David Cameron, toxic Tory (?)

Bagehot in today's Economist newspaper believes that the Conservative leader is under pressure to reverse his whole leadership strategy....

If David Cameron is loathed by voters but grudgingly credited with economic competence, can he win the next general election? A few months ago the question would have sounded bizarre. Mr Cameron secured the Conservative leadership in 2005 with a pledge to decontaminate the party’s brand. Rescuing the “nasty party” was Mr Cameron’s mission, and he pursued it with well-bred cheer, whether being pulled by huskies across an Arctic glacier to show concern over climate change, talking of his devotion to the National Health Service or making the conservative case for gay marriage.

With Britain seemingly headed back into recession, the prime minister finds himself at a turning point. Close allies, Conservative MPs and sympathetic think-tanks advise him that the quest for economic growth must trump all other considerations. Wish lists are pouring in from all sides, with a bias towards supply-side reforms aimed at making Britain a lightly-taxed, flexibly-regulated and competitive place to do business. All point to the same conclusion: that Mr Cameron might have to retoxify the Tory brand to save the economy.

Suggestions include abolishing the 50% top rate of income tax and speeding up cuts to corporation tax. Keeping wealth-creators in Britain matters more than accusations of being the party of the rich, many on the right tell Mr Cameron and his chancellor of the exchequer, George Osborne. Ditch those huskies, others argue, and with them British pledges to reduce greenhouse-gas emissions faster than European neighbours. There are calls to postpone dreams of “rebalancing” the economy away from the finance-oriented City of London and the south-east of England: this is a moment for helping the strongest first. Defend City institutions from hostile European Union regulations, it is argued. Slash back employment laws and other red tape, say many MPs: if that involves a dust-up with Brussels, good.

Tories close to the leadership insist that Mr Cameron is willing to stake everything on the economy. The mood inside 10 Downing Street is now “all about growth”, says one. “We can be thought of as nice or not, but if the economy isn’t growing, we’ve had it.”

Alas, many Tory MPs do not believe their party leadership, suspecting that Mr Cameron and Mr Osborne are too focused on the party’s image to risk really unpopular reforms. As men of inherited wealth, the prime minister and chancellor cannot imagine the scrappy rage of the self-made entrepreneur drowning in red tape, suggests a Tory MP. Worse, their privileged backgrounds make them feel guilty about curbing workers’ rights.

Some senior Tories seem determined to force the pace of reform. Steve Hilton, the prime minister’s chief policy guru, commissioned a venture capitalist, Adrian Beecroft, to write a report on areas in which employment laws could be loosened. The Lib Dems rejected Mr Beecroft’s boldest idea—giving employers the right to sack unproductive workers with compensation but without giving a reason. Workers who fear the sack do not spend, argued the Lib Dem leader and deputy prime minister, Nick Clegg.

Amid the worsening economic gloom, Lib Dem ministers are showing signs of flexibility. On November 23rd the business secretary, Vince Cable, announced a new, two-year probation period before workers could claim unfair dismissal, and said he was seeking evidence on whether Beecroft-style “no fault” sackings might be allowed in the smallest firms. Disgruntled, unnamed Lib Dems told reporters this was a return to “Victorian employment practices”—a painful rebuke for Mr Cable, who earlier this year swore he would not help the ideological heirs of those who sent “children up chimneys”.

Yet for now, on the big political choice facing the coalition—to worry about public opinion or gamble everything on economic growth—Mr Clegg’s party is hedging its bets. Well-placed Lib Dems talk about the need to fix the deficit while advancing goals such as social mobility, and continue to argue that their presence in the coalition is softening the harshest Tory policies. On November 26th Mr Clegg was due to unveil an avowedly interventionist scheme to subsidise the wages of teenagers hired by private firms. Too many Lib Dems complacently point to opinion polls showing that voters may be wary of the coalition’s economic management, but distrust Labour still more.

Just now, only the economy matters

Coalition tensions are rising. Tories blame the Lib Dems for holding the coalition back, accusing them of terror at being seen as “mean and nasty”. Lib Dems deny that they are blocking pro-growth reforms, saying that the real divide is between realists and “supply-side fantasists” in the Conservative high command who think that tweaking labour laws can offset billions of pounds of vanished demand.

Enough. The economic stakes for Britain are too high for such squabbling. The Lib Dems still dream of being the kindlier half of the coalition. Yet without economic growth, this will earn them no voter gratitude in 2015. The Conservatives are being hypocritical: for all their bold talk of deregulation, the party is still defending right-wing shibboleths, notably plans to limit skilled immigration, even though government-commissioned studies predict that this will hurt growth.

A grand bargain beckons. The Lib Dems should accept new, pro-growth reforms to employment laws, welfare and education that anger the left. In return, they should demand concessions on things such as immigration rules that will enrage the right. Coalition government is rare in Britain: both parties should use it to overcome each other’s flaws and remove obstacles to growth. It is a risky strategy. But the alternatives are worse.