in demand), raises the demand for houses (of which there is a shortage) and thus pushes up prices, and, ultimately, only increases nominal GDP whilst per capita GDP has barely shifted in a decade and a half.

For the purposes of this post, I shall address only the latter issue; given where we are right now, the former is a much thornier problem — at least politically — and probably cannot be solved without radical (and some might say “authoritarian”) action.

The second problem is easier to solve because it is caused, essentially, by the single biggest drag on our economy — our planning system.

Our stagnant economy is not a fiscal problem

In the recent Institute of Economic Affairs (IEA) discussion of Rachel Reeves’s (disastrous) Budget, the IEA economist Dr Kristian Niemietz rightly pointed out (10m 40s) that the real problems facing the British economy are not fiscal or monetary.

Here is the relevant part of the transcript (edited for clarity):

“Whatever complaints we may have about the fiscal situation that is not where Britain is exceptionally bad — that is not the reason why we've had a near stagnant economy for one and a half decades.

“It really is the supply side bottlenecks that hold us back. We keep returning to the Foundations essay: they [the authors] spell this out and they also make clear that even to the extent that you think that that public investment has a role to play... Well even there, the problem with things like infrastructure investment here [in the UK] is that we just get less infrastructure for every unit of spending.

“That they show very clearly: that for comparable projects in France and Italy, they just get a lot more bang for the buck: they get a tram network for the kind of money that we just spend on the application for something — that then never gets built.

“And it's that sort of thing: if she [Reeves] sorted that out then you could either from the given transport investment budget you could generate bigger growth effect, or you could then even justify higher spending because the kind of project that makes economic sense, there would then be just more of those; and it's in that sense, really, that the the big things that we need to do are on the non-fiscal side.”

This is very true, and provides a political opportunity for the Conservatives, if they are willing to seize it. Because, as the Armchair General has pointed out again and again, the UK’s inability to build anything is making us all poorer through a stagnant economy (quite apart from the preoccupation with the massive and ever-present housing crisis).

As referred to by Dr Niemietz above, the colossal scale of this issue, root causes, and solutions have been examined in a long and superbly-researched treatise called Foundations — and, if they really want to make a difference, it should be essential reading for the Conservatives.

Foundations: the argument

Foundations was written by three think-tank researchers with long pedigrees (with Ben Southwood and Sam Bowman, at least, known to the General — they formerly occupied senior positions at the influential free market Adam Smith Institute).

The trio begin by setting out some concrete examples of the scale of the problem…

Here are some facts to set the scene about the state of the British economy.

• Between 2004 and 2021, before Russia’s invasion of Ukraine, the industrial price of energy tripled in nominal terms, or doubled relative to consumer prices.

• With almost identical population sizes, the UK has under 30 million homes, while France has around 37 million. 800,000 British families have second homes compared to 3.4 million French families.

• Per capita electricity generation in the UK is just two thirds of what it is in France (4,800 kilowatt-hours per year in Britain versus 7,300 kilowatt-hours per year in France) and barely over a third of what it is in the United States (12,672 kilowatt-hours per year). We are closer to developing countries like Brazil and South Africa in terms of per capita electricity output than we are to Germany, China, Japan, Sweden, or Canada.

• Britain’s last nuclear power plant was built between 1987 and 1995. Its next one, Hinkley Point C, is between four and six times more costly per megawatt of capacity than South Korean nuclear power plants, and four times as expensive as those that South Korea’s KEPCO has agreed to build in Czechia.

• Tram projects in Britain are two and a half times more expensive than French projects on a per mile basis. In the last 25 years, France has built 21 tramways in different cities, including cities with populations of just 150,000, equivalent to Lincoln or Carlisle. The UK has still not managed to build a tramway in Leeds, the largest city in Europe without mass transit, with a population of nearly 800,000.

• At £396 million, each mile of HS2 will cost more than four times more than each mile of the Naples to Bari high speed line. It will be more than eight times more expensive per mile than France’s high speed link between Tours and Bordeaux.

• Britain has not built a new reservoir since 1992. Since then, Britain’s population has grown by 10 million.

• Despite huge and rising demand, Heathrow annual flight numbers have been almost completely flat since 2000. Annual passenger numbers have risen by 10 million because planes have become larger, but this still compares poorly to the 22 million added at Amsterdam’s Schiphol and the 15 million added at Paris’s Charles de Gaulle. The right to take off and land at Heathrow once per week is worth tens of millions of pounds.

• The planning documentation for the Lower Thames Crossing, a proposed tunnel under the Thames connecting Kent and Essex, runs to 360,000 pages, and the application process alone has cost £297 million. That is more than twice as much as it cost in Norway to actually build the longest road tunnel in the world.

These are not just disconnected observations. They highlight the most important economic fact about modern Britain: that it is difficult to build almost anything, anywhere. This prevents investment, increases energy costs, and makes it harder for productive economic clusters to expand. This, in turn, lowers our productivity, incomes, and tax revenues.

Throughout the essay, the writers delve deeper into these areas, outlining causes, proposing solutions, and concluding with the following call to action:

The good news is that the hardest things to create are ours already. No government can legislate into being a respect for the rule of law, appetite for scientific discovery and entrepreneurship, or tolerance of eccentricity and debate. Such a culture takes centuries to build: it is the most precious inheritance that we have received from the generations that went before us. By comparison, what we must do is surprisingly simple: get Britain building by removing barriers and lowering costs. If we can establish these foundations, growth and dynamism will follow. We have done this before. We can do it again.

All of this is indisputably true: nationalisation never works, and in 1947 we effectively nationalised land use — is it any wonder that our deeply dysfunctional planning system is now destroying our prosperity (and has been for decades)…?

Strike Labour

And whilst Labour has promised “planning reform”, all of the indications are that they are not going to do anything significant. The government may mandate that individual projects go ahead in the teeth of opposition — most notably the hundreds of miles of electricity pylons required to hook up their pointless and eye-wateringly expensive windmills — or, as they have done, re-jig and make “mandatory” the utterly ineffective building targets for local councils.

But there is no indication that this Labour government intend to fundamentally reform these de facto bans on building… well… anything at all. If that were the case, then Reeves would have done better simply to delay her Budget until the new fiscal year, since the necessary tax rises could have been much smaller (although, of course, given the spitefulness of Starmer’s Labour, our Chancellor probably just wanted to do it anyway — that certainly applies to the VAT raid on private schools, which will raise no money at all (and will probably be a nett cost)).

Given their immediate terrible performance (after being elected by only 20% of the total electorate), the conclusion of the Office for Budget Responsibility (OBR) that Reeves’s recent Budget will be a drag on growth (as high taxes (especially Capital Gain Tax) and excessive debt inevitably are), and the conclusion that addressing the core causes of our sclerotic economy are not on the agenda, the Armchair General believes that this Labour government will be a one-term affair (and may not even make it to the full five years).

As such, the Conservatives have time — but not too much time — to pull together a strong manifesto for dragging this country out of the doldrums.

Planning: the Conservatives’ political agenda

The core of the new Conservative manifesto must be a growth agenda; it needs to set out the following core principles:

1. if we carry on the current trajectory, the British government will be effectively bankrupt in the net 50 years — so something needs to change;

2. therefore, in order to pay for all the goodies that we have promised ourselves (now and in the future), we need to massively accelerate economic growth;

3. unless we can build the roads, railways, power stations, research labs, data centres, and homes that we need, then our economy will not grow at the required rate — and spending will need to be cut to the bone;

4. given the above, the only way to grow is to reform planning laws;

5. removing the barriers to building will lead to greater investment, lower energy prices (leading to even greater investment), greater social mobility, regeneration of all the regions (so-called “levelling up”), and vast increases in per capita GDP;

6. where the state invests in infrastructure, then it will cost considerably less than it does currently — meaning that not only will those projects undertaken provide more value for money, but also that many more projects will be viable;

7. this prosperity and increased mobility will remove even the perceived need for immigrants to perform low-wage jobs (including in our public services), and remove the economic pressures of those that we have already taken in¹;

8. if we do it right, then we will also be able to cut taxes without drastically cutting the size of the state.²

The argument needs to be as stark and inevitable as that.

What this means is that the Conservatives need not stand on a platform of slashing state spending — thus addressing the huge numbers of people in this country who, incredibly, still believe in the benevolent state.

Except for one caveat, there really is no downside to adopting Foundations, in full, as the core of the next Conservative manifesto (although it should not be the full extent of said manifesto — there are many other areas that need to be addressed, which I shall write about later).

The caveat

The biggest issue is that planning reform is never going to be popular — as the excellent Jonn Elledge outlines in his regular CapX NimbyWatch column, the NIMBYs are alive and well and frustrating building projects all over the country.

But one of the strengths of Foundations is that it lays out what existed before the malign 1947 Town & Country Planning Act, and why it worked — and it was largely because local people had incentives, financial and otherwise. Allied to the core argument laid out above, this should provide both local and national incentive to at least consider the option.

Further, when the Armchair General lived in Purley, sarf of Croydon, he joined the ghastly Next Door app. This was full of people complaining about new developments: ostensibly, the main focus of these complaints was on the accompanying infrastructure — sewerage, roads, etc. With easier planning laws, all of these issues could be addressed much more quickly and cheaply — this allaying the fears of all but the most rigid and obstreperous of locals.

Finally, of course, it needs to be hammered home (after so many years of “there’s no space” arguments) that less than 9% of this country is built on — even if you include roads, parks and gardens.

The strategy

The Conservative Party now has about five years to make the case for planning reform. Kemi needs to ensure that the party is disciplined, and that the messages outlined are developed fully, and are delivered at every level by MPs and party members: in Parliament, in MPs’ correspondence with constituents, and on the doorstep.

Some of the members won’t like it: but Kemi should hold out the promise of the local Constituency Associations being able to pick their own prospective MP candidates again, as a carrot to reinforce obedience.

The Whips should keep the Parliamentary Party in line; if MPs will not toe the line, then they will lose the Whip and not be reselected (local associations will be able to choose anyone they want, other than those barred by the leader).

At every turn, the Conservative Party must emphasise that these measures (and all of the others which should be adopted³) will:

• not cost the government money — and therefore will not require tax rises;

• make the country richer — and thus improve living standards across the whole of Britain;

• end the housing crisis — thus giving young people a reason to get on in the workforce;

• remove the need — or even the fig-leaf justifications — for mass immigration;

• restore Britain to an economic powerhouse that can hold its head high, and punch above its weight, on the world stage.

This should be a message of positivity, but rooted in real and achievable change. To repeat the final paragraph of Foundations:

The good news is that the hardest things to create are ours already. No government can legislate into being a respect for the rule of law, appetite for scientific discovery and entrepreneurship, or tolerance of eccentricity and debate. Such a culture takes centuries to build: it is the most precious inheritance that we have received from the generations that went before us. By comparison, what we must do is surprisingly simple: get Britain building by removing barriers and lowering costs. If we can establish these foundations, growth and dynamism will follow. We have done this before. We can do it again.

And, if the Conservatives are not just to win power but actually to improve the fortune of British citizens, then Kemi should adopt this agenda with alacrity.

And if she will not, then perhaps Reform will…

1. As I say, the cultural issues are for another time.

2. Obviously, as a classical liberal, I believe that the size of the state should be drastically cut — but this is not a popular argument in a country that has been raised and educated on socialist doctrine for decades.

3. Which I shall discuss in later posts.