Conservative economic thinking has just taken a great leap forward

Britain’s economic torpor is not inevitable, but the painful consequence of decisions we have made

Received wisdom says it should not be like this. France, with its strikes, crazy labour laws and taxes, is as rich per capita as Britain, with our restrictive union laws, flexible labour markets and – relatively speaking – lower taxes. So why are the French, who break every rule in our Treasury’s book, more productive than we are? Why, if they worked the hours we do, would they be richer than us?
The explanation is given in a report just published by three thinkers on the centre-Right. Ben Southwood, Samuel Hughes and Sam Bowman argue that France is prosperous because it succeeds where we fail: building housing, infrastructure and energy supply.
It is not often that a document of this kind cuts through in Westminster, but after its launch a consensus grew. From the deepest thinkers to the weather vanes who move with the moment, all agreed that Foundations was vital reading.For some time now thoughtful Conservatives have discussed the need for a project like that pursued by Keith Joseph, Alfred Sherman, John Hoskyns and others in the 1970s. The Thatcher governments owed much to those years of intellectual graft and practical planning. Perhaps this – and papers that follow – could be our Stepping Stones, the 1977 document that planned to face down the unions, reform taxes and free the economy. 
Of course the comparison is limited. Foundations is a public document, making an opening argument, and seeks to persuade, while Stepping Stones was an internal memo setting out a plan of action. But Conservatives seek clarity of purpose. Southwood, Hughes and Bowman say we can return to growth and prosperity if we build again: housing, infrastructure and energy.
The central diagnosis is that we need supply side reforms to get these things built. Without these reforms, our investment in infrastructure will continue to be insufficient, leaving us with high energy costs, workers disconnected, and our most productive cities unable to expand. The evidence it provides is relentless.
In the decade and a half before Russia’s invasion of Ukraine, our industrial energy prices tripled. We generate less electricity per capita than rich industrial countries like Germany and Japan, resembling instead developing countries like Brazil and South Africa. We last built a nuclear power plant between 1987 and 1995, and Hinkley Point – a cash machine for the French and Chinese firms awarded the contract – is four times more expensive than the plant built by KEPCO, a South Korean company, in Czechia.
Each mile of HS2 costs us £396 million, more than eight times the cost of the high speed line between Tours and Bordeaux in France. With no third runway at Heathrow built in the decades we have known it was necessary, annual flight numbers have remained flat, while rival airports in Europe have expanded. The application process for a new tunnel under the Thames connecting Kent and Essex has already cost £297 million – more than twice as much as it cost to build the world’s longest road tunnel in Norway.
The causes of these costs and blockages are regulation and bureaucracy, excessive rounds of consultation, and the armies of lawyers, consultants, lobbyists and PR firms needed to navigate local councils and administrative law. And what is true for infrastructure is as true for our dysfunctional housing sector, which Foundations calls “the largest cause of British stagnation”. While Brits could once move to where the jobs and opportunities were, now this flexibility is impossible. There are no incentives for local communities and councils to accept new development – only cost.
Strikingly, for the authors are not considered to be interventionists, the report argues that “there are good reasons to want the UK to have a large, productive industrial base”. This is a welcome development, and reflects the central argument of A Conservative Economy, which Gavin Rice and I co-authored earlier this year, and which made the case for reindustrialisation and the reduction of Britain’s trade deficit. As Foundations rightly argues, “any industrial strategy aimed at doing this must first reckon with the enormous rises in energy prices for UK businesses since the mid-2000s.”
Of course, the nature and extent of any industrial strategy implemented by Conservatives is open to debate. Nobody on the centre-Right wants to see the kind of corporatism advanced by Labour – with unions and big business determining policy through a statutory industrial strategy council – but how far from their ideological comfort zone many on the centre-Right are prepared to go is a live question. 
Foundations repeatedly cites 2008 as an economic turning point, when Britain started to under-perform other rich economies in productivity, competitiveness and wages. This is correct, but the under-investment the authors cite was not only caused by specific tax rules and supply-side costs, but the broader fiscal and monetary policies – and hands-off approach to mergers and acquisitions – that discouraged it.
Similarly, British energy prices have not only risen because of building costs, but because of choices. As the report acknowledges, renewable energy sources are intermittent and expensive, and climate policies have deliberately layered costs onto households and industry. And countries like France have advantages over Britain, such as its superior health service. Perhaps French interventionism is a cause of its success with infrastructure and industry, not a drag. 
And of course since 2008, other challenges have emerged. The world economy has become more dysfunctional as China has grown more powerful, and subsidies, tariffs and other barriers to trade have grown more contentious. 
How the centre-Right deals with these challenges – from keeping life sciences in Britain to stopping Chinese EVs destroying Western car manufacturing – all while seeking to reindustrialise and rebalance our economy, will determine what kind of country we will be in the decades to come. For now, Foundations has taken conservative economic thinking several steps forward, and reminded us that decline is not inevitable. Our prosperity depends on our own decisions.