'Modernisation' is widely misunderstood. But who can doubt Heseltine is the true Tory moderniser?

The former Deputy Prime Minister's weighty report into economic growth is a bold challenge to the laissez-faire orthodoxy which still holds the Tory leadership in thrall

The true moderniser of the Conservative Party turns out to be a 79-year-old. Agree or disagree with Michael Heseltine’s weighty report on economic growth, there can be no dispute that that it challenges the laissez-faire orthodoxy of the past three decades, an orthodoxy that still holds the Tory leadership in its thrall.

Not that Heseltine’s proposals are surprising. His report is almost a memoir of his consistently held and passionately expressed views. He is calling for a huge transfer of cash from the Treasury to local institutions and the establishment of a National Growth Council. He challenges the idea that sweeping deregulation and tax cuts will almost alone generate growth. While reflecting Heseltine’s familiar ideas the proposals still stand out as being strikingly distinctive. In the UK we are not used to senior Conservatives putting a case in this robust way and have not been since Heseltine left frontline politics.

Yet although the proposals seem almost like an act of insurrection, the relationship between Heseltine and the Conservative leadership is nuanced and complex, as it was when he became a dissenting voice in Margaret Thatcher’s Cabinet. Thatcher was wary of Heseltine for several reasons, but she gave him some space to be a hyperactive minister. In the early 1980s, he did much to revive bleak inner cities, most prominently in Liverpool and East London but in other areas, too. Conversely, while he was critical of her leadership, and became the instrument of her fall, he worked with her fairly harmoniously at times.

Big tent

Fast-forward three decades and the children of Thatcher – David Cameron and George Osborne – deserve some credit for commissioning the report from Heseltine. Like her, they have given him some space. Indeed, they have a tendency to ask those who are not ideological soulmates to come up with ideas. The left-of-centre Will Hutton is another who has been called upon. Partly, their political generosity is an attempt to construct a Blair/Brown style big tent. The New Labour duo often commissioned counter-intuitive figures to review policy. But Blair and Brown always made sure that the subsequent recommendations would chime with what they wanted before the review had taken place. Cameron and Osborne are either more politically inept or less controlling, perhaps both, when they ask those with strongly unswerving views to review policies.

Having been so generous, the Tory leadership will not dismiss his recommendations. After all, in theory they are supporters of robust localism, although in practice (like New Labour) they are less so now they are in government. Sporadically, they show an interest in rebalancing the economy away from dependence on London. In principle, at least, they recognise the benefits of capital spending. In his first Autumn Statement, Osborne said impressively that it had been a mistake in the recession of the early 1990s to cut capital spending. Unfortunately, the more detailed figures published as he spoke outlined cuts in this specific area. Even so, they have been bold at times with capital investment, and recognise the need to be bolder still.

Meanwhile, Hesletine is broadly supportive of the Coalition, supports the deficit-reduction strategy and public-service reforms. Whereas he never thought that Cameron would secure an overall majority at the last election, he thinks and hopes the Conservatives will win next time. This is a subtle dance with some noisy moves.

His report is a noisy move. The proposals would not cause much of a stir in other equivalent countries. Judged by the standards of Germany, Sweden or France, his ideas are modest. In the UK, where deregulation, tax cuts and vaguely defined “markets” are still the fashionable solution to virtually every economic challenge, he is a revolutionary.

The contrast with the proposals put forward recently by some of the more self-confidently vibrant Tory MPs from the new 2010 intake is especially marked. In their recent book, Britannia Unchained, a group of them call for welfare cuts, sweeping labour market deregulation and laud countries such as Singapore that regard public spending as even more of a sin than it is perceived to be in the UK. They are the continuing link with the 1980s. Heseltine offers an incomparably more balanced and sensible route, not least against the background of a financial crisis caused by too little regulation.

“Modernisation” is one of the most over-used terms in British politics, but if it is to mean anything it must surely signal a break with the past. Since the 1980s, the Conservatives have become a more dogmatically anti-state party and supporter of a purer version of free market laissez-faire economics. Heseltine moved from being a mainstream Conservative in the 1970s to becoming a partially dissenting voice. He is still in that position, acknowledging openly at the end of his report that he expects opposition from within. “I would be naive if I were not already aware of those who are resistant to some or all of what I suggest,” he says.

Lonely

In his interview on BBC Radio 4’s Today programme he suggested that opposition might come from Treasury officials reluctant always to give away power from Whitehall to local institutions. But he knows resistance is much wider than that. He states in his report that the Government does not have an adequate programme for economic growth. This omission is not a terrible accident. Senior ministers arrived in power with a view that government should not being doing as much. They sought to intervene less before and after breakfast, lunch and dinner. Famously, Heseltine has always wanted to intervene between every meal.

So do Labour. Some senior Labour figures were not only making mischief when they declared support for a lot of the Heseltine proposals. One ally of Miliband’s noted that Germany, with its powerful devolved institutions and more balanced economy, is a model for some of those advising the Labour leader, and is to some extent the model for Heseltine, too. Although it should be noted that there are also considerable internal tensions within Labour about how realistic it is to transplant the German model to the UK. Perhaps a new divide in British politics is forming between those who turn to Germany for guidance and the varying figures that seek to breathe fresh life into the Anglo-American alternative.

Heseltine insists that, at the very least, he hopes to start a debate. The insistence reveals that he does not have excessively high expectations about implementation in the short term. He has cause for pessimism. A fatal flaw in Heseltine’s report is that there is no Heseltine in the Cabinet to implement it. It can be lonely being a genuine moderniser.