In this month's Prospect: a new politics

The Conservatives have learned some of the lessons of the 2008 crash. Labour, judging by its leadership campaign, has not yet. As Anatole Kaletsky argues, it is striking how much George Osborne’s Budget on 8th July changed the principles on which his party intends to govern—and rejected Thatcherism in favour of an embrace of government’s power to shape people’s lives. It was much heralded as “the first Tory Budget in 18 years;” many predicted a return to the small-state, low-tax ideology of Margaret Thatcher and Nigel Lawson. Far from it. In setting his sights on Britain’s stubbornly low productivity, he is tackling what Prospect has called the UK’s biggest economic problem. Investment in infrastructure and education is part of the answer, but the well-meant pronouncements of many governments are evidence that neither is easy. In setting out to create three million apprenticeships, however, Osborne began to do something about technical education and practical ways of getting people into work. That, too, was the thrust of the tax, welfare and living wage announcements.

The transition will be painful for more people more quickly than necessary; Osborne was right to move back the target of reaching surplus—but his fixation on that still takes too little account of how cheap borrowing remains. And there was plenty in the plans for both right and left to dislike. All the same, this was an ambitious attempt to increase the incentives to work. The measures on devolution to cities (which we have welcomed in our Blueprint for Britain series), and investment in northern transport, extend some of his more imaginative (albeit cheaper) initiatives of the first term.

All of this shows that the Tories have learned some lessons from 2008: that the market does not deliver perfect solutions all the time, and that the financial sector is not an example of a perfectly working market, either. This is a long way from Thatcher. In contrast, Labour looks lost, as John Harris writes. It is struggling to work out what parts of markets it should embrace, in order to work out how it wants to regulate them. The lessons it needs to learn, about how the digital revolution has reshaped politics as well as the world of work, are bigger than the choice of any one leader. As he argues, though, at this point Liz Kendall appears closest to putting words to the problem.