American conservatives don’t have much respect for David Cameron, the British prime minister whom many see as a squish. But they should. Most of Cameron’s American admirers focus on his support for same-sex civil marriage and his seeming allergy to populist gestures. His real virtue, however, lies in his ability to make a highly ambitious reform agenda seem utterly pragmatic, and even dull. And in his recent address at the annual Conservative Party conference in Birmingham, Cameron hit upon a pair of tax proposals that have much to teach his U.S. counterparts.
Cameron became leader of the Conservative Party in late December 2005, positioning himself as the “heir to Blair.” During his years in opposition, he carefully presented himself as a modernizer in tune with a Britain that was more diverse and more socially liberal than it was under Thatcher. He emphasized his compassion for society’s most marginalized members (“hug a hoodie”) and his keen interest in combating climate change (“hug a husky”), among other causes traditionally associated with the political left. It is easy see why many on the right, not just in the U.S. but in Britain as well, found Cameron’s apparent rush to the left cloying.
Once in office, as the head of a coalition with the left-of-center Liberal Democrats, Cameron has periodically adjusted his message, in keeping with the changing mood of post-crisis Britain: he has spent far less time talking about climate change and far more time talking about restoring the country’s fiscal health and reforming welfare and education. Moreover, his government has had great success in increasing employment levels. While labor force participation for prime-age male workers has declined since 2002 in the United States, it has increased in Britain — indeed, it is now higher in Britain, at 86 percent, in Britain than it is in the U.S., at 81 percent. Credit goes at least in part to the Cameron government’s welfare-to-work initiatives, including a Work Programme that tasked private employment service providers with the long-term unemployed, with the providers compensated primarily on the basis of their success in connecting workers with jobs that stick. Though the WP is still quite young, and though some of the government’s welfare-to-work efforts, like the Universal Credit, haven’t gone smoothly at all, it sent a clear message that Cameron intended to pursue a work-first approach.
Cameron’s welcome shift to the right could reflect the fact that the greatest threat to his government has come not from the left, but rather from UKIP, a once-minor party that has surged on the strength of its opposition to the European Union and its vigorous anti-elitism. Recently, two Conservative MPs, Douglas Carswell and Mark Reckless, have defected to UKIP, an ominous sign that the UKIP challenge is gaining momentum. Though few hold Reckless in high esteem, Carswell is by all accounts a serious thinker, and a frequent collaborator and co-author of Daniel Hannan, a Conservative member of the European Parliament, a favorite among American conservative intellectuals. If the left unites behind Labour while the right fragments, Ed Miliband, Labour’s unreconstructed socialist leader, will almost surely win the next general election. This is despite the fact that, on closer examination, Cameron has been a quite effective conservative reformer, as Adrian Wooldridge recently argued in The Spectator.
“The problem which haunts Britain is not a problem of representation,” Wooldridge writes. “As long as the state continues to overpromise, overcharge and underdeliver, it will continue to provoke mass fury.” Cameron, according to Wooldridge, “is in a surprisingly good position to make this argument,” having “already presided over the biggest reduction in the size of the state since the second world war.” This is no small feat given that Britain’s policymaking elites are well to the left of America’s, and the legitimacy of Britain’s welfare state is more firmly entrenched than it is in the United States. While constantly underscoring his commitment to protecting the NHS, Britain’s socialized health system, and the cornerstone of its postwar civil religion, Cameron has imposed real fiscal discipline on a British state that had grown rapidly during the Blair-Brown years, and his support of the spread of free schools will likely have deep and lasting consequences. Wooldridge wants Cameron to run his 2015 campaign on devolving power not just from London to Britain’s cities and towns, but from the British state to families, civic organizations, and private enterprises.
In his conference address, Cameron spent less time offering a Wooldridgean vision of Britain as a post-bureaucratic utopia, attractive though that vision is, than he did on connecting his reform efforts to a moral vision.
“I’ll tell you who we represent,” said Cameron to the assembled activists. “This party is the union for hardworking parents…the father who reads his children stories at night because he wants them to learn…the mother who works all the hours God sends to give her children the best start.” He called on Conservatives to be the trade union for “the young woman who wants an Apprenticeship” and “the teenagers who want to make something of their lives,” and he insisted that “our young people must know this is a country where if you put in, you will get out.” That is, Cameron offered a vision of conditional reciprocity, in which those who make an effort to better their lives — who work, save, and invest — would have the Conservative Party as an ally. And this served as the emotive basis for his modest but appealing tax proposals: first, he pledged to raise the tax-free personal allowance from £10,500 to £12,500; second, he pledged to raise the threshold for the 40 percent tax rate from £41,900 to £50,000. As Fraser Nelson, editor of The Spectator, has observed, these promises are not quite as impressive as they might seem at first glance, as merely adjusting these numbers for inflation would get you to a £12,300 tax-free personal allowance and a £49,300 threshold for the 40 percent tax rate by 2020. In recent years, however, these figures haven’t been adjusted for inflation to increase revenue, so this does mark a positive change.
What strike me as most attractive about Cameron’s tax promises is that they are both very hard for the left to attack and very hard for the left to mimic. Raising the tax-free personal allowance is not, in my view, a wise tax policy, as it will benefit high-earners without having any positive impact on their work incentives; raising the 40 percent tax rate threshold is similarly unlikely to spur a big increase in work effort. Yet both measures will increase disposable income for low- and middle-income households, if only modestly, and neither can be characterized as a giveaway to the rich. They are, however, tax cuts that will reduce revenue that might otherwise be devoted to expanding government. Labour can’t copy the Conservatives without reinforcing the perception that they are fiscally reckless. The Conservatives under Cameron, meanwhile, have earned a reputation for fiscal probity by restraining spending even when it was unpopular to do so, and so they have at least some leeway on this front.
Cameron’s proposals bear a resemblance to the new Lee-Rubio tax reform proposal, with its expansion of the child credit. Lee and Rubio call for a modest return of the top tax rate to its Bush-era level, but the most visible beneficiaries of their tax reform will be middle-income families with children, a fact that resonates with Cameron’s characterization of conservatives as “the union for hardworking parents.” It should go without saying that Britain’s political environment is very different from America’s. But Cameron has learned not to play on the left’s turf. Instead of expending precious political capital arguing over the top rate for the highest earners, an argument that Labour desperately wants to have, he is making the case for middle-class tax cuts, freedom of choice in public services, and work over welfare. Not bad ground on which to fight.