The cognoscenti tell us to disregard the Conservatives - they are divided, sleazy, and above all out of fashion. Well, maybe. But experience shows that in the end what gets opposition politicians elected is the failure of the ones in power and a credible offer of an alternative team or set of policies. The British people are a ruthless lot with their politicians - rightly so; their view is based on an unsentimental assessment of what is needed and who can deliver it. Winston Churchill was elbowed aside after glorious victory in 1945; Margaret Thatcher won in 1979 on the bankruptcy of Labour policies. Tony Blair won in 1997 even though the bulk of his economic policies were hers; the people decided there had to be a new team after the debacle of the Exchange Rate Mechanism discredited those who had foolishly pushed her out.

Not even the cognoscenti can tell what problems or crises may befall Mr. Blair's government between now and 2001, the probable next election year. So we had better ask whether William Hague is putting into place those building blocks of team and policy. Let us leave the team issue to those in the know: but there is clearly a lot of talent in place, and Michael Portillo still to come - unlike poor Mr. Blair who has quite a few duffers still to ease out of their chauffeur-driven limousines.

The difficult side is policy. After the 1997 election cataclysm the Tories lost confidence not just in themselves but also in their policies. This was pretty silly when these had been so comprehensively taken over by New Labour. But in a nervous breakdown one can do pretty silly things.

Mr. Hague deserves a lot of credit for pulling the Tories out of this breakdown. He finally gave us at the last party conference the rough outlines of the new policy track- the 'Commonsense' agenda. Apart from the well-known and impregnable line on Europe it includes a tax guarantee - to cut tax as a percentage of national income -, a pledge of balanced budgets, commitment to light regulation and continued market flexibility, and rigorous targeting of welfare excesses, starting with the cutting off of unemployment benefit after 3 months from those who refuse a job. In his speech to the CBI conference on November 1st he spelt out the implications: Britain under the Tories would reject the Hairy Mammoth model of state as regulator, big spender, and subsidiser of failing manufacturing firms (take a bow, Mr Schröder), in favour of the American Dynamic model.

So far so good. The Commonsense agenda is a fine outline. The real problem is what it leaves out. It deals in quite general terms with 'cutting welfare'; but which and how? What about the welfare 'traps' of high disincentives to work or work harder because of means-testing? The Tax Guarantee sounds cautious, even defeatist; it only aims to cut taxes as a fraction of national income- yet even so spending has a tendency to rise faster than national income. It is now - properly measured to include the welfare cost of the Working Family Tax Credit- about 40%, well up from where the 38% it reached in 1988. From 1960 to 1982 it rose relentlessly from 34% to 46%. Getting it down to that 38% required Herculean efforts by the Thatcher government. If Labour raise it above 40% in the election run-up which seems probable, will the Tories cut it back from there to say 38% again? In the USA, the home of the Dynamic model, the ratio is 34%; marginal income tax rates (no mention in the agenda) do not exceed 30%.

Which bits of welfare will the Tories cut? And why do they 'have no plans to cut education or health spending'? The word 'cut', remember, is the most ambiguous word in the English language; Mrs. Thatcher was accused of 'cutting' welfare even though its real value rose rapidly, as indeed did its  share of national income. So these new Tory words could mean everything or nothing. We need to know just which.

The problem with welfare, health and education spending by the state is not that spending as such as bad- on the contrary who can be against having proper insurance, serious health care or a good education? The problem is actually quite simple: it is that the state is doing the spending and in so doing  has acquired a monopoly which stifles creative private activity and financing- the state 'crowds out' private activity. The result is that we spend less in total as a nation on health care and education than the USA (12.3% of our national income against their 20.6%) so that our provision is both less in total and of poorer quality. As for welfare we dole out around 13% of our national income in social benefits (about half of them to non-pensioners), which seduce 13% of our working-age households into unemployment; we have some 6 million people who have failed to take out second pensions; we dish out housing benefits to around 4 million people to subsidise their demand for scarce housing land.

But none of these things is addressed in the Commonsense agenda. In an extraordinary switch they are beginning to be addressed- not yet satisfactorily, but it is a start - by New Labour. Alan Milburn has suddenly discovered that our NHS is failing miserably on cancer. Alistair Darling has come up with his Stakeholder Pension designed to get everyone to contract into a second, private pension. Gordon Brown has already pronounced the end of unemployment benefits after 6 months - 'no fifth option'. Who knows; he may even give us some surprise tax cuts in his next budget, so well can he afford it. The Tories have lost the initiative to New Labour on these core issues on which Toryism defined itself so effectively as the party of serious economic reform.

The Commonsense agenda's substance therefore falls short of its rhetoric. It too is a start in difficult circumstances and William Hague is to be congratulated on gritting his teeth to make it; our appetites are whetted. But our stomachs are still hungry.
 

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