By: Elliot Keck, head of campaigns
During the Conservative leadership campaign Kemi Badenoch conspicuously avoided proposing any major policies that she would pursue were she to win. Instead she would govern from “first principles.” It was a successful strategy: she won, after all. There was also genuine wisdom in the approach. She was not running to be prime minister, it’s years until an election and besides, the public aren’t listening. We saw under the last government a scattergun approach to policy which continuously tried to capture the zeitgeist, instead of focusing on what would make the country a more prosperous, harmonious place to live
That’s why we ended up with rising crime, a broken prisons system, a record high tax burden, stingy defence spending, sluggish growth and failing public services. What seemed fashionable at the time ended up doing huge damage in the longer term.
But now she is in position the policies will have to come. Not now, and not even in the next year or two necessarily, but that election will arrive faster than you think.
Given that, we at the TPA have a selection of five policies we think Badenoch should start considering.
Policy one: abolish stamp duty
This is a policy put forward by her fellow leadership contender, James Cleverly, during his campaign. There really are only upsides to this one and it’s frankly mad that the Labour government aren’t doing it themselves. Doing it for residential properties would only sacrifice £9 billion in revenues, and modelling of the dynamic effects of scrapping this tax invariably shows that the boost to growth would make up much of this. It’s one of the easiest, most politically palatable ways to ease the housing market. It doesn’t itself lead to a single additional house, meaning no angry local residents to contend with. What it does do is lead to a far more efficient allocation of existing housing.
Just imagine a retired couple living in a four-bedroom house. Their children are adults and have moved out. They’d like to downsize, maybe to a bungalow, or a flat. But stamp duty adds an unacceptable cost to the moving process that they have to pay up front. They remain in that house, meaning the young family with three children can’t move into it.
Policy two: reform public sector pensions
Public sector pensions are a significant day to day cost to taxpayers, and are a ticking time bomb for the Treasury. The total public sector pensions liability, i.e. the total amount that will be owed at present, is £2.9 trillion. That’s larger than the UK economy. Now you’d think that this wouldn’t be a concern, because after all, there must be a big pot of money that this can be paid out of, made up from the employer and employee contributions. But you’d be wrong.
There are two types of pensions, effectively. Defined benefit pensions and defined contribution pensions. In the former, you and your employer both make contributions. But what you actually receive when you retire is based on how long you’ve worked at the company, and your average, or final, salary. If the contributions made aren’t enough to cover the pension, they are topped up. In the case of defined contribution pensions, your pension is based solely on how much you and your employer have contributed, and how well those contributions have performed as investments.
Public sector pensions are all defined benefit, i.e. gold-plated, pensions. But it’s worse than that. They are unfunded. The contributions made aren’t put in a fund and then invested, with any shortfall being made up by the Treasury. They simply go straight into the general fund.
Ideally, all new public sector workers would move to a defined contribution scheme. And existing ones would move onto one after a certain period of time. This may not be politically feasible for the moment. At the very least, though, public sector pensions should become funded, even if they remain as defined benefit schemes.
Policy three: unfreeze tax thresholds
Rachel Reeves pulled a rabbit out of the hat on budget day when she announced tax thresholds would be unfrozen when the current freeze ends in 2028-29. Look into the detail, though and this is a rabbit on life support. 2028-29 could be after the next election, or just before, meaning this looks at best like a pre-election giveaway and at worst, a pledge that she may never need to act on.
Badenoch should promise to unfreeze the thresholds permanently as soon as she gets into office, and ideally raise the 40p rate significantly.
Policy four: abandon the generational smoking ban
Badenoch deserves praise for her principled stand on this awful policy, as she was the only cabinet member to vote against it when Sunak proposed it earlier this year. She has since described it as the “least conservative policy of the last Conservative government.”
In what would be an easy win that would massively benefit the Treasury (given the enormous amounts of tax that smokers pay), she should promise to scrap the ban on day one. She should also freeze tobacco duty, to close the gap between the costs on the legal market and the black market.
Policy five: end taxpayer funding of Stonewall
The last government made a start on this, by ending Whitehall funding of Stonewall. Yet there are still dozens of public bodies pumping money into this highly controversial charity. TPA research found that in 2022-23 more than £1.1 million was handed out to the group. This includes NHS trusts, the devolved administrations, and quangos. Still much work to be done.