Speeches recovered from the Conservative party’s online archive More…

George Osborne: Progressive reform in an age of austerity

It's a pleasure to be here at Demos again, this time as a member of your advisory council.

Demos is now firmly established as a leading voice of the liberal conscience in British public life - the organisation that best carries forward the intellectual tradition of JS Mill, Isaiah Berlin and Karl Popper - the nursery for the next generation of ideas to extend freedom's boundaries.

Your recent work, Philip, on the Liberal Republic was a provocative and timely analysis which challenged all those of us who are optimistic about human nature, who believe in an open society and who champion progressive values.

And the relationship Demos has established with James Purnell - and the launch of the Open Left project - demonstrates there is still intellectual energy on the Left. Just not in the Government.

In sheltering James here you have proved that the noble British tradition which sustained Berlin and Popper, survives - you are providing a dissident intellectual who has been forced to flee repressive authoritarian rule with a safe home.

Alongside your work at Demos on the left, you have also been helping us with the launch of your project on progressive Conservatism.

And that is what I want to talk to you about today.

My argument is simple.

The torch of progressive politics has been passed to a new generation of politicians - and those politicians are Conservatives.

By pursuing a course of illiberalism, centralisation, fiscal incontinence and opposition to meaningful public service reform, the current leadership of the Labour Party has abandoned the field of progressive politics.

In its place, the modern Conservative Party is now the dominant progressive force in British politics.

Whether it is pioneering open primaries to select our parliamentary candidates, or using new technology to give the public power through access to government information, or our commitment to a radical localisation of power, we are the ones setting the progressive pace in politics.

Some now say that the economic problems facing the country, and in particular the ballooning budget deficit, mean that the Conservative Party must put our interest in public service reform, localism and environmental improvement on the back burner.

They say that the progressive priorities that motivated the Conservative Party in the first couple of years of David Cameron's leadership are luxuries that cannot be afforded an age of austerity.

I couldn't disagree more strongly.

Indeed, I would argue that our commitment to fiscal responsibility in the face of mounting national debt is not at odds with progressive politics, but fundamentally aligned to it - as politicians on the left from Bill Clinton to former Canadian Prime Minister Jean Chretien once understood.

For there is nothing progressive about out-of-control spending that the poorest end up having to pay for, and nothing fair about huge national debts that future generations are left having to pay for.

And it is that fiscal responsibility allied to a passionate belief in public service reform - particularly in education - which is the only progressive route out of this debt crisis.

We face a choice between progressive reform with the Conservatives and front line cuts under Labour.

Without fundamentally improving the productivity of public services, the quality of those services will deteriorate as budgets are squeezed.

Since the current Labour Prime Minister has made himself a roadblock to reform, and refuses even to acknowledge the budget constraints, the only path he offers is one that will lead to deep cuts in front line services.

The alternative is the progressive one - and the Conservative one. 

Real reforms to public services, allied to a commitment to fiscal responsibility, means cuts on the frontline can be avoided and we can deliver more for less.

This is choice I want to explain to you today.

Let me start by laying my own cards on the table.

My politics are unapologetically progressive.

I reject the view that politics is about managing, making-do and merely conserving what works from one generation to the next.

I am optimistic about the potential of individuals to transform their lives, and society, for the better.

I am excited by the huge potential of technological and scientific innovation to enhance opportunity, spread knowledge, make power more accountable and our society richer in every way.

There is a caricature of Conservatives which holds that at every opportunity we try turn the clock back - and usually fail.

But that is not my Conservatism, and its has never been the approach of my party when it has been at its boldest, and at its best.

Benjamin Disraeli's speech in Edinburgh in 1867 set the challenge that all Conservatives should rise to. 

"In a progressive country change is constant; and the great question is not whether you should resist change which is inevitable, but whether that change should be carried out in deference to the manners, the customs, the laws, and the traditions of a people"

At its best the Conservative Party has done exactly that, from Shaftesbury's Factory Acts, to Stanley Baldwin's extension of state pensions, to Rab Butler's education act, to Margaret Thatcher's radical extension of ownership.

These were the great progressive answers to the challenges of their day - and they were Conservative answers.

Now we face a new set of problems.

Our broken democratic institutions, most especially our Parliament, have lost the trust of the public.

Our broken economy has left millions without jobs and left the government without any money.

Our broken society has become more fractured, more unequal and less fair.

Each problem requires a progressive response - and yet from the British left there is a deafening silence.

In each area, it is the modern Conservative Party providing the ideas, generating the debate and offering the country answers.

Take the challenge of repairing trust in politics.

Last week, for the first time ever, thousands of people helped a political party choose its parliamentary candidate.

The postal ballot primary in Totnes did not happen by accident.

It required a conscious decision by the Conservative leadership to take a risk, spend some money, overturn the established way of doing things and try something new.

While Labour politicians respond with worthy articles about how their party should think about trusting the public more, the Conservative Party is actually doing it.

And what happens when our candidates are selected?

They have used their time and effort to set up around 150 social action projects in their own communities, to start local job clubs, and to start changing things now rather than waiting until they get elected.

Together with our activists and MPs they are also making a real difference to the lives of people around the world, with truly impressive social action projects in Rwanda, Bosnia and Sierra Leone.

What is the Labour response?  Matthew Taylor at the RSA talked recently of his frustration at how his attempt to get Labour candidates involved in social action was met with a stony silence from the high command.

And ask yourself the question: which Party is using new technology to shift the power relationship between citizen and state?
The Conservative Party.  We will give people the choice of accessing their own health records and we have committed ourselves to a transparency revolution that will see every item of government spending over £25,000 published on line. 

And again, we are not just talking about it.  We are doing it.  From small Conservative district councils like Windsor to the Conservative Mayor of London, taxpayers can go online and search how their tax pounds are spent.

Yet when we introduced legislation in Parliament to bring this transparency to national government, the Labour Government blocked it with a set of excuses that would have drawn a wry smile from Sir Humphrey Appleby.

From directly elected mayors and police commissioners, to a new age of transparency, it is the Conservative Party that is

championing the progressive ideas that will take power away from bureaucracies and politicians and give it to the people.
"Ah", I hear some critics say.

"Social action projects and climate change campaigns belong to the time before the crunch.

Now Osborne and Cameron are talking the language of budget responsibility and spending cuts.

Progressive politics is a luxury the Conservative Party can't afford in an age of austerity" they say.

Well those critics couldn't be more wrong.

There is no trade off between progressive values and economic recovery - they go hand in hand.


First, fiscal responsibility is itself deeply progressive.

For, as I argued to Demos last August, where is the fairness in saddling future generations with our own soaring debts?
It may have been that most Conservative of thinkers, Edmund Burke, who said that society is "a partnership not only between those who are living but between those who are living, those who are dead, and those who are to be born."

But there is nothing remotely progressive about tearing up that partnership and borrowing one pound in every four you spend, as Britain is currently doing.

How can you provide consistently well funded public services when you lose control of public spending?

How can you build a more equal society when your government ends up spending more on servicing the cost of its debts than educating your children?

I have argued for fiscal responsibility from the moment I became Shadow Chancellor more than four years ago.

I argued it with my Party in good times, like at our Party Conference in 2006 when some wanted me to commit to large unfunded tax cuts - and how right we were to resist that.

I have argued it with my opponents in difficult economic times, when I warned them last autumn that the cupboard was bare and the discretionary borrowing had to stop - and now Britain faces the humiliating possibility of losing its international credit rating.

The irony today is that understanding that fiscal responsibility is at the heart of good progressive government was the great insight of the new left in the early 1990s

It was Bill Clinton and the New Democrats who made the case for balanced budgets and deficit control against both some on the Republican right and the hard core left of their own party.

And during an economic recovery they eliminated the US budget deficit and pushed ahead with deeply controversial welfare reform - something many thought was impossible.

In so doing they laid the foundations for the growth, prosperity and progressive politics of Nineties America.

At the same time as Bill Clinton and Lloyd Bentsen were taking tough decisions in the US, Jean Chretien and Paul Martin took the necessary steps in Canada to bring that country's ballooning deficit under control.

Again, facing down opposition from their Left and Right, the Canadian liberals were able to exercise the spending restraint necessary to restore confidence in Canada's economy and make future progressive policy advances possible.

As two of the leading members of Jean Chretien's team - Marcel Massé and Jocelyn Bourgeon - explained when they were in London earlier this year, they realised that nothing short of a fundamental review of all federal spending programmes would be sufficient to tackle the Canadian deficit in a sustainable way.

The result was that health spending was largely protected, spending on the most vulnerable - particularly the elderly - was increased, but many other areas saw significant spending reductions and transformations in the way that services were delivered.

And in Sweden it was a Social Democrat - Goran Persson - who restored the fiscal situation after 1994, first as finance minister and then Prime Minister.

Within four years Sweden had a budget surplus.

What these centre-Left politicians understood is that there is nothing progressive about saddling the next generation with crippling debts which impoverish our children and restrict a nation's opportunities.

And the tragedy is that Gordon Brown claimed to understand that too, when he was doing my job in opposition fifteen years ago.

That is why he devised his golden rule, talked of the bills of social failure, matched Tory spending plans and devised the epithet of the Iron Chancellor.

This is what he said a year before becoming Chancellor: "I tell you we have learned from past mistakes.  Just as you cannot spend your way out of recession, you cannot, in a global economy, simply spend your way through a recovery either"

He went on to say:

"Losing control of public spending doesn't help the poor. It's those who depend on public services who suffer if spending has to be reined back."

What happened to the Gordon Brown who once told the Labour Party those hard truths?

Alone in the country, isolated even within his own Cabinet, he now maintains the that there is no debt crisis, that a 12% budget deficit does not require budget cuts, that somehow the spending taps can be left gushing away even as the ceiling collapses below.

It is not progressive or fair or honest.

What is more serious for the Labour Party is that Gordon Brown's position renders them irrelevant to the debate that will dominate political discussion for years to come: how do we get government to live within its means?

I've seen what happens when political parties turn their back on the realities of the modern world and I see it happening again.

There is another reality that the current Labour leadership is in denial about, leaving the Conservatives to take a progressive lead.

And that is the question of how we deal with this enormous budget deficit - the largest of any major economy.

Let me hazard a political forecast.

This autumn, perhaps even this September, Gordon Brown will be finally forced to admit that spending will have to be cut.

It will be a moment of personal defeat when it happens, but happen it will for I am sure he realises how ridiculous his position has become.

Then he and his Chancellor will commission a series of hefty reports from lofty experts that will show how this will all be achieved by the magic of Whitehall efficiency gains. 

We will have the Gershon Report Mark 3, which will prove about as effective as the Gershon Report Mark 1 and Mark 2.

Now don't misunderstand me, this government has become deeply and desperately inefficient.

We can and we will achieve billions of pounds of savings by applying some basic financial discipline to procurement and recruitment and cost control.

But to pretend that efficiency savings alone will suffice when the country is borrowing one pound for every four it is spending, is to take the public for fools.

It is deeply dishonest and it condemns those who claim it to the sidelines of the real debate.

The truth is that we need to fundamentally reform the way public services are delivered.

This was true in the years of plenty, as politicians of the left like Tony Blair and Alan Milburn eventually came to recognise.

It is doubly true in an age of austerity.

For the alternative to fundamental reform of public services are deep cuts in the quality of those services.

Progressive reform or front line cuts - that is the choice the country faces.

Look at the facts staring us all in the face.

Productivity in our public sector fell by 3.2 per cent between 1997 and 2007.

As a result the World Economic Forum now ranks the UK 76th out of 134 countries on efficiency of public spending.
That is not just behind the high-achievers such as Singapore (1st), Finland (5th) and Sweden (18th); it also puts us behind countries like Greece (75th), Mozambique (70th), Tajikistan (68th) and Ethiopia (46th).

The result is that unless we improve the productivity of public services through real reform then Labour's own plans for lower spending imply deep cuts in the delivery of front line services.

Take the NHS.

As a Conservative Party we have committed ourselves to real increases in health spending.

But even with this guarantee, the challenges presented by an ageing population, increasing expectations and technological developments are such that the public will not get the provision of health care that they have come to expect and depend upon unless there are substantial improvements in productivity in every part of the system.

As the King's Fund warned last month, "even under the most optimistic funding scenario, the NHS will struggle to meet people's health care needs without significant increases in productivity".

Yet Gordon Brown has been the internal roadblock to serious reform of the NHS from the moment he opposed the creation of Foundation hospitals and destroyed every Labour health secretary who tried to reform health.

In his speech to the SMF in 2003, he explained he was implacably opposed to any diversity of provision in the NHS.
He said all health care had to be not just publicly funded but publicly provided too, and he said patients were incapable of exercising choice about the healthcare.

What is progressive about that?

As Andrew Lansley has set out, it is now the Conservatives who are now making the case for progressive reform in health, achieving improvements through patient choice and professional autonomy, bringing productivity gains through diversity of provision and an effective roll out of payment by results.

So the choice in health is clear.

Conservative health reform that will translate a real terms increase in funding into even bigger real improvements in the quality of patient care.

Or Labour opposition to reform that will lead, even with increases in funding, to a reduction in front line services.

I know which is the progressive approach - and so too do many on the left.

An even starker choice applies in education - for if current demographic trends continue then increasing pupil numbers will put an even greater strain on our schools.

Britain has experienced a mini baby boom.  Between 2003 and 2008 there was a 14% increase in the number of births.

If that higher birth rate is sustained, then even if real terms spending on schools is maintained at current levels, spending per pupil would fall by a similar proportion over the next two decades.

That would be an £800 cut in spending per pupil if we stick with Labour's current education system.

We have to face up to the consequences of what happens when a mini baby boom hits an unreformed education system at a time when money is tight. 

Without reforms to get more of the education budget to the front line, and reforms to make that money go further once it gets there, there will be cuts in the classroom.

And yet we have a Labour Prime Minister and Labour Children's Secretary both implacably opposed to genuine education reform.

In the two years Ed Balls has been in charge of our schools he has systematically undone many of the tentative reforms that the Labour Government had started to introduce with the active parliamentary support of the Conservative Party.

He has taken away curriculum freedoms enjoyed by new academies.

He is currently seeking to impose on those academies a heavy handed duty to co-operate with local education authorities.

He is increasing the power of his Department to control and manipulate the information published about school performance.

He is implacably opposed to extending diversity of provision of state funded education, which he calls a 'free market education experiment'.

How can any genuinely progressive politician be opposed to education reform when they see how clearly our school system is failing too many of our children?

Four in ten children leave primary school unable to read, write or add up properly.

In those schools where half or more of pupils are eligible for free school meals barely one pupil in ten scrapes five GCSE passes.

More students got three As at A-Levels in the independent school sector, which educates just 7 per cent of our children, than in the entire comprehensive sector.

There has been no shortage of money thrown at education over the last decade, but we are getting less and less for every pound spent.

The most recent data from the Office of National Statistics show a steady decline in productivity in education since 1997.

But at the same time as our spending per pupil has increased by 65 per cent in real terms, our education system has moved from fourth place to fourteenth in the world for science, from seventh to seventeenth for literacy and from eight to twenty-fourth for mathematics.

That is because across the globe other nations are embracing and extending education reform.

In Sweden new, independent state schools, outside local government bureaucracy, are raising standards for pupils and challenging the entrenched establishment to embrace innovation.

In America, Barack Obama and Arne Duncan, have put their trust in charter schools - again state schools operating outside local bureaucracies - socially comprehensive in intake but rigorously academic in ethos - because they succeed in raising achievement levels, especially among ethnic minority pupils.

In Australia, and New Zealand, education reform is also at the heart of what new Governments are offering, with greater rigour, choice, competition and enhanced teacher quality all part of continuous, whole system, change. 

So what about the argument that reform has to wait because we don't have the short term resources to invest in it?

That argument couldn't be more wrong.

Not only do we need to reform now, or risk being left further and further behind, but the real lesson of education policy is that it is only through reform that you can get the best possible deal for the taxpayer.

Of course some structural reforms take time before their full effects become apparent, but the international evidence shows that from day one it is possible to start getting more of the budget to the front line and spending that money more effectively.

Sweden introduced its supply side education reforms in the early nineties in the aftermath of a banking crisis and the wake of a recession.

They not only drove up standards, the reforms also ensured that resources were used more efficiently.

New providers used the same amount of per pupil funding available to existing state schools and found innovative ways of making it go far further.

They negotiated contracts on premises, IT and textbooks which reduced costs, liberating more money to spend on teaching and learning.

The competitive pressures introduced by new education providers forced existing bureaucracies to look at their own cost base and that drove further reform - and savings.

Education reform is not an optional extra we'll pay for at some unspecified date in the future.

It is central to our plans for early action to make Britain more competitive and secure better value for every pound that's spent.
It is vital if we are to avoid Labour's frontline cuts to education.

That is why, as Michael Gove has set out, the next Conservative Government intends to act, and legislate early.

We will identify the weakest schools in the state system and liberate them from local bureaucratic control - handing them over to those organisations with a proven track  record of educational success.

We will identify the strongest schools in the state system - and offer them the chance to leave local bureaucratic control, take control of every penny the bureaucracy currently spends on their behalf, and enjoy all the freedoms of academy status, if in return they also take an underperforming school under their wing, and use their new freedoms to help raise standards in that under-performing school.

And, most radically of all, we will allow new providers to set up state schools where there is demonstrable demand from parents.

We will, as they have in Sweden, give parents the ability to take the money the education bureaucracy currently spends on their behalf and allow them to take that money to the new school they want.

This is progressive education reform in action.

It would be desirable in the best of economic times.  It is more crucial than ever in difficult time, when money is scarce.

It is the way to not just protect but improve the quality of education in this country.

And the choice is clear.

If we don't reform public services like health and education, and make the money that is available go further, the alternative is deep cuts to the front line services that we need to compete and deliver the dream of a fairer society.

Front line cuts not progressive reform - that is course that the current Labour leadership offer.

I am under no illusions about the immensity of the task which faces the next government. But I also know that there is no point in seeking office unless you use it to effect radical transformation.

Both Margaret Thatcher and Clement Attlee, both FDR and Ronald Reagan, took power at times of austerity and were required to steer their countries through wrenching periods of economic turbulence.

But they knew that they were entrusted with office not simply to navigate the storms but also to construct new settlements.

They all recognised that the times required a radical extension of opportunity, the fundamental reform of state institutions, the renewal of the idea of progress without which nothing worthwhile endures.

That is why, even as the scale of the difficulties our nation faces becomes clearer every day, I remain an optimist.
Because one thing is certain - our times require the most radical change.

And the Conservative Party is now the most powerful vehicle for change in this country - and the best hope for radicals and progressives.

Keyboard shortcuts

j previous speech k next speech