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Davis: Creating an opportunity society

Speech at the IPPR

"I am very aware that a few eyebrows will be raised by a Conservative speaking to the IPPR about the way we organise our country. Surely it must be a very big tent indeed that can encompass the aims of a centre left thinktank and a centre right politician.

But we must not confuse means and ends. The aim of the IPPR is to use its research to produce a "fairer, more inclusive and more environmentally sustainable world". I can sign up to that. Indeed, I hope we can continue to work together.

I have admired the way some of our leading thinktanks moved seamlessly from providing policy ideas for the Conservative government of the 1990s to offering help to New Labour after 1997, without deviating at all from their central purpose.

I look forward to the day when the IPPR, still regarding itself as progressive, still promoting fairness, inclusion and sustainability, produces research which can be taken up and turned into policy by a modern Conservative government.

I can look forward to that day because, under the noise and battle of day-to-day politics, the aims of any British government will overlap. We all want to fight poverty and deprivation. We all want opportunity to be extended throughout our country. We all want to be proud of our public services and those who work in them. We all want social justice. Where we differ, genuinely and profoundly, is how to achieve this.

The just society, for Conservatives, is one in which no one is deprived of opportunity, and no one is excluded. It is, indeed, the fulfilment of Churchill's dream of a Britain, in which "there is a limit beneath which no man may fall, but no limit to which any man might rise".

Let me start by addressing how current policy has failed to spread opportunity throughout our society, and why it has failed.

The failings of New Labour

New Labour's approach, which has its roots in John Smith's social justice commission, rests on two propositions: that Britain is an unequal society and that the solution lies in large-scale increases in public spending.

These increases are rhetorically linked to reform in the public services, but the forces of conservatism, in this case the trade unions and the traditional wing of the Labour party, has meant that reform is at best half-hearted.

The result of this increased spending in a largely unreformed public sector is one that should make every left of centre politician blush and every right of centre politician think there has to be a better way.

Consider these facts about Britain after eight years of New Labour government:

· A man born in East Dorset expects to live for 80 years; a man born in Manchester for only 71.

· The proportion of children eligible for free school meals and achieving five good GCSEs is only half those who are not eligible for free school meals.

· In 38 of 43 types of cancer analysed, it's been shown that the survival rates of the affluent are greater than those of the least well off. · Even though more children from poorer backgrounds are staying on in education post 16, there is greater inequality of access to higher education.

· Since the mid 1990s the difference in disposable income between the richest and poorest 10% in Britain has widened.

Wherever you look, the aims of the social justice commission have not been achieved by the policies derived from its recommendations. There are too many victims of state failure in Britain today. I want to be their champion, giving them genuine opportunity to live a fulfilled life. We will only achieve this by a radically different approach.

The typical reaction to today's lack of social mobility is to do what Gordon Brown does: demand more state intervention. But the immobile society is, in large part, the result of too much government intervention, and of the wrong sort. It is a myth that such heavy-handed intrusions help the poor. They don't.

For example, today's rigid structures in health and education work not in favour of the less well off but, if anything, in favour of the affluent. A moment's reflection will show just why. In trying to get into a good hospital, the middle classes are generally more adept at finding the requisite information and making the necessary contacts.

Moreover, as Professor Julian Le Grand, the prime minister's policy strategy adviser, observed last November, it's the richer and better educated people who actually make most use of the health system. Not surprisingly, then, poor people have worse health outcomes.

In education, the divide is probably even greater. Ofsted consistently reports that the lowest school standards are concentrated in the most deprived areas. This isn't because children from poorer families are more stupid, or their parents less committed. It's because in today's rigged market of state education only the rich can exercise choice.

Wealthier people can buy a house in a good school's catchment area; poorer people can't afford to move. One recent study suggested that the premium on a house in the best possible secondary school area, compared with the worst, stands at £23,700.

In these circumstances, to describe state education as truly free is hypocrisy of the highest order. And this also helps explain why teenagers in deprived areas are six times less likely to go to university than their peers in the leafy suburbs.

British society today is also afflicted with specific ills. They don't all stem from the actions of government. But all have been worsened by its failures.

First, our society is disorderly, and severely affected by violent crime and the fear it engenders. Violent crime is up by 90% and robberies by 50% since Labour took office. Persistent youth offending has risen. Cocaine use has trebled.

Meanwhile, detection rates have fallen. There are 900,000 more unsolved crimes each year than there were in 1998.

The signals from the government about use of drink and drugs, which both fuel crime, have been disastrous. Asbos are failing. Their implementation record is risible. The better off have a reasonable chance of escaping the consequences of this breakdown of law and order. Their houses are barred and alarmed. They travel everywhere by car. Their neighbourhoods are safer. It is the less well off who suffer most.

- Unemployed people are almost three times as likely to be the victims of violent crime.

- People living in a council estate are 54% more likely to be burgled.

- Unemployed people are nearly twice as likely to have had a vehicle stolen.

The second great social ill also directly affects the least well off, though it weakens society as a whole: I mean the growth of welfare dependency. Three statistics tell most of the worrying truth:

- 30% of households in Britain depend on the state for more than 50% of their income.

- More than half the population receive some kind of benefits.

- And for families on means-tested benefits getting tax credits, of each extra £100 they earn, more than £70 goes in tax and cuts in benefit - that's a 70% marginal tax rate.

The third pervasive social problem that Britain faces comes from state dependency of a different sort: that resulting from a near-state monopoly in health and education and excessive centralisation of power in the hands of politicians and bureaucrats.

Britain has a second rate health service and underachieving schools because government, not patients and parents, makes the key decisions. If you look at the focus groups and the opinion research - and I sometimes wonder whether the Tory party has looked at them a little too much - you will find that most people are more interested in standards than in choice.

That's hardly a surprise. We'd all rather be cured in a state-run local hospital than have the luxury of agony in a variety of distant private ones. But it's also not the point, and Conservatives have a responsibility to say so.

The reason why standards are low, and value for money so poor, is because the present structures ensure precisely that. You have to focus on satisfying individual requirements not go in for mass production. You have to change the structures and substitute choice and competition for monopoly and central diktat, if you want a different and a better outcome, especially for the poor.

We must point to what's happened to the money that's been spent. The more that's gone in, the less the extra benefit has been - as you'd expect from a state monopoly.

In October last year, the Office of National Statistics showed that NHS productivity had fallen each year since 1997. In December, Professor Nick Bosanquet of Imperial College estimated that NHS inflation is absorbing 70% of annual spending increases. And after we've pointed out those facts, we can start to show how empowering individuals through choice will lead to real improvements.

A Conservative approach

However admirable the aims of New Labour, we can see that, eight years into the project, it is simply not working for far too many people. One key purpose for the next Conservative government will be to allow individuals to climb as high as they dare, wherever they start from. We will do this not by tweaking the current system, but by changing the whole approach to the support systems that allow individuals and communities to make progress.

Conservatives often find it difficult to speak persuasively about social policy.

One reason is that almost anything a Tory says on the subject is considered ripe for distortion.

For example, if a Conservative politician observes that children have a better chance of living fulfilled and gainful lives when brought up by two happily married parents, he is likely to be pilloried as narrow-minded. Perhaps it is easier for me, from my background, to express this truth.

And I do so without hesitation, knowing that there's a wealth of evidence to support what common sense suggests.

The family is the building block of society. It is in the interests of all - single, married, black, white, young, old, gay or straight - to keep the family strong. It's necessary for our economic success and for our stability as a nation. If the family fails, society fails. Modern families take a number of different forms, and as a class, politicians are the last people to preach about how others should live their private lives.

Like many people today, but far fewer then, I was brought up by a single mother. But, unlike my equivalents now, I had the benefits of a strong community on which to rely. The old working class ethic of self-help and mutual support still held sway.

And the welfare state actually worked.

I still remember how delighted we were when we were given a council house. I benefited, too, from going to a good grammar school. I've known difficulties in life - who hasn't? - but never real hardship.

And I owe that fact to the values that prevailed and the support I received.

Mine, I can see, was a privileged working class generation. Strong social networks and the welfare state still complemented one another. It was as if two trains were, at that particular moment, lined up alongside. We had easy access to both. What we didn't see then, but we can all admit now, is that those two trains were heading in opposite directions.

Social stability was receding. The intrusive state was advancing. And, as a result, it has become central to any mission of social reform to reduce the role of government in people's lives, rather than extend it.

Again, let me tell you of a more recent experience.

During the last parliament, when we were launching our policy to give housing association tenants the right to buy their homes, I went back to the council estate on which I used to live.

Being filmed with either children or animals is known as a risky tactic for politicians in search of a photo opportunity. But returning to your roots is another. I didn't know how the estate would look. But, as it turned out, I needn't have worried. There was no rubbish and no graffiti. It felt safe, and there was an indefinable sense of pride about the place.

The reason was clear: 71% of it was now owner occupied, because of the policies we introduced in the 80s. And please note: it wasn't 71% clean, 71% crime-free, or 71% orderly. The estate as a whole had benefited - because individuals had exercised choice, accepted responsibility, and gained a stake in improvement of the community.

If you ever want evidence that the drive to widen ownership is central to conservative social reform, go to that estate.

The White House recognises the rightness of the approach of empowerment through ownership: it's become crucial to the compassionate conservative agenda. We Conservatives in Britain should never be ashamed of it either.

It is with the background of a strong community that you are most likely to become a successful individual. A collection of strong communities is needed for a successful society.

David Willetts was right to identify that a strong society is as important to Conservatives as a strong economy.

One task for modern Conservatives is to show how state activity can diminish communities and weaken society, making worse the problems it is trying to solve. The most likely victims of this failure are the poor and the weak. The other half of this task is to show how a lower tax, decentralising government can provide better services and more opportunity, particularly for those who start out with few advantages in life.

Tories in recent years have become too timid about saying how we want to improve society. We sometimes behave as if the Left, with their vocabulary and their policies, had acquired a freehold on social policy.

I stand for a new Tory idealism.

I want to achieve the aims that moderate Conservatives have always championed: a strong society based on a free economy, with opportunity for all. To achieve those aims we need the methods which have been championed by thinkers of the right: decentralisation, less state intervention, competition and choice.

This is an idealism that brings together the various Tory traditions into a new consensus, and gives us the route map to a healthy society.

The Conservative view of society is coherent, distinctive and also has the merit of being true to lived experience.

For us, society is built from the bottom up. Individuals, families, local communities and nations, each reflect an aspect of human reality, none of which can be ignored or diminished if society is to flourish.

The collectivist view, by contrast, is a top-down view. For the social planners who designed failing institutions like vast inhuman council estates - and for their latter day equivalents who want to mould individuals into vice-free, quirk-free, identity card-numbered clones - only the mass counts, not the individual.

They lack understanding of what makes parents love their children, or neighbours take pride in their community, or soldiers make sacrifices for their country.

I am convinced that if you permit and encourage individuals, families and communities to express their identity and fulfil their own potential, the common good of all will be advanced. As with the council estate on which I grew up, the path of progress is by liberating people to pursue their own interests, and so helping them to help others. It isn't by imposing a plan.

In his book Between Hope and History, Bill Clinton used the example of the humble American one cent coin to illustrate this connection between individual liberty (opportunity) and community (obligation).

On one side of the coin, next to Lincoln's portrait, is a single word, "Liberty". On the other side is the American motto "E Pluribus Unum - Out of Many, One".

It does not say "Every man for himself" as we all too often allowed Conservatism to be caricatured in the 1980s.

Instead, it expresses the belief that the protection of personal freedoms and the quest for the common ground are the twin poles of a society in which opportunity and liberty can flourish.

That is why I am convinced that if you permit and encourage individuals, families and communities to express their identity and to fulfil their potential, the common good of all will be advanced.

And this, for me, is the link between the Conservative vision of the good society and our view of the economy.

The need for a free economy

A free economy is the only means of underpinning a free society. We know this from experience.

We have seen, in the fall of communism, how economic freedom eventually undermines tyranny. And we also understand that, even in democracies, whenever more and more people depend on government for their livelihoods, the possibilities of effective dissent are diminished.

But of even greater practical importance for us today is to recognise, and to shout out to all who have ears to hear, that a thriving free economy, with low taxes and light regulation, also leads to a stronger society. It does this in three ways.

First, it creates jobs. Where taxes are high and the burden of the state is heavy, fewer people seek jobs and at the same time unemployment is higher. The facts are indisputable, and indeed hardly disputed.

The contrast between the US on the one hand and countries like France and Germany on the other is obvious. The high tax, high regulation, Old Europe model has led to twice as high unemployment as the system which makes America the most powerful economy in the world.

Second, because free enterprise capitalism generates more wealth than corporatist capitalism, it also provides the means of improving public services. It pays for hospitals, schools, roads, and police.

Low tax economies can thus sustain better services, and higher levels of spending, than high tax economies. Once a virtuous circle of economic growth occurs, the possibilities of tackling what seemed intractable social problems begin to open up.

That is one merit of the debate on the flat tax, and I am delighted that George Osborne has set up a commission to help the Conservative party think seriously about its implications. Whatever the outcome, it is clear to me we need a flatter, simpler tax system.

Third, the low tax, free enterprise economy encourages the virtues required if a modern society is to flourish. A functioning free enterprise economy, under a rule of law, with opportunity for all, encourages self-reliance, hard work, independence of mind, a spirit of cooperation, pride of ownership, personal responsibility, and generosity.

These things need to be said, because they are too easily forgotten. And if they are forgotten by the Conservative party, they will certainly be ignored by the government - as it nudges Britain further towards the failed model of high taxes, over-regulation, lower growth and fewer jobs. But economics is not enough, not even market economics.

The moral dimension in politics

Politics has a moral dimension, because every human being has a moral worth which cannot be measured on the basis of his or her utility, ability, efficiency, or possessions. The market is neutral and impartial. That is, in many ways, its strength. But it is also why government cannot allow market forces free rein in every sphere.

For a Conservative, who is an economic liberal, but who must also be more than that, government has a social role.

That side of Conservative thinking is sometimes summed up in a phrase that means a lot to Tories, though less I suspect to the outside world: the phrase "One Nation".

We want a single national community in which, despite all the welcome differences, there are some common goals and values.

And the best measure of how much we practise that approach is how we treat the people who would otherwise be devalued - those whose dignity is at risk because they lack the means to defend their interests. In dealing with the problems of poverty, disadvantage, and vulnerability, the free market is a means not an end.

The Conservative mission today is to provide not just a safety net for those who are in danger of falling out of society, but the bridges by which new British citizens can be brought into the mainstream.

When a modern Conservative talks about One Nation, he or she needs to be clear that it is today's Britain, with its myriad of different personal backgrounds and origins, which needs uniting. Dividing people from the mainstream values of our society because of their ethnic origin is as much of a threat to a successful opportunity society as failing people because of a lack of decent education or healthcare.

For me, One Nation Britain is a country which celebrates and cherishes diversity but anchors its various strands in a core of shared and common values.

Perhaps the country's greatest problem is that British society is still too rigidly stratified. It's still too difficult to break through, and to move on and up, if you have a difficult start.

Social rigidities have changed, of course, but they are no less pervasive than in earlier days, when snobbery and prejudice held so many talented people back. By the best measure available, income inequalities haven't shrunk; if anything, under Tony Blair and Gordon Brown, they've grown.

What should matter most to us is what's happened to opportunity - as measured by mobility. Here the evidence is even more striking. A recent report from the LSE found that inter-generational mobility in Britain has actually fallen. And it's less than in many comparable countries.

I'm not really surprised.

I well remember a boy who was with me at school. He was the brightest in the class. But he left school at 16, because he wanted to be a banker. He joined a bank at the lowest rung and climbed his way up. I don't know what happened to him - I suspect he's earning more than me right now!

Today that would-be banker would have had to stay on in school and go to university - if he could ever afford to repay the loan required. And for the non-bankers among us, the plumbers and electricians who also left at 16, matters would hardly be easier, because of what's happened to vocational education.

My old classmates would today be forced to shatter so many glass ceilings they'd probably retire hurt. In many ways, it's become harder for people from difficult backgrounds to climb as high as their talents can take them.

Partly this is because we have undervalued vocational education for more than 50 years in this country. One small effect of this undervaluing of vocational education is the increasing number of professions who have insisted on graduate-only entry.

This was meant to enhance the status of the profession. Instead it serves to reduce opportunity for those who might make perfectly good bankers, lawyers, or nurses. I can't see the point of insisting on a degree that's not relevant to the profession as a compulsory entry hurdle. What we need is to reduce dependency, not increase it.

Priorities for a Conservative government

The six practical priorities for the next Conservative government's strategy to strengthen our society are, therefore, these:

First, we must rebuild a low-tax, low-regulation, free enterprise economy, which will generate the prosperity and jobs to invest in the future and lift people out of poverty.

This economic reform is needed not least to allow a new contract between the generations. Under the present high-tax economy, young workers are paying for the pensions of the elderly, but, in return, they know that they will be paying for their own pensions, as well as being saddled with extra debts if they are students. They think this is unfair. It is not surprising that what the thinktank Reform has identified as the iPod generation - insecure, pressured, overtaxed and debt-ridden - has little engagement with politics.

Second, we have to strengthen the forces of law and order, to reduce the fear of crime and to punish criminals effectively.

Zero tolerance, "broken windows" policing of neighbourhoods, the techniques introduced with such success by Ray Mallon in Middlesbrough - these lessons should be learned nationwide. We need more prisons, with regimes that are serious about rehabilitation. We need less bureaucracy in policing.

To those who say that this sounds like traditional tough Conservative policy, I would say that the people who will benefit most will be those living difficult lives in tough areas, and helping them is a moral responsibility, not a case of the Conservative party looking after its own.

Third, those things which government really has to do should be done as close as practicable to local communities - that's an excellent principle and the new Tory MPs are right to stress it.

Setting policing priorities and holding the police accountable are part of this, and elected sheriffs are needed to ensure it happens.

Fourth, public services must be reformed by empowering individuals, widening choice, breaking monopolies, cutting back targets, and encouraging competition, so as to drive up standards.

New groups will be allowed to set up state schools, for example. Inside our education system, while it is vital to make sure exams allow the academically successful to display their skills, and while admission to university should be purely on individual merit, the biggest problem is not for the academic, it is for those with practical skills.

Technical and vocational education has been undervalued for 50 years in this country. I want to reverse that, just as I tried to when I set up a Tate and Lyle scholarship system for school leavers.

Fifth, the central role of the family in society must be recognised in both the tax and the welfare systems.

You don't need to punish lone parents in order to strengthen marriage. Equity and compassion must go together.

Finally, welfare dependency must be tackled anew.

It is possible to reduce the numbers reliant on welfare, helping them get back in the labour market, reducing the disincentives created by marginal tax rates. It was done in America, where, through a package of measures, welfare rolls declined by 60% between 1996 and 2003. We must learn from other countries, not assume that our own way of doing things is best.

The opportunity society

British Conservatives have often been rather self-effacing when it comes to social policy, so it's been left to our American friends to coin the phrase "compassionate conservatism". Yet it accurately describes the approach that we Tories must embrace here too, as we develop our policies for a better Britain.

After all, individual Conservatives had been practising active compassion for years, through the hundreds of voluntary organisations, which help make society strong

It was inspiring to see so many young people demanding that poverty be ended in Africa. But what's even more inspiring is the way in which, in a free society and with no pressure from government, people's generosity knows no bounds.

For many people, giving their money and their time involves real sacrifice. But they make it, because they know, without being told, let alone coerced, that with opportunity comes duty. As the next Conservative government strives to widen opportunity further, we can rest assured that the British people will seize that opportunity to help the world.

But compassion alone is not enough. We need effective compassion to make a real difference to people's lives.

The welfare state was a noble idea. But it remains a 1940s structure, unable to cope with the modern world. It needs to be replaced by a welfare society, where individuals and non-government organisations play a significant role.

I deliberately link opportunity and welfare, because we need both, and we are more likely to get one with the other. The British people are generally fair, kind, and generous. If they are allowed to be successful individually, they will be happy to save for their old age, to support their own family and to assist charities for those in need all over the world.

So the opportunity society will enable us to enjoy a welfare society. This is modern Conservatism. Not just taking Blairism and removing the objectionable elements, but changing the way we live.

The state has a place, but the state must know its place.

That place is not to play the role of the family, or the community, but to help individuals and families to realise their own dreams.

In particular, and perhaps shockingly for a Conservative, I want to make sure that those near the bottom of the pile can realise their dreams, not because some focus group tells me that they are a target group for my party, but because it is the right thing to do for them, and for the rest of us who live around them.

I don't measure compassion by the amount of taxpayer's money spent; I measure it by the change we make to people's lives. Effective compassion means decentralised public services, local involvement, instinctive national solidarity in times of trouble, an extension of the power to choose.

Every politician should be judged on whether the policies they promote will help make a reality of the principles they have. I will stick to my principles.

I have been described as a hard-nosed rightwinger. Well, perhaps broken nosed. Certainly, looking at the social democratic world of the 60s and 70s made me a Conservative, by choice, not by background.

I want people to have the opportunity and security I had when I was growing up.

A lifetime in business and then politics has taught me that you need to be tough to get results. But the results I want will demonstrate that the practical application of Conservative principles will benefit everyone, not just a privileged few.

That is what I mean by an opportunity society, and that is the vision I think this country needs."

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