There has been a conflict in Conservative Party economic policy for the last thirty years - between conservative values of frugality and the rise of personal debt.
Mitya Pearson is studying for a Masters in Politics & Contemporary History at King’s College London.
Recent figures from the Bank of England show the most rapid annual increase in consumer credit in four-and-a-half years (3.5%), as shoppers turn to loans and credit card overdrafts to fund their spending. This serves to highlight an internal conflict inherent in Conservative Party economic policy for at least thirty years. Ever since Margaret Thatcher decreed that Hayekian free market theory would inform their economic policy, the attempt to retain traditional conservative values of cautious frugality and careful budgeting alongside this has been uncomfortable.
John Campbell notes in his excellent biography of Thatcher that:
“The central paradox of Thatcherism is that Mrs. Thatcher presided over and celebrated a culture of rampant materialism – ‘fun, greed and money’ – fundamentally at odds with her own values which were essentially conservative, old-fashioned and puritanical.”
She ‘believed in thrift’ and yet her liberal economic policies encouraged an era of ‘record indebtedness’.
In Michael Meacher’s attack on the notion that Thatcher ‘saved the country’ he highlights how in the two decades following the mid-1980s ‘private household debt rose to the level of total national income (£1.5 trillion)’, and ‘financial debt following her deregulation of the banks rose to 5 times total national income (a total of £7 trillion)’. The banking crisis itself can be seen to reflect the conflict between traditional careful money management and casino-style investment banking but, confusingly, the Conservatives wished to promote both.
This paradox continues to shroud the current conservative government who retain a penchant for extolling the virtues of thrift while encouraging people to take on debt.
Arguably, the government’s raison d’etre has been addressing ‘the most pressing issue facing Britain today’: reducing the UK’s deficit. David Cameron has consistently reiterated the need for us to ‘live within our means’ as a country; criticising Labour for its ‘reckless’ spending in government. George Osborne likes to talk of the ‘nation’s credit card’ and imposing a sober, conservative limit on Labour’s spending binge. However, as Duncan Weldon has shown, although the policies which Osborne introduced in his 2011 budget would reduce public debt by around £43bn but increase private household debt by around £245bn. Forecasters are also suggesting that his 2013 plan to help Britons onto the housing ladder will merely result in the creation of another housing/mortgage lending bubble.
Surely, such sticklers for careful budgeting should be more concerned by the mountain of debt being taken on by ordinary British people?
This paradox was also apparent in the internal party opposition to the increase in tuition fees. David Davis voted against the government because of his concern over ‘the huge level of debt we are encouraging young people to take on’. Increasing tuition fees fits the liberal economic mould; taking higher education funding further out of the hands of the state to make it the responsibility of private individuals. However, it clearly offends traditional conservative values, creating a system where any individual who wishes to go to university must take on a debt of nearly forty thousand pounds. It is a policy which normalises extreme personal debt.
The Conservative Party still strongly identifies itself with traditional, ‘small c’ conservative party ideas of careful spending and living within one’s means, however, their economic policies continue to encourage large scale personal debt.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.