The Royal Mail privatisation has been a resounding success: shares were priced at the top range of 330p and are now trading at 440p. The 99.7 per cent of Royal Mail staff who took shares have today seen the value of their stake jump by a third. Ditto the 15,000 Royal Mail middle managers who applied for a medium-term share programme and will keep the stake for three years. For once, I disagree with Spectator associate editor Allister Heath: he’s appalled that the government denied any shares to those who asked for £10,000 or more so all of those who applied for £750 could be satisfied. I’m delighted, and say in my Daily Telegraph column today that it represents the triumphant return of popular capitalism. It’s no accident that this has been overseen by Michael Fallon, a Tory radical who has been making the case for popular capitalism since Jim Callaghan was in power.
A trend can be seen. Wherever David Cameron is bold, it works. Welfare reform is the toughest thing his government has done: polls show it’s also the most popular and supported by Labour voters by a margin of 2:1. School reform is also radical, also highly successful: the free schools are massively oversubscribed and the programme can survive the inevitable failures like the Muslim school shut down in Bradford. Osborne has cut taxes (a tiny bit) for the low-paid but seen a huge response: more people are in work now than ever before. He has cut corporation tax, and revenues have jumped. He has lowered the 50p tax making it a 45p tax, and revenues from the best-paid 1 per cent have jumped to an all-time high. Yet still, Cameron and Osborne seem cagey, reluctant to move faster. It’s as if they believe the failed Labour orthodoxy that cuts hurt services, and lower tax rates always mean lower yields. Cameron was talking about Marx in PMQs on Wednesday and one quote did spring to mind:
‘Who are you going to believe? Me, or your own eyes?’
This is what the ghost of Keynes is saying to Cameron. He needs consider the evidence of his own time in office: conservatism actually works. And radical conservatism works best of all.
And bad capitalism? George Osborne, still half under Gordon Brown’s spell, is giving us all too much of that. He has suspended not only deficit reduction but cuts in total state spending: it’s now falling by 0.5 per cent a year, which is comfortably within the margin of error. But worst of all is his Help to Buy mortgage subsidy scheme, which is assembling an unexploded bomb under the property market. Inflating the property market is always a tempting option for a short-termist Chancellor: higher prices mean consumers feel richer, are more likely to borrow (and re-elect the incumbent government) while pushing people over stamp duty thresholds (revenue from this pernicious tax is up by a third).
A Bloomberg poll today shows that two-third of the 32 economists questioned think it’s dangerous. That’s because we saw, in America, what happens when politicians manipulate the property market – and these economists think it’s madness to artificially inflate the economy by hawking dangerously underpriced loans. Osborne boasts about cutting taxes for 24 million people, but he doesn’t say the amount is £1.40 a week – a sum easily eaten up by the inflation he tolerates. He should look at what he has done right in the last three years, and do more of it.
He’ll have a Autumn Statement soon, and will count the cost of losing Britain’s AAA credit rating (about £8 billion in extra debt interest) but he’ll also have extra cash from the rebounding economy that has meant tax revenues are twice what was expected. Last month, Sweden’s conservative finance minister announced his fifth round of tax cuts: that’s what I call a stimulus. Osborne should follow suit. The trajectory of the recovery and various government reforms are distinguishing bad capitalism from good capitalism. For the sake of the country and his own reputation, Osborne needs to do much more of the latter. The Royal Mail selloff shows that, done properly, capitalism is wildly popular. More, please.
Update: And here’s some of Groucho’s manifesto from Duck Soup:-