Thank you very much for the kind invitation to speak at this conference organised by Bright Blue on how centre-right policies can improve living standards.
There are many ways in which we can assess living standards: the quality of our environment, peace, and security at home and abroad; health and vitality.
But today I will focus on the most usual form of assessment: economic wellbeing.
And so let me start with context.
We have to stop living off the fumes of Empire. The fumes are comforting, they reinforce our sense of invulnerability, but they sap a sense of urgency, they indulge economic wishful thinking, they reward avoiding difficult choices. If we do not wake up from this opiate state we are going to find ourselves in the third league of nation states with emerging global powers and even middling European democracies enjoying higher living standards than we create ourselves.
The world does not owe us a living.
It does not owe any of you a living.
It does not owe me a living.
Each of us has to go out and earn one.
Competition for higher living standards is getting more global and more antagonistic.
These trends will make it harder for future generations of Britons to maintain relative living standards and, potentially, absolute living standards.
BACKDROP FROM THE ELECTIONS
In recent elections, the public have been clear in their views and their disdain:
“Nothing in Britain works like it should.”
“The country is going to the dogs.”
“I don’t think life will be as easy for me as it was for my parents.”
“Politicians don’t care – they are just in it for themselves.”
And the issue that most often crystalises these concerns: immigration. Immigration. Immigration.
And let me be clear: despite multiple Immigration Acts, a “hostile environment,” van signs encouraging illegal migrants to go home, the closure of bogus colleges, curbing the use of trucks in the Channel tunnel, years of co-operation with other European countries, the push for offshore processing in Rwanda.
Despite all these actions, it is still a fair and self-evident assessment that we failed in the eyes of the public.
And on public services too, we took our eye way too far off the ball in too many areas, particularly after 2015. The torture of Brexit negotiations and the torrent of Covid interventions provide some explanation but they do not provide an excuse for the unwillingness of successive Conservative governments to reshape and refocus the state.
With the notable exception of schools, the Conservative toolkit was still largely comprised of solutions from the last century: privatisation and top slicing cuts.
And in these, and in some other crucial areas of competence, looking back over our fourteen years in office I think we could have done with more management experience in our ministerial teams – though we were replete in this in comparison to the current Labour government.
As my former boss at LEK Consulting used to say “Strategy is what happens, not what is planned to happen.” Modern politics requires a much more critical, detailed eye from ministers on end results and requires the skills and determination to make the complex systems of government yield to their power.
And finally, over our fourteen years in office, we increasingly came to believe that government had all the answers and too often, despite what we said, we sought answers in more government rather than less. Too often that was mistaken.
It is perhaps NOT an irony that as politicians grew ever more eager to say that government was the solution to ever more problems, that the public got ever more frustrated with politicians’ failure to solve problems.
Whatever happened to “under promise and over deliver”?
THE LIABILITY STATE
We have constructed a series of public expectations that have overextended the state: of services provided free or subsidised by the state, of income support or replacement provided by the state, that the state will intervene whenever a “crisis” looms.
To maintain these obligations the state has increased rates of taxation to historically high levels and increased its debt to historically high levels for peace time.
But, for future living standards, compared to what I am about to say, that is the good news.
For the state is asking future generations – those generations which will face greater competition than we did to sustain living standards – are asking them to shoulder not only the burden of government debts amounting to approximately £2.8 trillion but also to fund the £1.4 trillion of public sector pensions governments have not provided for; plus another £1 trillion in other liabilities such a nuclear decommissioning and the £4 trillion in state pensions for which governments have not provided.
In total a £9 trillion level of obligations- on a £2.8trillion economy.
We have constructed a “Liability State” – a set of government promises about the future which are dependent on:
a) an economy growing faster than the interest rate charged on government borrowing; and
b) a working age population that grows in sufficient proportion to maintain a dependency ratio that is financially bearable.
Throughout the latter half of the last century, there was general confidence in both of these measures, but that confidence has ebbed significantly since the financial crisis of 2007-8.
Politicians of all parties are now questioning the over-reliance on the levels of legal migration that increase our labour market and rightly so. We should be sceptical.
But politicians should also consider what a reduction in working age population will mean for the sustainability of state liabilities.
NEW UNCERTAINTIES
And now there are new waves of uncertainty.
A new era with a change to the post war world order – creating a new order where Europe does not matter as much, if at all. And where Europe must contribute more to its own security.
An era where economic arrangements will be more tightly aligned to security, with greater visibility through supply chains and financial networks to ensure compatibility with national security objectives.
An era where the pace of technological change is likely to Increase further the velocity of change in society as a whole, with more potential for disorientation, misinformation, personal insecurity and psychological overload.
For the state to be able to address these uncertainties or to absorb future shocks akin to Covid or even Brexit, we should not leave unanswered the extent of our liabilities.
CONSERVATIVE PARTY IS UNDER NEW LEADERSHIP
These are some of the lessons we are taking to heart under the new leadership of Kemi Badenoch:
- We are being honest about our last period in government – what we got right and wrong.
- We are ensuring we secure ourselves to core Conservative principles.
- We are developing thorough, workable solutions to persistent problems.
- We will ensure that, by the next election, we have the talent, aspiration and drive to succeed.
The Conservative Party’s foundation must be different.
A society that underpins the family as the foundation of one’s security and of our society.
A society that seeks to expand the scope for individual freedom and the scope for individual self-reliance.
A society that encourages people to succeed and to recognise their responsibility to others who are less fortunate.
In these tasks, our aims should be to create a new era of freedom and to re-assert those long-cherished freedoms that are essential to economic prosperity.
Free trade and free enterprise are the bedrock of a free society.
In turn these freedoms are underpinned by a desire to create a better future for oneself, for one’s family and for society by deploying our talents as far as they will take us.
I was fortunate to grow up at a time that belief in these freedoms was about to usher in a new era of confidence in Britain.
“Free to Choose” by Milton Friedman was not only an economic text it was broadcast on mainstream TV.
On a Saturday night!
When there were only three channels!!
As other countries turn their back on free trade, and as other parties do too, the Conservative Party should stand firmly for trade free of tariffs, free of quotas and, to the largest extent possible, free of other trade barriers.
And as other parties – from Labour to Liberal Democrat to Reform – tout the virtues of nationalisation – the Conservative Party should stand firmly on the side of free enterprise, contestable markets and regulation only where absolutely necessary.
LABOUR’S TARGETED SOCIALISM
Nothing could be further from this recipe for our future than the policies being pursued by the current Labour government.
A government which barely understands the motivations, incentives and agility of the economy it seeks to manage with ungainly, brutish force.
But do not be fooled by its evident incompetence.
In one sense – socialism – this government knows exactly what it is doing.
This government is targeting every individual’s independence of the state.
Taxing private education.
Taxing family businesses.
Taxing family farmers.
Burdening private and non-profit care providers with extra taxes and fewer workers.
And even threatening to force the pensions of private sector workers into the investments the government believes need money.
Sir Keir Starmer’s definition of a working person is revealing.
He defined this as someone who “goes out and earns their living” and who “can’t write a cheque to get out of difficulties”, And he was explicit that people who get additional income from assets such as savings and shares would NOT come within his definition.
Think about that for a moment?
This Labour government’s vision is for a society where you work but if you get into any difficulties you must depend on the state, not be self-reliant. And when you bother to save any money, the state will not protect you.
SETTING A DIRECTION
More government is not an answer – and anyway is not an option – so: we must trust the people (again); create the space for a new generation of freedoms; and rediscover our love of wealth creation from owning your own home, to running your own business, to investing in new commercial opportunities
In a more competitive world this is the only way to higher living standards. And the best way government can help is not by picking winners, or by issuing industrial strategies every five minutes, but by being clear on the economic principles that will be the foundation for its programme of government.
WHICH PRINCIPLES CAN HELP?
As Shadow Chief Secretary my role is not to develop departmental policies, but I can suggest SEVEN principles I believe can help shape policies to improve living standards.
Principle One: Draw on all the talents
We should develop economic policies that draw on all the talents of all our people. Throughout my professional life I learned that potential was what to seek out and that potential came in many forms.
There is always a place for academic potential, but there is also technical potential, caring potential, creative potential, entrepreneurial potential.
Drawing on all the talents means that our economic policy must start by ensuring we create equivalent pathways for all our talents to develop and flourish.
Drawing on all the talents means our economic policy must be based on an inclusive society and vision for Britain.
Drawing on all the talents means encouraging private capital formation across the country.
And drawing on all the talents means bringing new skills into the Westminster bubble but also continuing to decentralise Whitehall powers to local leaders but by evolution not diktat.
Principle Two: Reinforce freedom under the law
If we are to encourage a risk taking culture, we must create a society in which people feel confident to create a new insight, express a new opinion, take da measured financial risk.
These freedoms need underpinning by our legal framework, not undermined by it. The Byzantine processes for planning consent, the confusion over corporate governance, the looming state mandating, or not, of private pensions diminish our economic potential. The extravagance of lawfare is an indulgence imported from America and frequently perpetuated by the moneyed and well connected that to frequently and unnecessarily subordinates the interests of the majority to the pet interests of a tiny minority.
Principle Three: Empower Citizen Control
The coming era of AI and big data heralds a new era of citizen control. With the right approach we can replace the bureaucratic, producer driven state with real, effective citizen empowered control over the public service each of us use.
And more. By informing citizens about health outcomes and personalizing education for every child, targeting benefits more acutely we can empower citizens further.
And with that empowerment we can encourage greater accountability for decisions
Principle Four: Encourage Self Reliance
The bind we are in is, that as we have been seduced into normalising that the State is the answer, we have undermined the need for self-reliance, the importance of people making choices and being resilient to the consequences.
Ambition, risk, reward fade and society and the economy ossify.
I cannot count the times that Members of Parliament have reached for the mantra “those with the broadest shoulders should…”. invariably followed by a demand for such people to fund the specific interest or concern of that MP.
Well, I say I cannot count the times because I could do a search of Hansard. Here are some recent examples:
Daisy Cooper – Liberal Democrat – “those with the broadest shoulders—those big corporations—to bring in billions of pounds in order to support people at the other end of the ladder.” (12th May 2025) Income Tax: Personal Allowance
Bell Ribeiro Perry – Labour “If the Government are to recoup costs from somewhere, they should cast their gaze away from some of the most vulnerable in our society and instead look at those with the broadest shoulder” (7th May 2025) PIP Disabled People
Stephanie Peacock – Labour “Given the requirements in the Bill, we expect any charges to be distributed proportionately. Those with the broadest shoulders will pay the most.” 28th April 2025 Football Governance
Neil Duncan Jordan – Labour “Should we not be looking at raising funds from those with the broadest shoulders?” (8th April 2025) Wealth Tax: Potential Merits
Lucy Powell – Labour “All that has raised billions of pounds for our public services, and for what we are doing. We absolutely think that those with the broadest shoulders should pay the highest price.” (27th March 2025) Business of the House
And so it goes on… All well and good for politicians to assert this – repeatedly and endlessly – but people will get the message. People will seek out opportunities elsewhere if they feel they are being taxed unfairly or maligned for the fruits their talents create.
We will end up with no people with broad shoulders.
I don’t know what a country without people with broad shoulders looks like, but I am prepared to bet, they are worse off
A better policy is to encourage people who have created wealth in this country, to double down again on creating wealth in THIS country. A better policy is to have a more positive attitude to economic risk taking: one that understands that sometimes an early failure leads to a larger success.#
Principle Five: Declutter the State.
To help improve future living standards the government should focus on doing fewer things and strain to do each of these things better.
The state is more than a business, but it involves a huge variety of business processes. Yet unlike many of the most successful global businesses, the public sector does not have a relentless focus on improvement.
Many years ago, at business school, I learned about the improvements in efficiency that Japanese companies were achieving.
For decades, leading businesses have finetuned supply chains, logistics modelling and distribution methods providing their customers with an amazing array of products deliverable to their homes within hours.
Many leading businesses have adapted technology to create insights about, improve connection with gain feedback from their customers enabling more personalised service and better product design.
We need a generation of public sector leaders energised by the same sense of purpose: a ruthless focus on efficiency, improvement and quality – with much clearer accountabilities and a willingness to reward long term success.
Principle Six: Regulate the Regulators
A great place to start with clearer accountabilities is with our regulators.
Regulated sectors – from utilities to communications to financial services to transportation – comprise over a quarter of our country’s GDP.
Yet there is no system for effective evaluation of the performance of our regulators. When OFGEM was making such a hash of things in 2022, I decided to see who was responsible for holding them to account. The result – that it was the Business Select Committee -concerned me, not least because I was a member of the Business Select Committee.
I have proposed a new joint select committee – drawing the experience of members of the House of Lords together with the democratic mandate of MPs – charged with providing annual reviews of the performance of all our regulators, with driving them to achieve global best practice, and with real teeth to hire and fire if required.
Principle Seven: Address the Liabilities we are passing on
My last principle returns me to one of my first observations: that to give the best possible chance for future generations to be able to earn a better standard of living, we need to be much more serious about the liabilities that we currently plan to pass on.
And to repeat my caveat, that I do not do policy.
In Australia, in the 1990s it was a Labour government under Paul Keating that recognised the demographic challenge facing retirement incomes of Australians and introduced compulsory savings under their Superannuation system. It was a painful transition but now, forty years later the “pay as you go” system of retirement pensions has been largely replaced by a tax incentivized savings system with their state pension now fully means tested.
Again in Australia in 2006, the government established the Future Fund to strengthen the long term financial position of the Federal government by making provision for the pension obligations of public servants. Again this was a painful transition but now, twenty years later, the Future Fund has more than AUD 250bn of assets under management and the pressure on public finances to cover the pensions of retired public sector workers is much reduced.
BOLD ANSWERS TO PERSISTENT PROBLEMS
Across the Shadow Cabinet my colleagues are listening, researching, and developing bold answers to persistent problems and to deliver a better standard of living.
My encouragement is, wherever relevant, to test these emerging policies against these seven principles
1. Draw on all the talents
2. Reinforce freedom under the law
3. Empower citizen control
4. Encourage self reliance
5. Declutter the state
6. Regulate the regulators; and
7. Address the liabilities we are passing on
The keynote speech was delivered at Bright Blue’s ‘Raising the bar? How centre-right policies can improve living standards’ conference on the 14th of May 2025.
Richard Fuller CBE MP is the Shadow Chief Secretary to the Treasury.