Conservative Party

The Right Approach (Conservative policy statement)

Document type: Declassified documents
Venue: London
Source: Conservative Party, 1976
Editorial comments:
Importance ranking: Key
Word count: 23,200 words
Themes: Agriculture, Arts & entertainment, British Constitution (general discussions), Executive, Parliament, Union of UK nations, Commonwealth (Rhodesia-Zimbabwe), Commonwealth (South Africa), Conservatism, Conservative Party (history), Defence (general), Economic policy - theory and process, Education, Primary education, Secondary education, Employment, Industry, European elections, Monetary policy, Energy, Pay, Public spending & borrowing, Taxation, European Union (general), Foreign policy - theory and process, Family, Foreign policy (Asia), Foreign policy (development, aid, etc), Foreign policy (Middle East), Foreign policy (USA), Foreign policy (USSR & successor states), Health policy, Housing, Labour Party & socialism, Law & order, Local government finance, Liberal & Social Democratic Parties, Northern Ireland, Race, immigration, nationality, Religion & morality, Society, Social security & welfare, Terrorism, Trade unions, Trade union law reform

The Right Approach

A statement of Conservative aims

Conservative Central Office

[p2 begins]


First published October 1976

Published by the Conservative Central Office
32 Smith Square, Westminster SW1P 3HH
and printed by McCorquodale Printers Limited
15 Cavendish Square, London W1 [p3 begins]



What are these aims?

2. THE BACKGROUND (page 9)

Britain's poor economic performance Industrial attitudes
Questioning present policies
'This people's laws'

The class myth
Only the Left is left
A clear choice
A philosophy of balance
Rights and duties
Individual enterprise
Practical commonsense

Spending before earning
Conservative efforts to turn the tide
The failure of Labour's policies
Re-writing history
A long haul [p4 begins]


Public expenditure
Priorities for cuts
Cash limits
Local authority spending
Breaking out of the Socialist circle


The erosion of profits
Profit sharing
Employee participation
Liberating profits
Dismantling restrictive practices
Restoring safeguards
Partnership not interference
The nationalised industries
Smaller businesses


Responsible wage bargaining
The Conservative offer
Everyone hit by higher taxes
Escaping from the tax trap


Parliament must prevail
Democracy in the unions
Safeguarding individual rights
Strengthening the forces of the law
Northern Ireland

[p5 begins]


Encouraging home ownership
Sale of council houses
Council housing
A tenant's charter
The privately rented sector
Shorthold tenure
The need to act soon


Social security
Tax credits
The National Health Service
Voluntary service to the community


Standards, choice and resources
A Parents' Charter
Further and higher education
The arts
Excellence and opportunity


Labour's failures
The European Community
Direct elections
An effective Centre-Right alliance
Regional balances
An economic partnership


[p6 begins: blank page]

[p7 begins]


IT IS THE TASK OF THE CONSERVATIVE PARTY today to restore hope confidence to a disillusioned British people. Without the prospect of an alternative government with realistic policies, offending neither against common sense nor against the instincts of the majority, the very survival of parliamentary democracy could be threatened - by the increasing alienation of the electors, if not in the end by direct action from exasperated pressure groups.

Only the Conservative Party can provide that hope. A sense of this responsibility informs everything that follows in this document. It contains neither popular promises designed to win elections nor a host of detailed proposals which rapidly changing circumstances might soon render irrelevant. A party which seeks to deserve to govern must set out frankly and realistically what it believes it is actually capable of achieving in government. The British people have rightly become sceptical of short-term instant solutions, and more aware of the importance of pursuing with caution and consistency the right long- term aims.

What are these aims ?

The first essential can be simply described as a return to common sense. People at home and abroad have increasingly been feeling that many of the policies pursued in Britain in the last two years make no sense at all. Those who govern must be more ready both to listen and to examine the facts of life objectively. We believe that in both these respects Conservatives have the advantage of their Labour opponents, since we are not blinkered by a Socialist ideology that assumes the omni-competence of the State and is rooted in a theory of ownership and class conflict already decades out of date.


The main aims of our political strategy can be simply stated :

•To enable the country to live within its means, through the reduction and control of public expenditure and the re-building of a healthy and thriving mixed economy in which taxes can be lower and profits can fulfil their proper function. •To strengthen Parliament and the rule of law, reducing the scale and powers of bureaucracy and providing better protection for the rights of the individual. •To extend ownership, so that many more of our citizens have a stake in the community. •To encourage self-help and family life, while making it possible for the strong to help the weak effectively. •To improve educational standards, and to ensure that merit and initiative are encouraged and adequately rewarded. •To maintain Britain's security and interests, and to in- crease her influence abroad, not least through a whole-hearted contribution to the development of the European Community.

The purpose of this document is to illuminate the discussion of these themes, explaining the implications of available options and giving as clear a lead as possible in a process of decision-making in which everyone must ultimately share if the necessary action is to be taken with the understanding and consent of the people.

We have not attempted, as we shall in our next election manifesto, to cover all the main subjects. For example, while we remain committed to the objective of abolishing the domestic rating system, the recent report of the Layfield Committee will have to be carefully studied before we bring forward detailed proposals. There are other subjects on which we shall be completing policy proposals in the near future.

We do not pretend to know today the answers to every problem that may confront us when we are called upon to govern - especially if that moment comes after many more months of Socialist rule. When complex issues are still the subject of legitimate debate betwen acknowledged experts, and when even short-term forecasts are liable to turn out wildly wrong, there is little sense in being too dogmatic now.

But we are convinced that our strategy is right, and that only along these lines can Britain's economy and society be restored in due time to health. This strategy is based upon a balanced political philosophy and a realistic understanding of the world as it is.



AS A NATION dependent on trade, we should be fully aware of events and changes abroad when we come to discuss policy at home.

In recent years, we have had to change many of our assumptions about the post-war world. This is not surprising. More than half the world's population, and just under half of our own, have been born since the war. New fields of knowledge have been explored. New expectations of what is possible, desirable and even essential have been aroused.

The 1970s have seen the end of the international monetary order established in 1944. The oil embargo and the subsequent quintupling of oil prices dramatically changed the balance of economic power which had previously prevailed. The developed countries have had to acknowledge the new economic and political strength of some of the producer countries; they are taking more seriously anxieties about the pressure of population and economic expansion on resources; they are moving towards a greater understanding of the problems of the less developed countries, and of the need to tackle these problems together.

The economic balance has changed, and the Soviet Union has done all it can to alter the political balance, greatly expanding its military (and particularly its naval) power. While Russian leaders have spoken about detente and sought technological and economic help from the free nations of the West, they have set out to extend their influence (for example, in Africa) and to undermine the Western Alliance. It is hardly surprising that China, which has emerged from the shadows, should be so concerned about growing Soviet power and ambitions; it is more surprising that some people in the West have not appeared to take them seriously, and have even deluded themselves that it is possible to distinguish between Communist aims within the democracies of the West and the global political interests of the Soviet Union.


However, American resolution and the NATO alliance - the indispensable guarantors of a free Europe - have survived the challenges to them. The European Community, which we joined in 1973, has survived the different but tough challenges which it has faced. Britain is now committed to a future in Europe, and the business of the Community cannot be regarded as a branch of foreign affairs. Unfortunately, it has been conducted recently in a state of increasing confusion and stress, partly the result of the widening gap between its successful and unsuccessful members.

Britain' s poor economic performance

Britain faces this new world in a weaker and relatively poorer state than most of our competitors. We have suffered from low productivity and low profits, and therefore low investment and industrial stagnation. Most recently we have endured a wounding bout of inflation, leading to very high unemployment, and we are now heavily in debt.

The priorities of any government should be the reduction of our debt burden and the mastering of inflation, leading to a fall in unemployment and the resumption of soundly based economic expansion. These objectives cannot be achieved without restraint, sacrifice and a change in direction. We should not pretend that oil will provide an easy way out. The tapping of the North Sea's riches is not going to put right structural weaknesses in our home economy.

There are few excuses for our poor economic performance. But how much is due to government? How much is due to the cumulative effect of government policies on attitudes to work, and competence at work, at all levels? How much is due to a conscious decision to give up the benefits of a better economic performance in favour of other things ?

There are certainly many failings in our economy for which govern- ments have been directly responsible. We are, as a country, over- taxed. The rewards for additional skill and effort have been heavily cut back in the last two years. The public sector now controls about 60 per cent of the national income, compared with around 50 per cent as recently as 1973. The Government has nationalised great sections of industry , which it has subsequently mismanaged. It has also hemmed in with restrictions and controls those parts of industry left in the free enterprise sector. The standard of living of the whole country -whether measured in terms of the pay packet or of effective social provision -has suffered as a result in comparison with that of our friends and competitors.


Industrial attitudes

Foreigners have often claimed to perceive the roots of our economic failure in industrial attitudes. They argue that the class war dominates British industrial life, and that the trade union movement perpetuates this struggle because of the power it wields in a sophisticated and inter-dependent economy.

Trade unions do exercise great power. But so do other groups in our inter-dependent society. And the question many of them have begun to ask themselves is, 'Why should we act responsibly when no one else seems to do so?'. Yet men and women do not enter their work-places for the first time determined to see how little work they can do, how much disruption they can cause. They want a satisfying job and a fair reward for their hard work.

Two and a half years ago, we fought a General Election in which the central question was the relationship between parliamentary author- ity and industrial power. Much of what we said then has been borne out by events. Concern about this issue is one of the reasons why an increasing number of people has begun to question the adequacy of existing institutions.

Questioning present policies

There are many other aspects of our life, some of which we have taken for granted for years, that are being questioned today. Mer more than fifteen years of debate about the structure of our education system, people have begun to worry about what is actually being taught - or not taught - in the classroom. They wonder whether our National Health Service, which used to be regarded as one of the wonders of the world, can survive in its present form. They are worried about a tax and social security system which, while it does not help the genuinely needy as much as they think would be right, does lead to obvious unfairness and even positively encourages dependence on the State. They ask how it can be sensible to go on building so many council houses at enormous cost to taxpayers and ratepayers when most people want to own their homes. They are deeply concerned about the increase in violence, the erosion of standards, the growth of bureau- cracy, and the fact that no one seems to listen to what they have to say, for example on immigration or environmental matters.

Many of these worries have been intensified by our economic problems, the solution of which is the first essential.

[p12 begins]

'This people's laws'

We believe that Britain can solve these problems. We have the resources to succeed, provided that we do not try to do too much too quickly. The rest of this decade is not going to be easy. But in time we should be able to do as well as, or better than, others. We have enough skill and sufficient resources. What we have to do is to use them properly, relearning some of the things we used to know about how to make a responsible free enterprise economy work to the advantage of everyone.

In the middle of the nineteenth century de Tocqueville, a remarkably shrewd and prophetic observer, wrote these words:

Looking at the turn given to the human spirit in England by political life; seeing the Englishman, certain of the support of his laws, relying on himself and unaware of any obstacle except the limit of his own powers, acting without constraint; seeing him, inspired by the sense that he can do anything, look restlessly at what now is, always in search of the best; seeing him like that, I am in no hurry to enquire whether nature has scooped out ports for him, and given him coal and iron. The reason for his commercial prosperity is not there at all: it is in himself.

Do you want to test whether a people is given to industry and commerce? Do not sound its ports, or examine the wood from its forests or the produce of its soil. The spirit of trade will get all these things and, without it, they are useless. Examine whether this people's laws give men the courage to seek prosperity, freedom to follow it up, the sense and habits to find it, and the assurance of reaping the benefit.

Journeys to England and Ireland, J. P. Mayer (ed.), Faber, 1958

What he said of England was no less true of the rest of our country. Can the British character have changed so much in little more than a hundred years? Or should we be re-examining some of `this people's laws', and the spirit which informs them, to see whether they are not now operating in quite the opposite direction to that described by de Tocqueville?

Of course, many of the changes in our laws since then have been made for the necessary purpose of helping the poor and protecting the weak. But if the able and enterprising are discouraged from the creation of wealth, the poor and weak will suffer with the rest.

The society that in the end will be the most prosperous and the [p13 begins] most contented is that in which there is the least possible conflict between the economic incentives, the ethos of accepted morality, and the laws which regulate behaviour and activity. If the tensions between these three are too great, there will be neither prosperity nor contentment.

To ease these destructive tensions is perhaps the greatest political problem facing us in Britain today.

[p14 begins]


THAT THESE TENSIONS are today greater than ever before is the result of Socialism in action. Unable even to agree among themselvesas to what Socialism is really all about, the members of the LabourParty have succeeded in angering some sections of the community and disappointing others.

They all talk, with varying degrees of emphasis, about `class'. Whereas the Social Democrats believe there should be no classes at all, the Marxists on the Left of the Party could not possibly do without them. They need the `class struggle' to justify both the instigation of industrial unrest and the expropriation by the State of the assets of `capitalists'. Meanwhile, the Social Democrats pursue their ideal of an unattainable equality through a process of levelling down which is no less socially divisive and no less damaging to the economy.

The class myth

The idea of the 'class struggle' and the ideal of `classlessness' are equally meaningless today. It is not the existence of classes that threatens the unity of the nation, but the existence of class feeling - and it is precisely this that both sections of the Labour Party are in the business of seeking to exacerbate. So long as success and ability are rewarded - as they must be if we are not all to become paupers - there will be classes, as there are even in Soviet Russia. And how can it be in the general interest to encourage envy and hatred of ability and success?

Most of the old notions of class are crumbling away, and certainly class is rapidly ceasing to be the main determinant of political behaviour. Universal education and economic progress have encouraged social mobility, as even the most cursory glance at the Government's own statistics should teach any Socialist. Nor has this mobility been[p15 begins]only in one direction. There are many more people today who could ask with George Orwell, 'I have a middle class education and a working class income -what class am I ?' .

The antagonisms and bitterness that exist in our society now have little or nothing to do with `class' in the traditional sense. They are for the most part the results of Socialism in action: for example, the political fomentation of industrial unrest, the relative strength of unionised and non-unionised labour, and the feudal system of municipal housing.

None of this does, or has ever done, much good to those who were supposed to be the victims in need of rescue. The assumption that the worst-off will always do better if only there is a Labour government is simply not true. Unemployment has always risen under Labour administrations. The promises made to the poor have generally been broken. Those whom the Labour Party would call `working class' people have fared much better under Conservative governments. Such temporary gains as have been achieved under Labour by particular sections of the community have always been threatened - or even nullified - by the ensuing economic chaos which Conservative administrations are called upon to sort out.

Only the Left is left

Social Democracy in Britain is dying. The uneasy alliance with the Marxist Left cannot survive. For the fourth and perhaps the last time, the Social Democrats have admitted the failure of their own Socialist policies and begun to adopt some of the prescriptions of their Conservative opponents. Always sceptical of the virtues of nationalisation, while yet conceding it as the price of Marxist support, they have now acknowledged the futility of their own panaceas. Huge public spending and redistributive taxation have produced neither equality nor prosperity -only inflation, unemployment and growing bureaucratic threats to individual liberties. Fighting forlorn rearguard actions even in their own constituencies, the Social Democrats are now in full retreat, defeated and disillusioned.

Only the Left is left. There is no place in the Labour Party for those who have lost faith in their own ideological certainties. The influence of the Marxists is bound to increase still further. Indeed, their dominance can be judged from the latest Labour Party policy document (Labour's Programme for Britain, 1976) - a programme far more Marxist than anything on which the Italian Communist Party dared to fight in its last election campaign.

[p16 begins]

A clear choice

One of the saddest features of the political scene is the disillusionment of those intellectual idealists who believed in the possibility of an alliance between liberal radicals and moderate Social Democrats, dedicated to the vision of Liberty, Equality and Fraternity. The increasing ascendancy of the Marxist Left in the Labour Party, together with the failure of the Social Democrats to establish either a convincing philosophy or viable practical policies, has destroyed these hopes. Measures designed to enforce an artificial equality have been seen to threaten essential liberties and to arouse resentments very far from fraternal. Social problems have been intensified, while fundamental economic problems are left unsolved. Once again, the facts of life have turned out to be Tory.

All other attempts to find a `third force' which is neither Marxist nor Tory have proved equally unrealistic, because they are founded on a fallacy. They assume that the choice between Socialism and Conservatism is one between 'extremes' of Left and Right. But there is notWng 'extreme' about the philosophy of balance and moderation which is the ethos of modern Conservatism. There is no future in trying to find a middle road between folly and common sense.

Just at the time when various commentators -for various reasons - have been hailing Labour as the new Establishment, or, in Sir Harold Wilson's words, as `the natural party of government', it has become apparent that the only people in the Labour Party who have a coherent prescription for the long-term problems of Britain are those who would substitute an authoritarian, near-Communist regime for the free democratic society in which we have so far chosen to live. It must be accepted that this does offer a coherent alternative - as it is certainly the only present alternative - to the Conservative approach. But it is the coherence of outdated Marxism.

The Labour Party today thus holds out no hope for the future, except to those who would choose to live in a society as closed and drab and impoverished as those in Eastern Europe.

A philosophy of balance

For answers which are relevant to Britain's real problems, and which are based on a philosophical approach that matches 'the manners, the customs, the laws, the traditions' of the British people, the country will need to turn to the Conservative Party.[p17 begins]

Man is both an individual and a social being, and all political philosophies have sought to accommodate these two, often conflicting, elements in human nature. Conservatism has always represented a balance between the two, arguing against Liberal individualists for man's social role and against Socialists for the right of the individual to develop as far and as fast as he can, choosing freely from a wide range of opportunities while recognising his duties towards his fellows.

We have laid particular stress on the individual and his freedom in recent years because Socialism has tipped the balance so far the other way. Moreover, many of the developments of modern industrial society have tended to dehumanise life and threaten the individuality and independence of men and women.

But we do not base our approach solely on the individual, on the view that the only role of society is to provide a framework of laws within which individual opportunities can flourish without becoming self-destructive. If we were to do this, a number of other things in which Conservatives believe - patriotism, loyalty, duty - would be meaningless. Man is an individual, answerable to himself. But he is also a citizen, the member of a complex network of small communities which go to make up society - family, neighbourhood, church, voluntary organisation, work-place and so on.

Rights and duties

While the network of social ties in the community may have narrowed as the State has assumed more and more social responsibilities, the network of economic ties has constantly widened as our economy has become more sophisticated. But the philosophy of these interdependent economic units - trade unions, pressure groups, industrial and commercial institutions - has become increasingly and stridently individualistic. As one group has discovered and used its strength, so others have come to question whether restraint is wise or necessary or right. What we have to set out, and it is in the main stream of Conservatism for us to do so, is a political philosophy that goes beyond the State and the individual, and begins to express in human terms the complex network of reciprocal rights and duties in an orderly society.

Such a philosophy will recognise that private ownership of property is essential if we are to encourage personal responsibility and the freedom that goes with it. Property diffuses power, increases choice and is an important source of independence. Since some people have more [p18 begins] ability and a greater opportunity to acquire property than others, there are bound to be social and economic inequalities. Conservatives are not egalitarians. We believe in levelling up, in enhancing opportunities, not in levelling down, which dries up the springs of enterprise and endeavour and ultimately means that there are fewer resources for helping the disadvantaged. Hostility to success, because success brings inequality, is often indistinguishable from envy and greed, especially when, as Alexander Solzhenitsyn has pointed out, it is dressed up in the language of the `class struggle'.

Individual enterprise

We believe that an economic system predominantly based on private enterprise does most to increase resources and opportunities through individual pioneering, effort and skill. Enterprise comes first from individuals, not from 'National Boards'. But this does not make us a laissez-faire party. We have always conceded that the State should have a role as the trustee of the whole community in any economic system, holding the balance between different interests.

The precise limits that should be placed on intervention by the State are reasonably the subject of debate within the Conservative Party, as are the proper boundaries between State and private provision. What no Conservative disputes is that intervention must be strictly limited to defined purposes, justified by particular circumstances rather than by doctrinaire theories.

In holding the balance, in reconciling conflicting groups, the State exercises powers which rest in our society on the twin pillars of parliamentary democracy and the rule of law. We have not in the past needed a written constitution, setting out in precise terms how these powers can be used, because there has been general acceptance that where change is necessary its evolution must respect our traditions. Those who want the State to take on more and more responsibilities have found this an increasingly burdensome constraint, and it is not surprising that, largely as a result of their actions, the merits of a written constitution are being canvassed.

Practical common sense

In practical terms, our policies aim to achieve a reasonable balance between the use of the nation's resources by the public and private sectors, between the use of the effective weapons available to a [p19 begins] government in the abatement of inflation, between what the State takes from its citizens in tax and what they retain, between those who are organised in powerful trade unions and the majority of workers who are not, between the thrust for greater size in most social and economic activities and the growing demand to reduce them to a human scale, between what the nation can afford to spend and a broadly agreed agenda of social priorities, between central and local government, between the improvement of quality and the widening of opportunity in education, between ownership by the State and ownership by the individual.

The balance which we seek has its roots not only in a distinctive, if too rarely articulated, Conservative approach, but also in basic common sense. That has always been one of the great strengths of Conservatism. The facts of life invariably do turn out to be Tory.

[p20 begins]


ECONOMIC FAILURE lies at the heart of Britain's problems. It has sapped our self-confidence, without altering our sense of what we deserve. A sustained and coherent economic strategy to reverse the decline is imperative.

Tomorrow's historians will find the economic history of Britain since the war baffling. They will ask themselves how, with a long history of industrial development, a sophisticated administration, mature and stable democratic institutions, and great scientific and technological strength, one of the most powerful countries of the world experienced decades of relative, and in some respects absolute, economic decline.

They will point to the development of deep-seated faults in the foundations of the economy; a concentration on largely irrelevant, superficial and often damaging changes in short-term policy; a reluctance to face reality until the last possible moment,born of the belief that things would somehow turn out right whatever happened; and a failure to understand the conditions on which a mixed but predominantly private enterprise economy depends if it is to operate successfully.

Spending before earning

They may also note a dangerous tendency - at least since the days of Labour's 1965 National Plan - to make over-optimistic assumptions about the scope for economic expansion. Exaggerated expectations, competition for electoral approval, attempts to emulate more successful economies, led us to spend in advance every penny -and more - of wealth that had yet to be produced. Public spending was massively increased even though production fell short of what was hoped for , and taxes rose sharply as a result.

[p21 begins]

Inflation was stimulated by rising taxes and excess demand. And so the economy ran time after time into the traditional 'stops'. The political pressures during each inevitable period of rising unemployment then led to a repetition of the same process.

At the end of each cycle the burden of public spending and taxes on the rest of the economy was heavier than planned. In each recession it has always seemed desirable to increase State spending to get the economy moving. Such expansion as has been achieved by this strategy has in the end been at the expense of private spending, profits, investment, the trade balance and, ultimately, the rate of growth itself.

Socialist policies have been a major cause of these distortions of our economy. The Socialist obsession with extending the power of the State has led to widespread nationalisation and to massive growth of government spending and bureaucracy. The obsession with equality has created a tax system that penalises skill and enterprise. The expectations raised could not be fulfilled.

Conservative efforts to turn the tide

Conservatives have fought to turn the tide, and often we have achieved success. In the 1950s, for example, there was a substantial and soundly based increase in prosperity. And between 1970 and 1974 the Conservative government under Mr Heath made a serious attempt to deal with some of the major structural problems of our economy, in the face of a malevolent Opposition and of what turned out to be a world economic blizzard. As the energy crisis developed, we had taken the tough decisions that were necessary to ride out the storm. Monetary policy was sharply tightened. Unprecedented public spending cuts were announced. Restraint in wage bargaining was firmly pursued and widely approved. At the end of Mr Heath's government, our inflation rate differed little from that of our competitors.

The failure of Labour's policies

Labour took office in 1974 with the threat of an oil embargo diminishing, and with Britain better placed than most countries (thanks to our large reserves of coal and the prospect of North Sea oil) to adjust to the increase in oil prices and the world recession it was bound to cause. The three-day week was quickly seen to have caused far [p22 begins] less damage than was at one time feared. The people had begun to perceive that some sacrifices were necessary. With honest and courageous leadership they could have been brought to face the painful adjustments that were needed.

But the Labour Party's political programme was dominated by the need to satisfy the demands of a handful of union leaders and the Party's left wing. Now we can count the cost. Inflation soared to about twice the international average. Nationalisation and the threat of nationalisation have sapped confidence in industry. The massive increase in public spending has starved it of the funds needed for investment. Profits were virtually eliminated. Industrial production has fallen below the levels of the three-day week.

The number of bankruptcies last year was the highest since present records were kept. Small businesses have been penalised. Unemployment - which is still, despite improvements in benefits, a painful and demoralising blow for many families - has risen to record postwar levels. An enormous deficit has caused the biggest collapse of sterling in our history, and an immensely damaging crisis of international confidence. We shall be weighed down with Socialist debt for years to come.

Re-writing history

Some Labour ministers have been driven to concede, at least implicitly, that the policies which they launched against the nation two and a half years ago were totally wrong. They talk of the need to raise profits and investment; to prevent the burden of taxation rising further; to stop borrowing and keep the nation's spending within its means; to cut public spending so as to allow industry the room to expand. They have started re-writing history by claiming that they have always believed in these things -or at least since July 1975. Their first disastrous fifteen months are apparently to be disregarded.

Yet those months were characteristic of the Labour Party. And it is the very nature of that Party which now makes it impossible for Labour leaders to take the measures that are necessary. They can only do too little, too late. The main thrust of their policies remains plainly and unequivocally wrong: dependence on foreign borrowing; the pursuit of over-optimistic growth objectives; a preference for selective industrial intervention rather than a genuine attempt to increase profits substantially; further nationalisation and penal rates of personal taxation. Until these things are put right, the economy will remain so twisted and mis-shapen that sustained recovery will be impossible.

[p23 begins]

A long haul

Yet it is sustained recovery that is needed. For the troubles of our economy are by now long-standing and deep-seated. To make the structural changes that are necessary to restore the dynamic of a mixed economy will need a settled approach over a long, hard haul. It is idle to talk, as so often before, of the economic miracle that is round the corner. The foundations of economic health will not be relaid in less than a decade. Our best hope is to start this difficult task sooner rather than later .

In contrast to the Labour Party, we do not expect salvation to come from any sudden new initiative. Least of all do we believe that the right balance will be restored by eliminating economic freedom and imposing a command economy.

Some Socialists argue that British industry will never thrive while there is competition from abroad. They want a full siege-economy, with protection through import controls from international competition. There is always a case for taking effective action to prevent the unfair and damaging dumping of foreign goods within Britain. But we totally reject the wider argument. An absence or reduction of competition is the surest recipe for inefficiency, and for an accelerated decline in our standard of living compared with those of other countries.

The Conservative approach entails living within our means, paying our way in the world, mastering inflation, reviving the wealth-creating part of the economy and encouraging all those on whom it depends.

This approach means less bureaucracy and less legislation, lower taxes and borrowing, higher profits leading to more investment and more employment, and rewards for enterprise and hard work.

To gain the consent and support which will be essential if we are going to meet all these objectives, we shall have to encourage a wider understanding of the free enterprise system and greater participation in it, and also to secure from all sections of society a broader acceptance and understanding of economic reality.

[p24 begins]


THE FIRST ESSENTIAL in economic management is the conquest of inflation. This must be the foundation of a more stable economic environment. To this end, a steady and disciplined monetary policy is vital. Monetary policy will be neither stable nor disciplined unless the State's own finances are swiftly put in order. As things are, the Government's expenditure far outruns its revenue. And the difference - the borrowing requirement - is greater than the amount which the private sector at home and our friends overseas will for long be able or willing to lend. No government can go on borrowing one pound out of every five that it spends.

A reduction in government borrowing is thus essential to proper control of the money supply. In addition, it would now be right to announce clear targets for monetary expansion as one of the objectives of economic management. This would bring us into line with other countries, such as Germany and the USA, which have had more success in controlling inflation than we have. Such a policy would be new to this country and will need careful technical study and explanation if it is to be introduced and operated successfully.

Public expenditure

The Conservative Party's view that public spending cuts are essential if we are to bring the economy back into balance, and avoid an explosion in the money supply and an acceleration of the rise in prices, has now been accepted by politicians and informed opinion across a very wide political spectrum.

The frightening scale of what has happened under this government makes the need for cuts self-evident. Since 1973 national output has fallen. The value of that reduced production has been further diminished by the oil crisis. While every other part of the economy has [p25 begins] had to tighten its belt, the Government has nearly doubled the spending levels it inherited, in money terms, and raised these by over 15 per cent in real terms.

How far reductions will now need to go is difficult to say with precision, since the prospects for the economy are obscure. Nor can we tell what actual spending level will emerge from the Government's present or future plans, the inaccuracy of which is now proverbial. But given that the level of spending today is several billion pounds higher than that planned by the last Conservative government, while production levels and prospects for growth are lower, it is clear that very large reductions will be unavoidable. The days of high spending politics are at an end.

Priorities for cuts

Some broad priorities for economies are clear.

First, it is possible to eliminate a number of identifiable Socialist policies with significant consequent savings, such as the Community Land Act and nationalisation plans, thus avoiding a formidable increase in government borrowing and interest payments.

Second, substantial money savings can be made by reducing subsidies of various kinds, particularly on food and housing, which have seen a massive expansion recently and which even the Labour Government know they will have to cut. Money savings -of any kind -count in a sense twice over, since they reduce the burden of debt interest in future years as well as the borrowing requirement in the year they are carried out.

Third, it is possible to reduce the burden on the rest of the economy of the main spending programmes by more effective control of the costs incurred in undertaking them and by the elimination of waste and extravagance. Costs leapt by an enormous oe2 billion or so between 1973 and today over and above what can be explained by the normal effects of inflation. Some of this increase should be reversible without reducing the level of physical provision of services. Frightening examples of serious waste and extravagance are well known to every citizen, and are now reported widely and regularly in the press.

However, it is probable (as the most recent cuts announced by the Government have shown) that reductions in the scale of some public services are inescapable. Where these cuts should be and, far more important, how closely they can be specified, implemented and controlled will depend very largely on two related questions: the scope [p26 begins] and effectiveness of cash limits, and the nature of the Government's relationship with the local authorities.

Cash limits

The case for cash limits, first pressed on a reluctant Government by Conservative spokesmen last year, has now been accepted. The first year of their operation has just begun, covering over half of all government spending. Such limits should give greater discretion to managers and decision-makers to choose how best to deploy their resources. Very detailed cuts laid down from above would run counter to the spirit of the system. The case for specifying in detail has of course been much stronger under the 'funny money' system used until this year, but it may not be the best way to proceed in the future.

Local authority spending

Where local authority spending is concerned, the matter is more complicated still. For it is becoming clearer than ever that the present system of relations between central and local government does not provide a sure way of regulating either the level or the character of local spending. The tensions between the Government and the authorities in the summer of this year over the Rate Support Grant probably herald the death throes of the present system. The need for substantial changes has in any case been made clear by the analysis of the Layfield Committee.

It is in the national interest that there should be effective controls on the total of local government spending; we simply cannot afford the steady seepage that has occurred over recent years, even during periods of notional financial restraint. But within a total budget, local government should have much greater freedom over how it spends its money. Priorities should be worked out locally.

Cash limits, strictly applied, should help deal with a number of problems, including the necessary reduction of manpower in local authorities. But strict control will demand that central government does not add duties or new commitments to local authorities without providing the resources to discharge them, as has so frequently happened in the past.

Parliament, as well as people, has been overwhelmed by legislation in recent years. A self-denying ordinance for legislators is now greatly [p27 begins] to be desired. Meanwhile, any new legislation that affects local authorities should be accompanied by an appraisal, agreed with the associations which represent them, of the revenue and manpower implications. Strict control will also mean that unexpected increases in costs will have to be met by economies, not by increasing central government grants, and that central government should not bail out those authorities which have been extravagant or have mismanaged their affairs.

Breaking out of the Socialist circle

Regaining control of public expenditure, and steadily reducing the share of the national income absorbed by government, is not a narrow,restrictive policy. It does not, as some Socialists argue, threaten freedom. It is difficult to see how individual freedom is promoted by blanket subsidies or by wasting hundreds of millions of pounds on the nationalisation of the aircraft and shipbuilding industries. On the contrary, freedom is threatened, as even some Socialists have now admitted, by the increase in public spending as a proportion of the nation's resources.

We do not argue that all public spending is bad and that only private spending is good. But too much public spending that the nation cannot afford is bad. It saddles an increasing number of people with a growing burden of tax. It throttles initiative at every level. It destroys jobs. We shall only have a chance of breaking out of the closing Socialist circle of tax, subsidy, controls, debt and unemployment if we succeed in cutting the overload of public spending.

[p28 begins]


RESTORATION OF OUR NATIONAL PROSPERITY will depend above all else on our industrial performance. All our economic policies therefore- not least curbing the growing appetite of the public sector- are designed to create a climate in which industry can thrive and expand.

One of the main difficulties against which industry has been struggling for years in this country has been endless change. It has suffered from unpredictable changes in the parity of the exchange rate, the concertina-like expansions and contractions of the economy, an endless succession of constantly changing forecasts and guide-lines from government, and frequent chopping and changing of the tax system.

The erosion of profits

But the fundamental problem has been the erosion of the cornerstone of the whole edifice of industrial enterprise -profits and profitability. These provide both the incentive and the financial resources out of which expansion comes. For twenty years or so both have been under sharp downward pressure, and profits have now dwindled to nearly nothing when one allows for the distorting effects of inflation. The reason for the fall in investment is this progressive and increasingly dramatic decline in the return on capital. Human nature today is doubtless what it was yesterday, last year and last century. If fewer people are embarking on new ventures to make profits, the reason is that fewer such possibilities exist.

So there has not been an `investment strike' by industry, as Labour politicians claim: there has been an 'investment lock-out' by Socialism, a failure to provide conditions in which investment offers a worthwhile return.

It will be essential to demonstrate in the next few years, far more [p29 begins] effectively than we have in the past, the essential role of profits. Every company can help to do this with its own work-force by better and closer communication. Employee participation, in terms of cash as well as information and commitment, should help to establish the unity of interest that exists in every firm in securing success and increased profits.

Profit sharing

It is time to back words with deeds in spreading ownership and enterprise in industry. Millions of workers are already major equity owners at one remove through their pension funds and life assurance policies. But we think it is right to go further than this and to use the tax system to help make Britain a nation of genuine worker owners on a scale not encouraged by our existing financial institutions. Britain's source of wealth, like that of other free economies, is the accumulated internal savings of companies, the proceeds of business capital growth. This is the wealth creation in which employees should have a greater share.

We think that the best way of spreading ownership is probably by encouraging voluntary employee profit-sharing schemes through tax relief. These schemes should be based on bonuses derived from profits belonging to the company (not the employee), which would be used to create or purchase employee shares. In this way an employee could build up a fund without risking his or her own savings.

The timing of the introduction of this sort of change would naturally have to depend on the general economic situation. But its initial cost would be unlikely to be great. And the increased cost, if a scheme was taken up with the enthusiasm which we would wish, would be more than matched by the returns. We should be providing an opportunity of saving in the hands of the individual rather than forced savings through taxed incomes.

We believe that proposals of this kind - which we shall publish later in more detail for wide discussions with industry , unions and the financial institutions - would help to strengthen our democracy, spreading ownership to millions of working people in a way that State Socialism never can and never will. They would form, along with our proposals for wider home ownership, a vital part of our total strategy for increasing the scope for personal independence and responsible citizenship.

[p29 begins]

Employee participation

Many workers wish to be associated not only with the profits but also with the decision making and management of their firms. Job security, pay and conditions of work have been the traditional concern of people at work and those who represent them. But today, partly because of the extension of education, people quite properly want the opportunity to exercise more initiative and to share more responsibility, and many good employers have already given them this chance.

The European Commission and European Parliament have been studying participation for some time and the Labour Government have set up the Bullock Committee to examine it. It would not be sensible to comment in more than general terms before the Committee reports. But we are concerned that the Labour Government may have decided already that giving people more say at their place of work will somehow be achieved by the statutory imposition of a fixed number of trade union representatives on boards of directors.

Employee participation must involve all employees. In companies with a history of strong trade union involvement, it may make sense to develop existing methods of collective bargaining. In companies with a partly unionised work-force and with many different unions, it may initially be best to introduce consultation committees with both shop stewards and directly elected worker representatives. What it is important to understand is that no single model can be universally applied; this would make nonsense of the whole question. A code of practice is much more likely to be helpful than legislative prescription.

Liberating profits

A wider understanding of private enterprise, and a greater identification with its success, should be accompanied by measures to liberate profits.

The burden of tax on industry will need to be eased. It is now generally agreed that traditional methods of calculating profits for corporate taxation are entirely unsuitable in a period of high inflation. The Government's temporary provisions for stock relief have to some extent eased the difficulties of companies which have had to pay taxes on paper profits that do not reflect real values. But we recognise the urgent need for a more radical revision of company taxation. The precise nature of any reforms on the line of the Sandilands Report must obviously have regard to the work of the accountants on the Morpeth Committee.

[p31 begins]

The present price controls (which were not designed to last for ever) are doing more and more damage to business and industry. They have prevented investment, destroyed jobs and limited consumer choice. Further substantial relaxations of the Price Code are urgently required. One important objective must be a reduction in the large administrative burden that it now involves. If total removal of the Code is not yet possible the present system must certainly give way to one that recognises the need for a return to profitability and is at the same time more flexible and responsive to current consumer requirements. It must be emphasized that such measures do not prevent inflation and are no substitute for the essential pursuit of the necessary economic policies.

There must also be a relaxation of dividend controls, to help companies obtain funds for investment and job creation.

Dismantling restrictive practices

A government which does these things will have gone a long way towards restoring profitability in industry. But even this will not be enough. There is, for example, an urgent need to dismantle those restrictive practices which are one of the main causes of the decline of some industries. There is no point in buying a new machine which produces more goods with fewer workers if it cannot be economically manned. This is not a matter of denouncing particular groups but of having the courage to give them leadership and to tell them the truth.

People will not face the truth if the Government continues to subsidise industry in response to political and ideological pressure, taking little account of efficiency, market prospects and the chances of success. Featherbedding failure is a certain route to industrial impoverishment.

Restoring safeguards

There may be occasions when a government has to intervene to assist a company in financial difficulties on strategic, or technological or other grounds. The Socialist climate in which industry has now to operate does not encourage the belief that there will be no such occasions in the immediate future. But if assistance is shown to be necessary it must be seen as exceptional, and be subjected to the closest scrutiny.

For this reason, the safeguards covering expenditure which were [p32 begins] removed in 1975 from Section 8 of the 1972 Industry Act should be restored; and further safeguards are needed in the operation of Section 7, which covers help to firms in the regions. The powers of Parliamentary scrutiny over all government support for industry should be increased, for example by placing a duty on the Industrial Development Advisory Board to give independent advice to Parliament as well as to Ministers. Our aim is to make it much more difficult for governments to become involved in supporting unviable industrial concerns, without making it impossible to support potentially viable firms where there is an overwhelmingly good reason for doing so that can be justified in Parliament.

Partnership not interference

Government should withdraw from its current overbearing role in industrial matters. There has to be a dialogue and a constructive voluntary partnership between government and industry, for example through the National Economic Development Office (NEDO) machinery. Government can sometimes help to smooth out problems for industry , in the training and mobility of workers, the financing and marketing of exports, and so on. But the Government's main role is to provide the economic climate within which industry can thrive.

The battery of weapons for interfering in industry introduced since 1974 must therefore be scrapped. We should repeal the 1975 Industry Act, getting rid of its disclosure provisions and planning agreements. The National Enterprise Board must be abolished, though we shall have to retain some sort of administrative mechanism for selling off NEB shareholdings where this is possible, and for administering those which cannot be sold off immediately. This body would have no innovating powers of its own. Similarly, the powers of the Scottish and Welsh Development Agencies to buy into profitable companies should be removed and as much as possible of the interests of British Shipbuilders and British Aerospace -if the Government do succeed in setting up these nationalised bodies -should be sold off to the private sector.

The nationalised industries

The performance of the nationalised industries, which have a major stake in our mixed economy, has caused increasing disquiet for many years. Quality of service has in many cases seriously deteriorated, [p33 begins] massive financial losses have been accumulated and morale has declined to dangerously low levels.

The first requirement is to re-establish and to adhere to clear financial objectives for each corporation. Such objectives will be irrelevant unless management is granted the degree of freedom needed to set prices and meet each industry's statutory obligations without outside interference. Total freedom to set monopoly prices can, however, encourage management to tolerate inefficiency and pay too little regard to the consumer interest. There is, therefore, need for effective monitoring of each corporation's performance.

The next requirement is to ensure the recruitment of top-quality management and directors. To achieve this, changes will probably be needed in their terms and conditions of service. Equally important, the Government will have to accept that the corporations should, as a rule, be paid for undertaking activities which do not conform with their legal obligations or their financial objectives, rather than be compelled to carry them out by pressure behind the scenes. Without such an understanding the task of efficient and accountable management often becomes impossible.

Finally, the Government must set clear boundaries to the corporations' spheres of action, without which there will remain the serious risk of unfair competition with the private sector. In some cases it may also be appropriate to sell back to private enterprise assets or activities where willing buyers can be found.

Our economy will do best if public participation and interference in industry are reduced, if the right tax structure is established and if policy is based so far as possible on the market. This is particularly the case in two of our most important industries, energy and agriculture.


While it would be dangerous to look to North Sea oil to rescue us from all our ills, there can be no doubt that our enviable access to energy supplies of many kinds will be of great importance in the future. Our special position means that we shall be well placed, both in the European Community and in the wider forum of the International Energy Agency, to promote the interests of Britain, the Community and consumer countries.

But for the next decade or more the most important consideration in the energy policy of any country will be the exceptional uncertainty about the price and ease of access to basic fuels. Since no one can be [p 34 begins] sure which will be cheap and which difficult to obtain, the ability to switch our own pattern of consumption between oil, coal, gas and nuclear power will be invaluable. So the first task of any government should be to ensure that we can properly exploit that potential.

The private sector's progress in developing the North Sea has been hindered by the exotic complications of the British National Oil Corporation and the negotiation of participation agreements. The operations of the nationalised fuel industries lack a clear framework of commercial and financial objectives. A viable strategy for nuclear power generation is still very much in doubt.

Our priorities will therefore be threefold. First, the financial privileges of the British National Oil Corporation should be removed so that it is required to conform from the first to normal commercial disciplines and, where appropriate, to dispose of its assets to willing buyers at reasonable prices. Second, a relationship should be established with the major nationalised corporations based on commercial pricing and the maximum of managerial independence, in the framework of a strategic approach designed to make certain that we can meet the nation' s energy needs efficiently and economically. The third priority -nuclear power generation -is not a subject about which much can be sensibly said until more is known about progress in developing the next generation of reactors and the generating industry's purchasing plans.


International developments in the 1970s have made it clear that the era of cheap and abundant food supplies is now over and that security of supply is of even greater importance than it used to be. Every country , including Britain, must accept that for some time the cost of food will be high and increasing. Whatever may be done through selective welfare measures to shield the neediest from the full effects of the inevitable price increases, there is no way in which the country as a whole can avoid them. At the same time the industry has been disrupted more than most by the combinatio, n of the oil crisis and unfavou, rable w, eather. Furthermore, in Britain, though not elsewhere, its interests have been seriously neglected in favour of the short-run consumer interest for electoral reasons, and damaged by several major pieces of legislation such as the Capital Transfer Tax. The painful and humiliating dispute with Iceland and other diplomatic misadventures have greatly damaged our fishing industry.

Our priority is therefore to recreate the right conditions for cost- [p35 begins] conscious expansion. This will require changes in the taxes introduced by Labour; an end to artificially low prices which depress investment, production and confidence and necessitate higher imports and ultimately higher prices; the establishment of conditions of fair competition with our European partners; and special consideration for the problems of fishing, forestry and the uplands.

As the period of transition to full EEC membership draws to a close, the nature and development of the Common Agricultural Policy (CAP) will be of ever-greater importance to our farmers. The case for a Community-wide market in agricultural produce remains strong, provided it is economically and administratively efficient, and does not unduly favour Continental producer interests at the expense of consumers or exporters of agricultural products outside the Community. The CAP is at present under great strain and no one can predict what will have happened to it by the time the next Conservative government is formed. Nevertheless, it is of the greatest importance to the British consumer and farmer, and a future Conservative Minister of Agriculture will have to playa very active role in all aspects of its evolution.

Smaller businesses

Much of our present and future prosperity and expansion depends on the health and growth of smaller businesses. They provide a vital element in the free enterprise system. They ensure a wide range of choice for consumers, employ many millions of people, and are a major source of inventions and new products.

Small businesses have faced exceptionally difficult conditions recently. They have had to grapple not only with the recession and inflation but also with a hostile government. Measures such as the Employment Protection Act, the Trade Union and Labour Relations Act and the new Pensions Act have imposed massive bureaucratic burdens that seriously strain their limited resources. Changes in taxation have been equally onerous -perhaps particularly so for shopkeepers who have had to cope with a second VAT rate on top of the Capital Transfer Tax and stiff increases in rates and social security contributions.

We shall therefore be announcing in a few months a detailed programme for the revival of smaller businesses. One element in it will be a proposal for a new legal status for small firms -the `proprietary company' - which will assist them to start and grow. The purpose of the proposal is to shield small firms from legislation which leans [p 36 begins] unduly harshly on them (given their modest resources) or is quite irrelevant to them. Another important element in a programme to help the development of small businesses is a replacement for the damaging and unfair Capital Transfer Tax. We shall be proposing urgent action to 'draw its teeth' in the context of a wider review of the whole complicated field of capital taxation.

[p37 begins]


ONE OF THE MAIN AIMS of all these policies is the creation of a highwage, low-cost economy. Strange though it may seem, restraint in pay bargaining can play a vital role in achieving this. For it is only improvement in the real value of pay, as opposed to paper pay rises, that raises living standards.

Restraint in pay bargaining - particularly when we are still fighting against the tearaway inflation of recent years - serves to curb the alternative of unemployment, to secure the growth of profits as the basis for future jobs, to control the size of the pay and salary element in public spending and to diminish inflationary expectations.

Restraint in pay bargaining does not necessarily imply the adoption of a fully-fledged `prices and incomes policy', such as governments of both parties have tried on several occasions since the war. Experience does not suggest that this is the best way of finding a long-term solution to the problem. That same experience demonstrates the unwisdom of flatly and permanently rejecting the idea.

The difficulties of statutory incomes policies have become all too well-known: bureaucracy, rigidity, compression of differentials and so on. Almost insoluble problems of sanctions and enforcement also arise. They have turned out to be temporary measures, which decline in effectiveness with the passage of time and provoke a damaging rebound when they end. They offer an open incitement to attack by militants. The present policy, although not formally statutory, is unlikely to be an exception. The number of strikes in Britain actually increased in the first year of the `Social Contract', and the welcome improvement in the strike record since then is almost certainly due rather to the massive unemployment unleashed by the `Contract' than to workers' tenderness for a Labour government.

The `Social Contract' approach has other defects. Unions tend to demand and obtain policies in exchange for restraint which either damage the national interest as a whole (such as tight price controls) [p 38 begins] or which they hope will further their own interests at the expense of the rest of the community. The basic bargain is likely to mean that the Government promises to do things that ought not to be done, in exchange for a promise of wage restraint which is ih everybody's interest anyway.

The intimate bond thus established between government and unions has political as well as economic drawbacks. It is not possible to represent and include other interests in the country in this bargaining process. It erodes the authority of moderate union leaders and exposes them to militant pressures. It threatens to undermine and supplant still further the role of Parliament. This may seem inevitable to a Labour government, since the unions are constitutionally a part of the Labour movement. It is not appropriate for any party which accepts that it is the proper duty of government to represent the community as a whole.

Responsible wage bargaining

Is there any alternative to statutory policies or social contracts? Other countries have found ways. Indeed the most successful Western economies of the same size as our own are those which manage to do without such policies. The West Germans, for example, without any elaborate machinery, establish each year a generally agreed basis for responsible wage bargaining. They do, however, make extensive use of consultative procedures -known as Concerted Action -for.establishing this basis. However difficult it may be, we need to develop a comparable approach that would be compatible with existing British institutions.

But it would be foolish to pretend that this can be accomplished overnight. It will take time, and patient and painful adjustment to economic reality. We shall need to use every available means ofmaking collective bargaining a more orderly and responsible process. Our purpose must be to exclude the need for any further resort to a formal incomes policy.

Monetary restraint, including the setting of targets for monetary expansion, is a key feature of economic policy, though by no means the only one. Excessive wage claims should clearly not be accommodated by an easy expansion in bank lending. In the public sector this must be supplemented by the use of cash limits. Every organisation (including those in the public sector) should be put into a position in which workers and management are obliged to face together the inescapable choice between realistic pay levels and job security, or excessive earnings and a doubtful future.

[p39 begins]

The Conservative offer

Some argue that government will always have to pay a price to get people to act responsibly, that that price will be determined by the TUC, and that only a Labour government will, or can, pay it. We know what the price is for a Labour government: high public spending and borrowing, excessive blanket subsidies for food and council rents, more nationalisation and more Socialism. The public, unionised and non-unionised alike, are coming to understand the real cost of all this in the form of high taxation, restrictions of freedom and choice, the undermining of profitable industry, with high and prolonged unemployment and worsened prospects for an improved standard of living .

What the Conservative Party offers union members and the rest of the community is less bureaucracy and interference and lower public spending and taxation than under Socialism, more profits for industry and therefore more investment and job creation, and greater opportunities for home ownership and for sharing in the ownership of industry.


A highly paid work-force needs to be highly trained and highly mobile as well as highly responsible in the way it bargains. Mobility today is seriously impeded by Socialist housing policies. But with over a million men and women unemployed and with the need for an industrial revival over the next few years, training is especially important.

Training in skills must be greatly increased to avoid putting manpower strains on industry as production expands again. Means should be sought for using the capital equipment, currently made idle by the recession, for training purposes. As the pace oftechnological change quickens it is also important to ensure the development of a more capable and flexible work-force. Greater opportunities for re-training are a necessary complement to initial training. This has been recognised by the European Community, which is providing through the Social Fund a large amount of the money to finance re-training in this country .

The establishment by the last Conservative government of a unified, independent Manpower Services Commission (MSC) with a separate Training Services Agency (TSA) to co-ordinate all skill training was undoubtedly a great step forward. The TSA should be supported in attempts to find new ways of rapidly increasing skill training in parts [p40 begins] of the country and in types of employment where there is going to be demand.

Job prospects look particularly forbidding for young people. A situation in which tens of thousands of school-leavers are left with the choice ofidleness, or artificially created jobs which provide little or no serious training, will cause frustration and bitterness which could mar the whole of their adult working lives. Training opportunities could be extended beyond the teaching of skills to a very much wider preparation for the world of work. Help is especially needed for those without good academic qualifications to find their way to satisfying occupations.


If we are to leave people with higher take-home pay (thus reducing the pressures on pay bargaining that arise from high taxation), and restore incentives for work, skills, and initiative, then there will have to be major changes in the size and shape of our present tax burden.

This is made difficult by the increase in the size of the public sector, the interaction of higher public spending and the impact of inflation on an un-indexed tax system, and, of course, the extent to which Socialists have used the tax system in their doctrinaire pursuit of equality. The result has been that no significant group of citizens has gained. Britain has become saddled with the most eccentric and most penal tax structure of any developed country. A way out of this impasse must be found.

The last Conservative government had found one. In less than four years Lord Barbercarried out the most radical programme of tax reform seen in this century. Tax rates were cut; a unified system of income tax, abolishing surtax, and bringing substantial benefit to people on small investment incomes, was introduced; there was a reform of company tax; Value Added Tax replaced Selective Employment Tax and Purchase Tax; work on the Tax Credit scheme was far advanced; and work on the reform of capital taxation had started.

Everyone hit by higher taxes

The benefits of these reforms had scarcely begun to be felt when Mr Healey arrived at the Treasury, pledged to make the better-off `howl with anguish' at increased taxation.

It has not been only the better-off who have `howled with anguish'. [p41 begins] Almost everyone has been hit. Income tax is now virtually a universal tax, because the periodic adjustment of the income tax threshold has failed to keep pace with the increase in average earnings. Whereas in 1939 there were four million taxpayers, and in 1959 eighteen million, now there are twenty four million. Income tax is no longer a `middle class tax'. One effect of this has been to damage severely the prospects of the poor and low-paid, as we explain in a later chapter.

But the problem is not confined to tax thresholds. Average tax burdens for the family man on average earnings have increased from some 4.5 per cent in 1964, to 13 per cent in 1970, to over 19 per cent now. Since Labour raised the basic rate from 30 to 35 per cent, the absence of reduced rates is becoming an increasingly serious problem. Our marginal rates are far higher than in most developed countries. For example, after exemptions the US taxpayer begins paying at a rate of 14 per cent and the German taxpayer at 22 per cent. Moreover , alongside this there has developed a major parallel tax system through the percentage national insurance contribution, soon to be extended by the new payroll tax. This adds a further 5.75 per cent to the effective marginal rates while the employer's contribution will rise next spring to almost 11 per cent.

Inflation has also greatly worsened the tax problems of those at the top of the scale, and what inflation has left undone, Mr Healey has completed. The injustices and anomalies of the present taxes on capital must be removed.

Escaping from the tax trap

Britain has - partly by accident - created a tax trap for its citizens. How can we break out of it? There will be no chance of doing so at all unless the proportion of national income consumed by public expenditure is steadily reduced. People can choose between a Labour government deciding how the money they earn is going to be spent, or deciding themselves how to spend more of their own money.

But at a time when the Government's borrowing requirement is well over half the total yield of income tax, it will not be easy to translate the first public expenditure reductions into early or substantial across-the-board cuts in personal taxation. The priority must be to cut the amount of money the Government is borrowing. Nevertheless, the next Conservative government will aim to do in time what Conservative predecessors have done: reduce the tax burden as a whole, and the rates of direct tax for everyone.

Britain also needs an `enterprise package' of tax reforms, designed [p42 begins] to restore incentives to save, invest and work hard. Why should we not set the standards of our tax system by aiming to bring them into line with those which now prevail within the European Community? Tax rates on investment income there do not, in general, go beyond 75 pence in the £ compared with 98 pence in Britain. And the top tax rate on earned income does not, in general, exceed 60 pence in the £ compared with 83 pence in the £ in Britain. So long as these wide disparities exist, the drain of talent from this country will continue.

Steady progress towards a more rational tax system must involve a reduction in the tax burden on rewards for hard work and enterprise. More and more people can see the sense in shifting part of this burden on to the pockets of those who spend and can afford to do so. For one thing, this widens choice. Obviously the nonsense of multi-rate VAT should be ended and the minimum turnover for VAT registration must be significantly increased. We have established a small group of experts to review the whole working and administration of VAT.

The conventional argument that indirect taxes always bear more harshly on the poor has been overthrown by what has happened in recent years. Many of the poor are now liable to high rates of income tax; and the most essential items of the household budget were zero-rated by the last Conservative government for VAT .

We remain committed to the evolution of a satisfactory Tax Credit scheme. Meanwhile, our aim is a tax system which is fair. This does not require another massive round of tax legislation. The main improvements must come from changes in the shape of th~present load and in the rates of existing taxes. We do not believe that most people feel that fairness must impose absolute distributive equality. Few can feel happy that their doctor would earn twice as much, and pay less tax on it, in France or the United States. Few manual workers are likely to be happy about a situation where they or their colleagues could get more by not working.

The economic strategy of the next Conservative government is therefore based on financial prudence, on shifting resources from government which spends the nation's wealth to those who create it, on restoring the profitability of industry, on wider ownership, on encouraging responsible wage bargaining, and on tax reform. This strategy does not promise any quick cures or easy solutions. But it does give Britain the chance to get firmly back on the long road to national solvency and renewed prosperity for all our people.

[p43 begins]


BRITAIN'S DEPRESSING ECONOMIC PERFORMANCE, the growth of extra-parliamentary power and of an impersonal and insensitive bureaucracy, together with the erosion of long-respected values, have together helped to promote an increasingly vocal debate about our constitution.

There is concern about the power of the executive, the apparent slide from open democracy to secret bureaucracy, the quality of the government of the nations which for over 250 years have made up the United Kingdom, andthe defence of individual liberty. People wonder whether anyone in authority -including those they elect -ever really listens to what they have to say. They are worried about growing lawlessness, and the possibility that the broad consent, on ~hich parliamentary democracy rests, may have broken down.

These are understandable anxieties. Some of them result from attempts by government to do too much, and from the tendency of political parties to promise too much.

We believe that our intention to promise less in opposition, to practice restraint in government and to give choice and freedom back to the people, will help to reduce the burden of government and to restore the faith of the public in those they elect.

We must also increase the authority of Parliament and its power over the Executive. We must stand firm in our defence of the law and give greater support to those who enforce it. We must show that we listen to, and understand, the anxieties of the people.

Parliament has traditionally been the main guardian of our laws and freedoms. One of the most serious charges against the Labour Party is that in opposition they condoned and encouraged undemocratic challenges to the authority of Parliament. The shabby story of Clay Cross stands as a perpetual reproach to Labour leaders. Now in [p44 begins] government they have used Parliament itself to undermine the rule of law and attack the liberty of the citizen.

We aim to restore Parliament's authority, not least in relation to an over-powerful Executive. We shall ensure more openness by government in economic matters, so that the elected representatives of the people can more successfully challenge and influence the development of government policy. Similarly, we have urged greater parliamentary control over the industrial policies of governments. Parliament should not be regarded, as it is too often by the Labour Party, as at best a machine for processing Socialist legislation and at worst a tiresome encumbrance slowing down progress towards the Socialist millennium.

Parliament must prevail

There is another question about Parliament which has been asked increasingly in the period since the Labour government's failure in 1969 to reform industrial relations. People not only wonder how much in practice a Labour government will care for the democratic constraints of Parliament; they also question whether the trade union movement is subject to the will of the democratic majority at Westminster.

We believe that a strong and responsible trade union movement has an important role in a free society; it should be widely consult~ and its interests acknowledged and understood. But the trade unions are not the government of the country. We are not asking the electorate to return us to office so that we can hand over government to any group, however important, which has not been elected to govern. It is Parliament, and no other body, which is elected to run the affairs of this country in the best interests of all the people.

Democracy in the unions

This is the view of the common-sense majority in the unions. They must make their voices heard and their opinions felt. We are encouraging the Conservative members of trade unions (about onethird of the total membership) to playa more active part in their union affairs.

Given the power that the leaders of trade unions wield, it is clearly important that they should be as representative as possible. A number of the leaders and national executives of unions are representative of [p45 begins] their members, but the frequently voiced criticism that trade unions are imperfectly democratic is surely fair. Polls of 10 per cent Or 20 per cent for important industrial jobs cannot be satisfactory either to the unions concerned or to the wider community interest.

The main drive for improvement in the democratic procedures of trade unions must come from union members themselves. But we are ready to help. Public money should be made ava.lable for the conduct of postal ballots for union elections where these are requested. Firms should also be encouraged to Provide time and facilities for the conduct of union meetings; this should lead to greater participation in union affairs.

Safeguarding individual rights

We have emphasized on a number of occasions that on our return to office we do not intend to introduce a major round of new industrial relations legislation. This in no way diminishes our opposit on to certain points in recent legislation which we fought resolutely in Parliament, nor our conviction that amending legislation will ultimately be necessary if voluntary arrangements are not in the meantime secured. We shall of course consult fully with all interested parties, but we are in no way curbing our right to amend provisions which prove in practice to be as ill-chosen or wrong-headed as we pave consistently argued. In particular, we are concerned to pr?>tect individual rights, for instance as they are affected by the closed shop.

The closed shop (in one form or another) has been a feature of British industrial life for over fifty years. Sometimes it has come about through the mutual wish of employers and employees; sometimes as a result of trade union or political pressure. Sometimes it has helped put industrial relations on an orderly basis; sometimes its working has threatened individual freedom. We believe a proper balance must be struck. For example, it is wrong that people who have given years of service can not only lose their jobs because they will not join - or are not accepted by - a union, but also receive no compensation.

Yet this is what is happening on the railways. It is intolerable that British Rail, a state-owned monopoly, should be telling men who have given many years of service to the railways that they must join a particular union or lose their jobs. It is wholly unacceptable that the only appeal for someone who feels that he cannot in conscience join a union is to a tribunal, comprising British Rail management and railway union officials, held behind locked doors, with no provision for publishing its deliberations or its decisions.

[p46 begins]We have made it clear all along that if satisfactory voluntary arrangements are not worked out to take proper account of objections based upon conscience or deeply held personal conviction and length of past service, it will be the duty of government to ensure that effective provision is made.

Additionally there must be an independent tribunal to safeguard the rights of an individual whose livelihood is endangered by arbitrary exclusion or expulsion from a trade union.

Strengthening the forces of the law

A government determined to protect individual liberties and to uphold the law must recognise that one of its first priorities should be to strengthen our police forces to cope with increasing crime and terrorism. This is why we have made it clear that one of the areas where public expenditure must not be cut, indeed where spending must be increased, is on the police.

Police recruitment has been improving, but establishment figures have still not been met, and anyway it is probable that these figures should be raised to a more realistic level. The pay and conditions of service of our police must therefore be steadily improved, and we must remove some of the anomalies which put the police in a less advantageous position in terms of salary than other public servants. The special constabulary must be strengthened and expanded, and there should be better national co-ordination of several important areas of police work.

More important than ensuring that the police have adequate resources is that there should be a positive commitment by Parliament, politicians and the people as a whole to our police service. A nation which fails to support its police will not succeed in protecting its citizens' freedoms.

Northern Ireland

There is no greater challenge to the rule of law in the United Kingdom than the dreadful outbreak of violence in Northern Ireland. In seven years, over 1500 have been killed, the social structure of the Province threatened and its economy gravely endangered. There is an atmosphere of near-despair at the failure of security policy to stop murder and destruction.

The continued terrorism means that there may be no early alternative [p47 begins] to direct rule from Westminster .This form of government tends to be insensitive to local opinion. Every step should be taken to make it less bureaucratic and more accessible. We are pressing the Government to provide a better system for discussion of Northern Ireland legislation in Parliament.

We are ready to co-operate with the Northern Ireland political parties in continuing the search for a stable constitutional system. We shall continue to encourage talks among them to pave the way for a devolved form of government. We also recognise that Northern Ireland is under-represented in Parliament, and believe this question should be discussed in the context of future representation of all parts of the United Kingdom.

There is no real prospect of constitutional advance until the rule of law is restored throughout the Province. This will only be achieved by a determination to destroy terrorism in place of the present unsatisfactory attempts to contain it. We have already urged the Government to intensify joint measures with the Government of the Irish Republic to establish greater control of the Border. We shall continue to press them to improve the manpower and equipment of the Royal Ulster Constabulary and its reserve and the Ulster Defence Regiment.

When the Government abolished detention last year, they provided no legal powers in its place to enable the Security Forces to catch the ring-leaders, many of whom roam the streets scotfree. We are studying possible amendments to the law to create a single offence of committing an act of terrorism which would cover organising, recruitin~and incitement within the United Kingdom.

Of all the steps to be taken in Northern Ireland, the most important is the restoration of confidence that we shall abandon negotiations with terrorists and not withdraw troops until they are no longer needed.


In the rest of the United Kingdom relations between different communities have been remarkably harmonious. Indeed, one of the unsung achievements of this country in the last twenty years has been the largely calm and tolerant way in which our towns and cities have received a significant number of immigrants. It is as remarkable in its way as the contribution which immigrants themselves, and their children born and brought up in our country , have made to many of our community services and industries. The British people do not need lectures about the importance of fair and equal treatment before the law for everyone who lives here. The overwhelming majority have [p48 begins] accorded that treatment. They accept that all acts of racial discrimi - nation, incitement to racial violence, and -most of all -violence itself, are wholly abhorrent to our British way of life and must be unequivocally condemned.

But our capacity to provide a home and future for immigrants and their families is not limitless. Strains have been placed on the services in many parts of the country where large numbers of immigrants have settled. These strains are made more severe when unemployment is high and resources limited. Therefore, the maintenance of racial harmony requires an immigration policy which can fulfil the two following criteria. First, there must be an immediate reduction in immigration. Second, there must be a clearly defined limit to the numbers of those to be allowed into this country.

The present level of immigration is much too high. It has increased by a very substantial amount under this government, and it must be cut. This can be done by greater administrative rigour and by reviewing some of the categories of those who are at present allowed to settle here. In addition, there must be firm action against illegal immigrants and those who overstay their permits.

On future immigration, the first essential is that the British people should know all the facts. This is why we have urged the Government to set up an independent inquiry into the best method of providing simple and easily understood statistics which will give the full facts to the public, and to establish a register of those dependants who wish to join immigrants already here. Until this is done, it will not b~ossible for the Government to work out a sensible policy of limitation which commands public sympathy and support. We must also draw up a new Nationality Act to allay fears of unending immigration and to establish a rational basis for British citizenship.

Public concern over immigration must be met. It is in the interest of those who have settled here and their families, just as much as it is in that of the majority, that we should take such measures as a matter of urgency.


The feeling that Parliament and government are out of touch with the people has probably been most acute in Scotland. This is partly the result of economic difficulties, but it goes deeper. Scotland, like Wales, is a nation with a proud history of cultural, social, economic and military achievement. It wants a greater say in its own specifically Scottish affairs; it wants some of the powers at present exercised in [p49 begins] London to be devolved to Edinburgh, and greater political control of the administrative powers already devolved.

The Conservative Party is the party of the Union. We reject the separatist arguments of the nationalist parties. We shall continue to stand fast for a Union which has endured so much, and achieved so much, not only in these islands but throughout the world. But in our view the Union is more likely to be harmed by doing nothing than by responding to the wish of the people of Scotland for less government from the centre.

We have argued for the establishment of a directly elected Scottish assembly, acting as another chamber of the United Kingdom Parliament. Its functions would be to take an important part in legislation with Parliament and to subject government in Scotland to full democratic scrutiny.

For Wales, where the constitutional situation and the popular feeling are different, a Select Committee of the House of Commons (free to meet in Cardiff) should be set up and the Welsh Council should be enlarged so that a majority of its members are nominated by the county and district councils. The responsibilities of the Welsh Office, for example in the fields of agriculture and transport, should also be increased.

Our proposals, while meeting legitimate Scottish and Welsh aspirations, are wholly consistent with the political and economic integrity of the United Kingdom. We do not think this is true of the Government's devolution proposals, which would also create more bureaucracy and cost the taxpayer yet more money.

[p50 begins]


HOUSING is one of the many areas in which present policies simply do not make sense. Most people want to become home-owners. Yet we devote the overwhelming majority of our resources to public rented housing .

There is no overall housing shortage though there are still areas of great need. Despite the bad conditions in which some families live even today, we are on the whole better housed than most other countries in Western Europe. Yet over the last few years there has been an explosion in public sector housing expenditure for which there is no conceivable social or demographic justification. In five years spending on housing has risen over four times as fast as spending on other things.

Council house subsidies have risen faster than any other major component of this expenditure. By last year the proportion of local authority current housing costs met by rents after rebates had fallen to well under fifty per cent. The latest available figures show that the average council rent, after rebate, now takes only just over five per cent of the average household income of local authority tenants. The average initial mortgage repayments, after tax relief has been taken into account, take about fifteen per cent of borrowers' earnings.

We are not only spending more money, failing to provide people with what most of them want; we are also failing in what the last Conservative government rightly argued should be the major policy objective -to make the best use of our existing housing stock. The private rented sector, though harried into a long decline, could still have an important role in meeting particular housing needs and helping to make the best use of the housing that should be available in this country. But the Labour Government have pursued the traditional Socialist vendetta against the private sector. The result has been to reduce further the amount of privately rented accommodation available.

[p51 begins]

Encouraging home ownership

There are three main reasons why we should do more to encourage home ownership. First, it gives people independence; the ownership of their home buttresses a family's freedom. Second, largely for this reason, most people want to become home-owners, and are happier as home-owners than as tenants. Third, helping people to become home-owners represents an excellent bargain for the taxpayer; the average subsidies on a newly built council house add up to about £1,300 in the first year, while tax relief on an average new mortgage is around £300.

To ensure a favourable climate for an increase in home ownership, it is important that there should be a steady flow of money through the building societies, a steady flow of land, and a reasonably stable construction industry. These conditions are unlikely to be fulfilled by a Labour government, which is running a massive public sector borrowing requirement, which intends to nationalise most development land, and whose supporters are now considering the nationalisation of the construction industry.

We recognise the great importance of reshaping the planning system, and the related taxation arrangements, so as to ensure - without encroaching on good farming land - that development land with planning permission and services will be available for development in areas where people want to live. As a first step, the Community Land Act should be repealed as soon as practicable. But we accept the need for some form of taxation on the gains arising out of the granting of planning permissions. On land use, we are looking carefully at the recommendations of the Dobry report on 'Development Control' (in England and Wales). Planning delays must be cut down as far as possible.

The exact extent of the additional support that should be given to first-time owner occupiers must depend on the state of the economy when we take office. Equally, conditions then will to some extent determine which method of encouragement is most appropriate. There are three methods in particular which we favour.

First, there is the scheme under which lower paid first-time purchasers of homes in the cheaper price ranges receive special help with the deposits through a contribution of oe1 for every oe2 saved by them up to a given limit. There must naturally be safeguards regarding age and income.

Second, there are shared purchase schemes. All the present means of house purchase require the buyer to possess or borrow 100 per cent [p52 begins] of the capital cost of the house at the time of purchase. Though a young married couple may be able to raise 60 per cent or 70 per cent of the cost of the cheapest house in their district, there is no way at the moment that they can then begin to climb the home ownership ladder. So they have little other choice than to join the council waiting list. The object of shared purchase schemes is to enable homebuyers to acquire initially less than a 100 per cent equity interest in their home and to buy the balance later. The purchaser takes out his maximum mortgage in the normal way. The balance could be found by the financial institutions, with the Exchequer bearing the cost of the interest on the money lent.

Third, there is stabilisation of the cost of home ownership through the establishment of a maximum mortgage rate, which the Government ensures by adjusting as necessary the composite rate of tax paid by the building societies.

The cost of any of these proposals would be more than covered by the savings on housing expenditure in general. In other words, we shall shift resources quite deliberately to helping people to buy their own homes, while bearing in mind the importance of trying to keep supply and demand in the housing market in balance.

Sale of council houses

We wish, once and for all, to get rid of the unfair restrictions on the sale of their homes to council tenants and new town tenants. We believe they should have the statutory right to buy their homes after three years occupancy either on a freehold basis or, in the case of flats in England and Wales, on a leasehold basis. A practical method would be to allow tenants to serve notice on the council, with access to the courts if the council refused the tenant's request to purchase or if it was obstructive.

We envisage council home sales being financed by building society and insurance company mortgages as well as local authority mortgages. The small cost of tax relief on additional mortgages would be more than offset by the increased revenue that would flow from a large programme of council home sales.

Local authorities are expensive and not always efficient providers of homes. It is doubtful whether many urban authorities add to the housing stock at all. Much local authority new building is essentially an expensive process of bull-dozing neighbourhoods into piles of rubble, with a switch within the rented sector from private to public.

The housing stock now exceeds the number of households by over [p53 begins] three-quarters of a million homes, and demand for council housing has been artificially inflated by ever more heavily subsidised rents {which 'oblige' councils to build, since relatively few re-lets are available), and by legislation which has ensured a sharply diminishing stock of private accommodation for rent.

Council housing

It would therefore be sensible to concentrate help for public housing on the areas of serious housing stress {which will in the main be in the older industrial cities), on areas of substantial population growth, and on particularly needy groups, such as the old and disabled, through the provision of sheltered and smaller dwellings which would release larger dwellings for younger families. Concentrating aid on need would lead to a significant reduction in public expenditure.

The whole system of regulating public housing by reference to rigid rules (in England and Wales the 12-year-old Parker-Morris standards) and to cumbersome methods of cost-control must be reviewed. We should also examine the longer-term possibility of block loan sanction approval to local authorities for their housing programmes.

The disproportionate rise in council house rent subsidies represents part of the price of the `Social Contract' which is paid by all those who are not council tenants, including the 45 per cent of owner-occupiers whose average household income (according to the Family Expenditure Survey) is lower than that of 30 per cent of existing council tenants. People with incomes of more than £100 a week should certainly not receive large subsidies at the expense offamilies who are far worse off.

Rent subsidies on this scale do nothing to increase the housing stock. Apart from benefiting -on a completely arbitrary basis -those who are already well housed, and ensuring an uneconomic use of the existing council housing, the main effect of these subsidies is to increase unemployment by seriously impeding labour mobility.

The present Labour Government seem to have secretly accepted some of these arguments (despite their recent history of resisting fair rents to the point of bending the law) and to have recognised the need for cutting these subsidies. We shall support them in any steps they take along this road, and review the progress they have made towards fairness and sanity when we are returned to office.

Yet there is a fundamental difference of principle between Socialist housing policy and our own. Obviously we do not regard higher council house rents as being something good in themselves. But [p54 begins] without a fair and realistic distribution of housing costs there can be no real choice for very many people. For largely political reasons, Socialists actually want to limit choice, to keep thousands of families trapped (at great publIc cost) In what has been called 'the serfdom' of municipal estates. We offer the much more attractive prospect of a choice -a free choice between ownership and a less restrictive kind of tenancy.

A tenants' charter

In many areas councils have imposed absurdly detailed restrictions on what their tenants can do at home. It is made plain to them that their home is not their own, but the council's. They are told whether or not they can keep a budgerigar; deterred from painting the back door; stopped from putting flower pots on the window sill. This is treating adults as though they were children. A model tenants' charter should be issued by the Government defining the responsibility of local authorities to their tenants, and setting out the freedoms that tenants can reasonably expect. We also think that tenants' cooperatives and management schemes should be encouraged.

Housing associations (for instance those for students) playa most valuable role and their existing programme should be maintained so far as economic circumstances permit. But we think that most housing association activity should be directed to the areas of housing stress and special need; that the present methods of financing associations should be reviewed; and that they should be encouraged to sell homes to those tenants who want and are able to buy.

The privately rented sector

The number of privately rented houses has fallen as a percentage oj the number of houses in the country from 90 per cent in 1900 to about 12 per cent today. This decline is partly the result of the rise of the building societies and the spread of owner-occupation. But it has been sharply increased by loud and persistent Socialist threats. Rent controls made residential accommodation a poor investment corn. pared with the alternatives; and security of tenure severely dis. couraged the smaller landlord from letting. The quality of these houses has declined with their numbers, again mainly because rent controls have not made it worthwhile either to keep existing investments in decent repair or to build for letting.

[p55 begins]

We shall try to halt this decline so that more homes are available. But the longer-term possibility of attracting new investment into privately rented housing must depend on the success of our initial policy, and on the creation of a climate in which private renting is once more seen as sensible and acceptable.

We accept that security of tenure cannot generally be abolished. On the other hand, an owner of property should be able to regain what is his when it is fair and right that he should have it. Too much protection of the tenant leads to hardship among the majority ofpoorer landlords, and can also make them vulnerable, frequently in their own homes, to unscrupulous tenants. So we propose a balanced approach in this sensitive field.

Shorthold tenure

In order to bring into use the large number of properties at present standing empty (especially in the big cities) and to encourage landlords to keep available for letting those properties which become vacant in the future, we think that a new system of shorthold tenure should be introduced. Under this, the tenant would have security during the period of the lease, but the landlord would be entitled to vacant possession at the end of it unless he only wanted to put in a different tenant. If he wished to remove a tenant for breaking a contractual obligation by not paying the rent, or damaging the property, he would be entitled under existing law to go to court to secure an eviction; and we would aim to ensure him speedier justice. A minimum period of lease would be necessary which would be extended if both parties agreed. The scheme would apply to both furnished and unfurnished accommodation and the rent would be fixed either by agreement or on application by either party to the Rent Officer with appeal to a Rent Assessment Committee or its successor.

A number of steps should be taken to encourage landlords to put property back on to the market; for example, student accommodation registered with an approved university or educational institution should be exempt from the security of tenure provisions of the Rent Acts, and flats which go with small shops should also be exempt. There are also some Capital Gains Tax anomalies which require review.

Above all, at the present time the level of rents in the private sector gives little return to the landlord on capital investment. We must ensure that a fair return is taken into account in fixing rents whilst at the same time trying to achieve a much greater take-up in rent allowances for poorer tenants.

[p56 begins]

If we are to make the best use of our existing stock, houses with a reasonable life expectancy should not be wantonly destroyed but renovated. To some extent the recent drop in the level of improvement grants reflects a redirection of resources to areas of greater need which Conservatives fully support and originally proposed. But there does seem to be evidence that the rateable value limits imposed on grants within the last two years have had a harmful effect. We pressed for the doubling of the limits for conversions (which has now been introduced), but we believe that urgent consideration should be given to increasing the limits for all grants. It is just as important to improve the existing stock of council housing .

The need to act soon

Restoring sense in housing will take time. But unless we make a start soon, the jungle of nonsense and unfairness will become impenetrable. We should aim to let people have what they most want, a home of their own; to cut subsidies that are not directed to social or financial need; and to make the greatest use of the homes that we have by ending the vendetta against private landlords.

[p57 begins]


CONSERVATIVES BELIEVE that it is people that matter, not sterile dogmas and 'social engineering'. We believe that the individual citizen should have more encouragement to provide for his own future, that it should always pay to work, that a sound family life lies at the heart of a healthy society, and that the welfare of the community depends upon the strong helping the weak.

Inflation is the greatest enemy of the weak. It leads to an increase in unemployment, which is still one of the main causes of social distress. Even when attempts are made to protect the weak, for example by raising benefits, they can only be partially successful. Inflation in Labour's first two years of office probably wiped £2,OOOm. off the value of the savings of retired people.

But the main reason why we have not done better in providing for the needy is that our economy has not grown as rapidly as that of other countries, where more successful, more profitable, and less hampered private enterprise systems have produced more resources for improving the real standards of community services.

The first need is therefore to curb inflation and help productive industry. There can be no major improvement in social benefits until Britain is paying her way in the world.

Social security

Our first priority must be to look after the retired, the disabled, the sick and the very poor.

This means that we must do our best to keep the purchasing power of pensions and other long-term benefits in line with prices. We must also do what we can to help people to go on living in their own homes as long as possible by the provision of home helps and other domi- [p58] ciliary services. We want to encourage local communities to become more involved in the care of those who, through age or infirmity, cannot always fend for themselves.

Future pensioners can look forward to benefiting progressively from the second pension under the scheme due to start in 1978. We have made it clear that we can accept the compromise reached last year. After the years of chop and change, it is important to have a period of stability. Nevertheless, we reserve the right to improve the contracting-out arrangements so that the terms enable the pensions industry to operate as effectively as it can.

While we welcome, and will implement, proposals of the Occupational Pensions Board to give pension scheme members a right to participate in the running of their schemes, we shall fight Labour's plan to give this right exclusively to trade unions.

We inflicted a defeat on the Government over the earnings rule, raising the amount which a retired person can earn, without any reduction in pension, to £35 a week in 1976-7 and to £50 a week in 1977-8. Abolition remains our ultimate aim, because we believe it is wrong to discourage those elderly men and women who wish to work.

Priority should continue to be given, when resources permit, to improving services to the disabled and the chronically sick. Families should be helped and encouraged to look after their own members.

It is in helping the poor that the social security system has gone most awry. We seem to have lost sight of the principle that it must always pay to work, with the result that many people are now better off on social security than working. For many more, the incentive to work is negligible. This is much more damaging to public morale and confidence, and much more harmful to the genuine poor, than the well publicised problem of social security abuse. Fraud and abuse can and should be rooted out, and we think there is a strong argument for increasing the numbers of 'fraud drives' and of special social security investigators. But a system which itself positively promotes unfairness raises more difficult problems.

Not the least disturbing of these problems has been the massive deepening of the 'poverty trap', and the gross unfairness to which this has led. Income tax now starts at such low levels of income, and at such a high basic rate, that the absurd situation has been reached of the poor who are working being taxed to pay for their own benefits. The tax threshold is now so low that a man with an income below the official poverty line (that is, below the long-term supplementary benefit entitlement) is actually paying tax. Since Labour came to office, approximately one million low-earners have been drawn into the income-tax net for the first time.

[p59 begins]

Thus, as a man's income rises, he not only loses the means-tested benefits, he comes into tax as well ; and the result can mean a marginal `tax rate' of seventy per cent, eighty per cent or even over one hundred per cent. Some families with several children have actually found themselves worse off as a result of having the £6 a week pay increase.

In the shorter term, this problem will only be solved by raising the tax threshold and reducing the basic rate of tax. There is also a strong case for taxing short-term benefits, as Labour originally intended thirty years ago.

Tax credits

In the longer term, this highly unsatisfactory situation should be progressively resolved by adoption of a tax credit scheme. This is the right way to give family support and it is also the most effective way out of the present tax and benefit trap. A scheme was originally put forward by the last Conservative government, and was examined by a Select Committee of the House of Commons. It is widely regarded as the greatest step forward in social security reform and provision for the poor since Beveridge. We are using our period in opposition to improve the scheme and to examine the possibilities of broadening it (for example, to cover the disabled) within the resources available.

The main advantages of going over to tax credits are that they ease the poverty trap, and provide the means for lifting over a million of the poor (including many retired people) out of their dependence on supplementary benefits. Tax credits would help to simplify our whole tax and welfare system, cutting through the thickets of means-tested benefits and reducing the cost of bureaucracy. They would help oneparent families and give all mothers a tax-free income as of right. They would restore the incentive to work by taxing all incomes, so that unemployment and other short-term benefits would be taxed just as pensions are today.

The Labour Party have just thrown away a chance to move decisively in this direction. They have abandoned the Child Benefit Scheme (Child Benefit was simply another name for part of the Conservative tax credit proposals) in favour of a feeble extension of family allowances which gives far less help to the really poor and does nothing to ease the poverty trap or to restore the incentive to work.

Labour have also discriminated against the self-employed for whom social security arrangements, in respect of both contributions paid and benefits received, are thoroughly unsatisfactory. We intend, as resources permit, to do everything possible to meet the legitimate [p60 begins] grievances of self-employed people in all sectors of the community. Their contribution to the economy is invaluable and their independence is essential to a balanced society.

The National Health Service

The Health Service is the largest single employer in the country and one of the biggest spenders. But the demands on the service have risen even faster than the increase in resources devoted to it. The advance in medical techniques, the rise in the number of elderly people in need of hospital attention, and what has been called the 'infinity of demand , for medical care have together put an immense strain on the service. A great deal of devoted work is done every day by the medical professions and others working in the Health Service, but they have to work under increasingly difficult conditions and morale has been shaken by the divisive actions of a doctrinaire Labour Government.

When the service is short of funds for priority tasks, there is no case for holding down prescription and other charges. More important, we should encourage rather than deter private provision. Increasing numbers of people have shown that they are ready to provide more for themselves; private medical insurance has doubled and redoubled over the last twenty years. It will be our aim to encourage this trend, and in particular to reverse the run-down in NHS pay beds. There is a strong argument for seeing that pay bed revenue goes directly to the hospital concerned, where it can be spent on identifiable items of equipment.

We see no reason for quantitative controls over the development of the private sector outside the NHS. We are examining ways of providing greater financial incentives to employer-employee medical insurance schemes, for example by restoring income-tax relief. The Royal Commission on the Health Service should be looking at other ways of increasing the funds available to the service, including systems of health finance that exist in other countries.

When the statutory services are under strain, it is more important than ever that the voluntary services should continue and expand their excellent work. They add an important additional dimension to social provision. The last Conservative government sought to encourage voluntary effort and even more must be done in this direction.

[p61 begins]


WHILE CONSERVATIVES have made the raising of educational standards and the extension of parental influence and choice their first priorities, Socialists have been increasingly preoccupied with the structure of education; with organising schools and class-rooms to produce children who are `equal', almost regardless of educational attainment. It is not surprising that this has been accompanied by increasing parental concern about what is actually taught and achieved inside the classrooms.

Parents are worried about the moral values taught in our schools ; about the decline of religious education; about their lack of influence and choice; about the imposition of one form of secondary education ; about the levelling down of standards; about the lack of discipline at many schools. They are concerned that their children's rights to literacy, to numeracy, and to a sound start in life should be recognised and implemented within the education system. Parental concern is not confined to one part of the country, or to particular income groups. It is widespread.

The purpose of Socialist educational policy has been to promote equality. Yet how widely does Socialist educational policy spread opportunity? How is the clever child from a disadvantaged background helped by the removal of the ladders of opportunity?

Standards, choice and resources

The Conservative Party is determined to raise standards and to extend parental influence and freedom of choice within the maintained system. We believe that it is possible to raise standards even though education will have to bear its share of the sacrifices essential to economic recovery. The Labour government, in sharp contrast to the [p62 begins] irresponsible promises they made in opposition, have already cut future education spending plans.

The recent publication of the report by Dr Neville Bennett of Lancaster University, and the earlier, shorter report from Keele University, on teaching methods have underlined the common-sense conclusions which Conservatives have spelt out again and again on educational standards. What is now needed is a sustained programme to bring about improvements. National standards in reading, writing and mathematics must be reintroduced and the performance of schools in meeting these standards monitored. In England and Wales, strengthening the Assessment of Performance Unit at the Department of Education would help to achieve this objective. The Unit would work closely with HM Inspectors who have a crucial role in ensuring the efficiency of individual schools. In Scotland, the role would be undertaken best by the Scottish Inspectorate in conjunction with the regional education advisers and the Secretary of State's consultative committee on the curriculum.


As the Lancaster University report confirmed, the standard of education depends largely on the quality of teaching. There should be more emphasis in teacher training courses on how to maintain discipline in the classroom and how to organise curricula. The profession's career structure should reflect, so far as possible, the importance of good teachers staying in the classroom rather than becoming administrators.

If teachers are to have any chance of maintaining discipline in schools, they need not only to be given some practical training, but, more important, to know they will have the support of the community when they are attempting to maintain order. They should be given clear guidelines so that they know by whom and on what occasions discipline may be enforced.

A Parents' Charter

Just as import, ant is the closer involvement of parents and the loc, al community in the life of, every school. We have drawn up a Parents' Charter setting out existing and additional rights for parents regarding the education of their children. Clear obligations should be imposed on government and local authorities to take account of the [p63 begins] wishes of parents. We are considering establishing a local appeal system for parents dissatisfied with the allotment of schools. To help parents make their choice of school, schools should be required to publish simple prospectuses with an annual report explaining the school's educational aims and achievements and the curriculum. Parents should have a right to sit on governing bodies, whose powers should be reviewed.

The introduction of education vouchers has been widely canvassed as a way of extending parental influence and choice but remains a matter of controversy. The whole subject needs a thorough enquiry and it would be helpful if local education authorities were to initiate a limited number of experiments.

But when all is said and done, the raising of standards remains the first priority. If there were more good schools and fewer bad ones, the frustrations arising from limited choice would be greatly reduced.


At the foot of the education ladder, the fall in the birth rate is bound to affect planning for nursery and primary schools. Expenditure cuts have already hit the previously planned targets for nursery education. It would be more sensible, and certainly more flexible, if local education authorities themselves had more choice about how to allocate resources between primary and nursery provision. In deprived areas, the Government will still want to give special assistance to nursery schools. The development of the play groups movement should be encouraged; play groups perform a valuable social as well as educational role.

We want, as will have been noted, to restore the balance between local and central government, on which our education system has rested for many years. For their part, the Labour Government have set out to weaken this relationship by attempting to impose comprehensive education on local authorities in England and Wales regardless of their wishes. This legislation should be scrapped.

We are determined to raise standards in comprehensive schools in which so many of our children are now educated. An impartial enquiry into their achievements and shortcomings is urgently needed. Amongst subjects which should be investigated are the size of school, the place of streaming and setting, and the role of sixth form colleges.

We have also pledged ourselves to restore direct grant status to the 170 schools in England and Wales which have had this taken away from them by the present Labour government. In Scotland, we will [p64 begins] restore the full value of the grant (which is being phased out by the Government) to the 26 grant-aided secondary schools. The direct grant and grant-aided lists should be re-opened so as to re-establish these schools which raise educational standards and broaden educational opportunity. A complete system of assisted places might usefully be introduced to be operated by both central and local government. The new status should be based on statute and open to voluntary aided, county and independent schools which wish to apply.

A matter which affects all children regardless of their school is the leaving age. There is still too large a group of senior pupils who throughout the school year are educationally uninterested or positively hostile to schooling, and feel they could be doing more productive things. We think that head teachers should be able to allow selected pupils, with the consent of their parents, to leave school early, for example when they are going into an apprenticeship or a further education course.

Examinations, and in particular external examinations, provide, in the words of the late Lord Crowther, a means `of showing pupils where they stand, of providing them with an incentive to continue, and of raising habits of work and standards of attainment'. We are sceptical about the arguments of the Schools Council for changing end-of-school examinations in England and Wales and believe that there must be further research before changes are introduced. Both the bright and the less academically able child should be catered for and we do not believe it is possible to do this by means of the single examination which has been proposed. An objective method of assessment is vital if confidence in the examination system is to be maintained.

Further and higher education

In post-school education we want to increase flexibility, retain diversity, encourage the economical use of resources and make it easier for students to transfer between different levels of institution and between different courses. Universities constitute the crown of the higher education system and their independence should continue to be guaranteed by the instrument of the University Grants Committee. Polytechnics too have become national institutions and their method of financing might well be reviewed. The opportunities in further education should be made better known to young people during their last year at school, and its resources more fully utilised in the tasks of re-learning and re-training.

[p65 begins]

The arts

The arts in Britain have provided us with some of our greatest postwar successes. But inflation and Socialism threaten them with a bleak future. Production costs have risen. Resources for both private and public patronage have been squeezed, raising more questions about priorities and about the criteria by which subsidies are allocated. The Capital Transfer Tax could seriously erode our national heritage of buildings, landscape and works of art.

We intend to publish a discussion paper on the problems facing all the arts, with a view to establishing a sensible framework for finance, training, and co-operation between public and private bodies. We re-affirm our commitment to the principle of establishing a public lending right for authors.

Excellence and opportunity

Socialists have sacrificed standards in chasing after equality. The aim of our education policy would be to restore the balance between the pursuit of excellence and the widening of opportunity. At a time when the education service is having to accustom itself to a cooler financial climate than it has known for many years, it should still be possible - given a rigorous concentration on priorities - to attain both these objectives.

[p66 begins]


THE CONSERVATIVE PARTY has always been outward-looking, while concerned with the security, the economic interests and the honour of Britain. The deplorable economic weakness of the country should not persuade us to turn our backs on this tradition. Despite our relative (and, we hope, temporary) impoverishment, we still carry considerable diplomatic strength, based on our history and experience and on the feeling the world still has that we shall pull ourselves together when it really matters.

Labour's failures

There is a tradition in our political life of bipartisanship in foreign affairs. This has been our approach under the present government. Nevertheless, it is right to criticise their bungling and their failures of will and initiative in foreign affairs, and their irresponsibility in matters affecting the security of the nation.

Of course they have been hampered by the performance of the economy under their direction; debtors are never in the strongest position to have their voices heard and their opinions respected. Even with this handicap they could have tried more and achieved more. It has sometimes seemed that their most vigorous activity has been striking poses about events in other countries which are disliked by their most militant supporters. This has frequently laid them open to fair criticism that they apply double standards in these matters.

The Government have been especially reprehensible in failing to exercise the influence which we have - or should have - in the European Community. Much of the Labour Party is still opposed to our membership of the Community; and when the Government is not paralysed by these internal differences, it all too often attempts - as [p67 begins] over the energy conference - to make empty gestures to satisfy its Socialist critics at home. This approach does not help the Community, and it does not help Britain.


The first priority of any government should be to defend its citizens from external threat or actual aggression. Labour's foreign and defence spokesmen concede that Communist pressure on the West has been building up at an alarming rate, that there is no sign of any halt in the arms race, and that in particular the Soviet Navy has been considerably expanded. Therefore, it is impossible to understand how they can think it right to cut the national resources devoted to our own security. It is not difficult to ima~gine how worried they would be if the United States government took the same attitude to defence. Yet the Americans do not get much encouragement to continue to underwrite Europe's security from the policies of the present British government.

It is our repeatedly stressed intention to strengthen Britain's defences. It would be irresponsible, and anyway impossible, to say by precisely how much we shall do this, and precisely how much it will cost. We do not have the advice which is available in government from professional advisers; we do not know what the world situation - or the domestic economic situation - will be when we come to office ; and before acting we should want to consult our allies. But our objective is clear. While we shall seek value for money in defence expenditure as elsewhere, we will not hesitate to spend what is necessary on our armed forces even while we are cutting public spending on other things.

The European Community

As NATO provides the framework within which we plan and implement our defence policies, so the European Community provides the framework not only for many of our domestic policies but also increasingly for the development of our foreign policies. For the last fifteen years, the Conservative Party has consistently believed that the best hope for Britain lay in membership of a free, strong and democratic European Community. In both government and opposition we have fought successfully to bring Britain within the European fold and, when that membership was threatened, to keep her there. But [p68 begins] recently it has sometimes appeared that our place in the Community, and the potential for Community action in areas like international economic affairs, is better understood by the governments from outside Europe with which we deal (including Commonwealth governments) than it is by this country. We forget the opportunities within the Community and seem obsessed with the difficulties it faces.

Analysis of the Community's difficulties has gone hand-in-hand with consideration of its political future. Our view is that those who want it to succeed would do well to concentrate on what is practical and what is attainable. But, while it is not sensible to set Utopian and unreal targets, we do need to recognise that there are many problems, beyond the range of national governments, which can be best dealt with on a European level.

Direct elections

The move to direct rather than indirect elections to the European Parliament should help this process. We hope that these elections will now be held in 1978. A directly elected European Parliament will provide the front line of democratic control over the Commission and the Council of Ministers, both in combination with the United Kingdom Parliament (where effectiveness in dealing with EEC matters needs to be improved) and in areas where the European Parliament has its own powers, for example over questioning Commissioners and controlling the Commission budget.

An effective Centre-Right alliance

As Mrs Thatcher has pointed out, the prospect of direct elections makes the creation of a working alliance of Centre and Right democratic parties in Europe a matter of urgency. For many years now, socialist parties have worked together in the Socialist International. Of course they have had many arguments, which continue today. But at least they have a framework of co-operation which enables them to meet and act together. The parties of the Centre and Right have found themselves hampered in their dealings with each other by many myths and misunderstandings. In particular, there have been obstacles in the way of co-operation between parties calling themselves `Conservative' and parties calling themselves `Christian Democrat'.

A fresh effort is required, since it would obviously be unwise for the Centre and Right parties inside the Community to fight direct [p69 begins] elections to the European Parliament as fragmented groups in opposition to a coherent socialist movement.

Equally, when we look beyond the boundaries of the Community we see a new European dimension taking shape in political life. The parties of the Centre and Right must work together, for example to encourage the new parties and groups in Portugal and Spain which share our ideas and are painfully struggling to build parliamentary democracy in those countries.

The parties of the Centre and Right, including our Conservative Party, are therefore intensifying their efforts to come together. The Christian Democrats inside the Community announced recently the formation of a new European People's Party. At the same time we have been holding discussions with a number of important Christian Democrat and Conservative parties inside and outside the Community, in order to form a working alliance. We are not aiming at a single monolithic party, but at an alliance of autonomous parties co-operating for a common cause. There is no conflict between these two parallel negotiations -indeed they complement each other .

It should be an advantage to bring together parties from outside the Community as well as inside. After all, we should look in the future to the enlargement of the Community to all those democratic European states which are able and willing to join.

Regional balances

The Soviet Union, partly through the expansion of its maritime power, has sought to achieve a position in which it could threaten to cut off the supplies of raw materials on which the West depends. As the Americans have already pointed out, threats of this nature cannot be held in check by the strategic power balance alone. There is an urgent need for complementary regional balances which, as events in Angola showed only too clearly, are at present often missing. Europe, through NATO and the European Community, should be able to help the United States in achieving this objective and safe-guarding our mutual interests, but in order to do so the Community will have to speak with one voice much more often than it has in the past. A more constructive and co-ordinated Community role might be welcome in many parts of the world, for example in the Middle East and in the Far East and Indian Ocean area.

In Southern Africa, and particularly over Rhodesia, Britain will continue, because of our history, to have the leading interest, though concerted action by the Community could be helpful towards a settlement [p70 begins] of the problems of this region. Our own policy on Rhodesia, while recognising the reality of ultimate majority rule, should be to try to help in achieving agreement on a transitional period, and in ensuring arrangements for such a transition in which all communities can have genuine confidence.

An economic partnership

A partnership between developed and less developed countries will depend on the future course of the world economy and on the opportunities for the poorer countries to benefit from the recovery of trade. Trade will provide the engine of development for these countries but they will also need more stable earnings for commodity exports and greater access to Western markets for their processed and manufactured goods, enabling them to diversify their economies. For the trade and commercial aspects of a new deal, the Lome Convention -the multilateral arrangement between the Community and 46 of the less developed countries -provides the model on which we should build.

We should try to persuade the members of the Community to direct a growing proportion of their aid through Community channels. The Nine can achieve far more together than on an individual basis. A joint effort would also help to make the rest of the world more aware of the Community's potential as a source of economic power and political influence.

[p71 begins]


WE HAVE SET OUT in this document our analysis of the problems facing Britain, some of the existing options, and our own Conservative aims for the rest of this decade and beyond. We have not offered extravagant promises, or doctrinaire and simplistic solutions.

In our economy, and in every area of policy and public administration, we want to re-establish balance and common sense; this may seem a prosaic objective, but in Britain today it is essential.

Our policies are designed to restore and defend individual freedom and responsibility. We mean to protect the individual from excessive interference by the State or by organisations licensed by the State, to stop the drift of power away from the people and their democratic institutions, and to give them more power as citizens, as owners and as consumers. We shall do this by better financial management, by reducing the proportion of the nation' s wealth consumed by the State, by steadily easing the burden of Britain's debts, by lowering taxes when we can, by encouraging home ownership, by taking the first steps towards making this country a nation of worker owners, by giving parents a greater say in the better education of their children.

Conservatives do not believe that they have a monopoly of the truth. But we do believe that the approach we outline today is the right one for this country, in tune with the instincts and views of the overwhelming majority of our fellow-citizens. There has seldom been a time when our party has had a greater opportunity to recruit the intellectual and political support of the nation. There has never been a time when the nation needed the Conservative Party more.