The “sea-change in Britain’s political economy” attempted during eleven years of Thatcher government duly witnessed fiscal conservatism. Public spending shrunk from 41% of GDP in 1979-80 to 34.7% in 1989-90.
By 2006, new party leader David Cameron was seeking to define modern, compassionate conservatism. Thanks to the “Thatcher revolution”, he posited, the Conservatives had won the battle of ideas in British politics. The common ground had become the new centre ground.
The proof of that ideological victory was none other than Tony Blair, who had moved his party from the left to the centre and won an election as a result. But, Cameron highlighted, this left the Conservatives moving to the right and allowed Blair to redefine the common ground as “social justice and economic efficiency”.
Therefore, the Conservatives must change to win. They had to fight for the centre ground or risk “irrelevance, defeat and failure”.
Cameron’s ‘new culture of thrift’
Consequently, Cameron initially signed up to New Labour’s fiscal plans for public spending and borrowing. However, when the onset of the 2007-8 financial crisis drove the United Kingdom economy into recession, Cameron abandoned his shadowing of Labour’s fiscal plans.
Cameron told his party “the age of irresponsibility is giving way to the age of austerity”. He argued that a complete change of direction was needed.
This would entail a return to fiscal conservatism – “delivering more with less” – and “a new culture of thrift in government”. The goal was a fiscal tightening equivalent to 6.3% of GDP by 2014-15 to eliminate the budget “deficit” inherited from Labour.
But this was never achieved. Instead, the Conservative/Liberal Democrat coalition’s “unavoidable deficit reduction plan”, which was meant to last for a single parliamentary term, evolved into a “long-term economic plan”.
The coalition’s age of austerity was prolonged by the government of Theresa May so that, in the end, it lasted a decade. She aimed to deliver a total fiscal consolidation of 8.8% of GDP by 2018-19, 82% of which was achieved by cuts in public spending.