Community Conservatism, Tom Tugendhat’s speech to the Social Market Foundation
This is the text of the speech as it was written, not as it was delivered. For the delivered version, see this video
What brought me into politics?
Everyone comes into politics for different reasons and it is always tempting to try to second guess them.
Before I entered parliament, I was a soldier. I was part of the army that invaded Iraq in 2003 and later Helmand in 2006. You might rightly assume from that, that I was always interested in foreign affairs and defence.
And you would be right.
But the reason I wanted to have a voice in our national debates was not because of what fighting taught me about other countries, but what serving alongside men and women from across our community taught me about our own country.
That insight into communities from across our nation was what propelled me into politics. And it still drives me every day.
It made it clear to me that my first duty, is to serve the people of the United Kingdom.
My epiphany: Iraq 2003
This awakening came in Iraq in 2003. Not in the aftermath when sectarian conflict destroyed the nation, but on that first morning.
We had crossed the border in the cover of darkness, and were now doing what the military call laying up – waiting in a wadi – a dry river bed – to see if we had been spotted.
This was my first experience of war: that quiet fear that grips you as you wait to see what the day will bring.
I was with a sergeant who had served for many years. Whose life had been nothing like mine. As you do in those situations, we chatted. Quietly whispering our life stories, wondering if it was the last time we would ever tell them, and making jokes to pass the time.
Over the coming weeks and months we came to know each other very well. I learnt about him, and his past. I learnt about his childhood and his family. I even learnt things his wife didn’t know, like how many children he has.
But mostly I learnt about the struggles he had been through to achieve so much and become a senior, respected sergeant in the Royal Marines.
What I learnt there, with these men, opened my eyes to see our community in a new light. Deep in enemy territory, I learned about my home, our country.
That was what marked me most.
Over the weeks of that conflict and later operations around the world I learned about the unfairness that can shape lives and action. I met incredibly courageous men and women who had risked everything on the battlefield but overcome much more at home. I saw our country in a new light. And I saw my duty differently.
That’s what jolted me out of the life I had lived before.
I realised that the comfort of a loving family, a strong community and economic security – the three great advantages I had been blessed with – were all too rare. I realised it was my duty to help shape our politics to deliver these more widely across our community.
That’s why I ran for Parliament. Not for an ideology … or a faith … But to promote the interests of all of us in the United Kingdom.
That’s why I have been taking a hard look at what we’re really dealing with today.
Four problem areas
I can broadly divide these into four areas – pay, services, investment, and ownership.
Wages
For those of you who read the website Unherd you will probably have seen the recent an article there by Peter Franklin about what people earn. It outlines some of the issues about pay in recent years and talks about wage inflation.
In short: there hasn’t been much.
If you look at the statistics for the past decade, pay has barely risen. We’re beginning to see a move now, but the rate of increase is still slower than it was 15 years ago. We have to ask ourselves – why? This doesn’t seem right.
Employment is at record levels – and unemployment at historic lows. The economy is doing well, and tax receipts are up. So why aren’t wages following?
Migration must be A factor. The ability to bring in people from outside to work will change the bargaining power of those already employed. But when factored against the record employment levels or number of businesses looking for workers, that can’t explain everything.
Perhaps it’s a lack of organised labour, right? Wrong. Union membership has made no statistical difference to wage growth over the past decade.
In truth, it’s hard to be certain what has changed, but it could be the return to employment of many people who had been parked by society and hidden by the statistics for too long: some who were ignored because they claimed the wrong kind of benefit to count.
Perhaps the change in the way we work has brought some, like students and retired people, back to employment. Working in different employment patterns to traditional workers, that’s a group of people who had been overlooked.
So that’s great news, right? There are more people are in work. Yes, it is. But it still leaves an unfairness.
While assets have risen, wages generally have not. Years of quantitative easing, the stimulus of low interest rates and cheap money, has seen homes, shares, in fact pretty much everything, rise in price. While pay has not. That’s hard on those with less. Those whose wages haven’t kept up.
Services
But that’s not true of everyone. Some people have seen their pay increase amazingly. Chief executives of water and rail companies have been rewarded as if they were entrepreneurs – as if they were people ready to risk everything to innovate.
But we know that’s not what they are. They haven’t come up with a new way of listening to music. Or dating. Or even a new way of running a water company. The truth is that running a major public utility is MORE like running a government department, THAN creating a start-up.
Running a public utility comes with certainties – pay and pension amongst others – and that’s not true of a start-up in a whole new sector.
We all know that. That’s why when we see the CEO of a water company paid millions, we all feel the corrosive effect that has on our faith in our system as a whole. It makes us feel we are being taken for a ride. That the system is rigged. And then we all start to look for answers.
Our public services should be about delivering a public good. About providing services to our community. Not about private gain, or skimming off profit from a captive market.
Particularly in natural monopolies, this raises questions about ownership.
Ownership
What we own, how we own it, shapes our society more fundamentally than almost any other decision we take. Governments have understood this for generations which is why the liberation of owning your own home transformed life for so many in the 1980s.
But the model of ownership we have been used to is shifting. And that is shaped by the way we reward work.
If we think of earnings as simply the product of hours spent working, then we haven’t understood how teams work, why communities work, and how working together enriches us all. We know from our own lives that cooperation allows us to play to our strengths. And that a combination of strengths makes a company stronger, a platoon stronger, and our community stronger.
And that cooperation works because the product of our combined labour is greater than the sum of the parts. That’s why we get together, and how we prosper.
But to pull people together, to get us working as one, is hard. The challenge in team building is aligning interests. And that’s why we need to go beyond pay.
Now, none of this is news. Companies from start-ups to multinationals have been doing this for decades. So how do they do it? They encourage employees to buy or accept equity so that they have a stake in the company as a whole, not just their bit. That’s pretty common in the boardroom. But as you get further down, it becomes less so. Sometimes that’s reasonable – transient workers don’t want a stake in a business they’re not going to stick with. But often it’s not. Often it’s just the bosses who get the shares. We can’t run an economy that just rewards the people at the top and leaves others feeling isolated.
The reality of life, whether in a platoon, a company or a country, is that we’re all in it together. It’s how families, communities and countries have worked for generations. It’s how businesses should work. Companies, just like societies and individuals, have responsibilities to everyone.
Paul Collier’s new book The Future Of Capitalism is all about this. We are not raw, rootless animals -as some economists imagine us to be – but individuals with bonds to our families and communities that are made up of rights and responsibilities.
We understand this at home and it is only the infantilization of our political discourse that has left us calling for one without recognising the other.
Investment
While wages, public services and ownership raise concern, so does investment. The imbalance in how we invest is clear across our country, but perhaps mostly obviously transport.
London has 2.6 times more transport spending than the North of England.
Given that I represent a community in Kent, you might think I would be pleased about this, after all, many of us travel into London for work every day and that investment makes those journeys possible.
But the spending acts like gravity, drawing people to our cities and away from other communities. Without the balance in other areas, this pushes everything from economic growth to house prices to centre on cities, and that has consequences for all of us.
For us in Kent, it means our kids will find it harder to buy a home as more people feel the need to be near London. And our services, from hospitals to schools, find it harder to recruit because the staff we all rely on are priced out.
But London’s success isn’t just down to the city. It’s certainly not down to the city’s current mayor. It’s the investment of the whole country that realises the importance of a global city to the wider economy.
That’s why we recognise that the investment we make in Crossrail, or the Underground isn’t returned in ticket sales. The return is London itself. Everything from the financial centre to the new tech companies are reliant on the infrastructure the whole country provides. That’s why we need to share the infrastructure spending more widely.
The imbalance in public transport, particularly in communities like mine in Kent, means those who can’t drive, particularly the young and the old, find it hard to get to around. If we saw investment in public transport in the same way throughout the rest of the country, it would help rebalance the economy and relieve the pressure on young people in the South East who are being priced out of the market.
So what is the answer to this?
Labour’s answer
If you listen to Labour, its nationalisation. Not just of railways. Because this Labour Party doesn’t understand cooperation. Only control.
Even the key policy from this year’s Labour Conference was about that. John McDonnell said that his idea of taking 10 percent of a company was so that he could give equity stakes to employees.
If that’s so, it’s a strange way of doing it. The equity scheme he outlined doesn’t leave employees a stake. Instead it gives the government a stake and the agreement to share some of the profits – some of the time.
Given the record of asset stripping by governments over the years, we all know what that means. There won’t be much to share and the employees won’t even own their stake so can’t decide what to do about it.
As with so many Labour policies today, it isn’t only bad news for those who are directly targeted. We would all suffer. Ambitious companies would move abroad or split into smaller, less efficient firms to avoid the partial nationalisation. And some would simply stop growing. Some of France’s most onerous employment laws kick in when a firm reaches 50 employees. It’s amazing how many have exactly 49 staff.
But the people this will hit hardest by this new tax would be savers. People who have worked all their lives to put something aside for retirement. Larger firms are – by definition – those whose shares are most likely to be held by pension firms and long-term investors. That 10 percent tax will rob council workers whose hard earned saving are invested in the Local Government Pension Scheme.
That’s hardly rewarding effort.
But it gets worse.
Last weekend the newspapers reported a call by one Labour MP for private homes to be nationalised. That’s nuts. The building block of a community is our family. Our homes are not just bricks and mortar. They are our haven from the world.
This year, Labour MPs have called for nationalisation of private companies, the internet, Facebook and now homes. That’s some list.
Apart from making clear that they don’t know how the internet actually works, it speaks to a deeper truth. Today’s Labour Party is about control. But not by us, by them. Control by politicians, Control by ministers, Control by the state. That’s not my vision of a free or fair community.
Jeremy Corbyn isn’t alone in trying to do this. He’s not even original. You see his brand of left-wing ideology across Europe today and even further afield. We don’t need a lesson from history to tell us why this is wrong. Though there are plenty. We just need to think about what it means today. What he’s attempting is a power grab.
Many of us are uncomfortable with the information so many of us give to the internet giants, how much they know about us, and how they can manipulate our behaviour. Just imagine that information in the hands of the state. And an ideological state at that.
That would shift power away from the many and enable a more powerful or centralised state than at any time in the past. The government Facebook idea has echoes of Orwell. It wouldn’t take long for the freedoms we enjoy today to be eroded.
This is why the role of the state isn’t simply to focus on efficiency, or delivery, but liberty and empowerment.
And that’s why markets matter.
They’re not just a tool for free exchange but, when properly regulated, they break up power structures and prevent concentration – either by the state or other large players.
And that’s where the state comes in. Once it has accepted that it isn’t an alternative to enterprise, it has a vital role as the regulator. To keep the market not just free but fair too. A fair market that serves the community.
There’s no such thing as the libertarian utopia of a completely free market. As Jesse Norman explains in his fantastic new book on Adam Smith, the great classical liberal philosopher himself made that clear.
Smith believed in the morality of the market, not just its freedom. He knew that the hidden hand needed regulation to promote competition and prevent it ever becoming a fist.
Role of the State
Given the situation I have set out, what should be the Conservative response? How do we answer the questions of pay, services, ownership, and investment?
It’s all about community.
What runs through my experience is that although we are individuals, we are linked together. We work together, we live together, and just as in a platoon the struggles of one affect the whole unit, so too in our community, we are all connected. That’s why there are a few areas we should think about today.
Government action
What does this mean in practice? How do we help pay, services, ownership, and investment?
These are of course complex problems but some of the answers are connected. And some of the examples much closer to home.
This morning, like most of you, I passed a Greggs. Now I’m not shy of their products, as you can probably guess, but that’s not why I like the company.
What I like is the way it is run. Employees in the bakery get to share not just in the profit of their own labour, but the output of the firm as a whole. After six months, they get profit share, and take part in a share-save scheme that allows them to buy in at a discounted rate.
Isn’t it time we started to look beyond increasing the tax threshold – the lowest paid are now largely out of income tax – and thought about putting public money to work rewarding companies who reward their staff better, as Greggs do? Should we consider tax breaks for profit-sharing? We know the only route to higher wages is higher productivity, so shouldn’t we look to encourage bosses to invest in training?
Greggs again provides some interesting ideas. They pick individuals who may not put themselves forward to be senior team leaders – the first level of responsibility – and reward them not just financially, but by making a deal: Take the step up and we will take the risk. Greggs guarantee the original job will be kept open, and they ensure predictable working hours. For many that’s more important than pay.
That investment in staff isn’t cheap. But Greggs say they see a direct correlation between the best performing stores and the kind of incentives we all want to see championed.
It’s not just good policy, it’s good business.
We know business has the money. The number of share buybacks we have seen in recent years as companies try to boost their share price – and their CEOs’ rewards – points to the fact that the funds are there. What we need is the will.
Could government encourage a change? A Conservative policy is to look at the distorting impact share buybacks have on a market: it’s in our manifesto.
But all companies are different. For some alignment isn’t just with workers, it’s with customers. We need to think again about the how we deliver common goods, particularly those that are natural monopolies.
That’s not a reason for nationalisation. I don’t see how handing the management over to ministers helps delivery.
But ownership is about more than profit. It’s about aligning incentive.
How do we get utilities to really deliver for the communities they serve? South West Water is piloting an interesting idea. They’re planning to give shares in the firm to customers. That’s not just sharing profits, it’s bring consumers on board.
But is individual ownership really the best model? One households’ shareholding will be worth relatively little. It may not be the best way of generating the community returns and incentives that benefit everyone. Might community wealth funds be better?
If public utilities were encouraged to share equity with their customers’ communities, through funds that would support local projects, some of the returns could be invested in growing communities in Britain as well as putting community members on the board.
Think of how that could change accountability. And nowhere more than on our railways.
As a user of Southern Rail I know that our franchise model doesn’t work. We can argue about splitting the track from the train, the foreign ownership of the operators, and the nationalised lines.
Or we can try to shape the future contracts to deliver.
Couldn’t we write the franchise agreements to ensure a community element was required? Perhaps a local not-for-profit owned by the train users could be required to have a stake in the bid? Or a community charity?
Just forcing the bidders to include the community in the plan would change the way they thought about the contract. Working with empowered local communities could transform the way our services work for us and make them more accountable.
Companies too could consider changing their ownership models. I’ve been lucky to be involved in helping with a few start-us and one of the early lessons to learn is about deploying equity. Some founders want to hang on to everything, never to dilute their ownership. But that misunderstands the point in it. There’s no point in owning 100 percent of nothing when you could have had 20 percent of something amazing.
The key to equity is learning how to spend it, and why. Good tech entrepreneurs use equity as a motivator. They bring people on board they couldn’t afford to pay. They compensate for hours that could never be compensated. In essence they use it for what it really is: a promise of a stake in a joint adventure and of future reward.
It’s not just tech companies that do this. Many major firms do this.
Now I’m not here to write tax policy in detail but to simply as ask a question: if it’s good enough for chief executives, then shouldn’t everyone be offered the same deal?
We could simply make sure all tax-advantaged schemes are open to all employees. Or we could go further. We could increase the tax-advantage proportionately for workers on lower incomes, reintroduce a relief on profit sharing, or even get the Treasury to matching some of the shares given to lower paid workers.
If firms were actually incentivised to reward employees and align returns, corporate culture would change. And that can’t happen too soon. Too many businesses forget that their duty is to serve a wider community, not just turn a profit.
That means not exploiting the most vulnerable. Citizens Advice have found that if you stick with your current insurer, mortgage provider, broadband service, or mobile phone network, you’re paying about £900 a year too much. You can guess who is least likely to switch. And past governments have made it worse. Market concentration in many areas means that there isn’t the competition we need. That’s why the regulators must do more. And have the encouragement of politicians to do more. That’s why this isn’t just about free markets – in these fields there is competition – but it is about corporate attitude to people.
Together with the poverty premium, the extra amount paid by those who can least afford it, we must ask not just about competition, but about regulators. Should they be more actively on the side of the consumer?
The role of government is essential. Just as we look again at our companies we must also ask about government. Over past decades we know that public investment has fallen out of kilter. The emphasis on cities has drawn resources from our towns and left many to a shadow of their former selves.
Lisa Nandy, the Labour MP from Wigan, has done some important work on towns. She has highlighted the fact that fewer people in towns than in cities have faith in politicians.
This is a problem for the whole country, because towns are part of our identity as a nation. That’s why we must look again at some of the problems towns face if we don’t want them condemned to be commuter dormitories.
We need to think about how to revitalise them by: rebuilding transport links, re-energising the High Street, and bringing jobs back to the community.
That could mean drawing inspiration from companies like Uber to change the way we travel. Investing in our shared spaces. And connecting our businesses across the country.
This mustn’t be some nostalgic utopianism. There is no doubt that the way we live has changed. As the father of two small children I know why shopping on line is easier than a supermarket on Saturday morning.
But real communities matter. Identity matters. Where we are from shapes us. How we interact defines us. A High Street of bookies and charity shops isn’t just an economic choice, it makes a statement and shapes the way we feel about ourselves.
That’s why a Conservative government needs to recognise that our choices as a nation shape every community and individual.
And that’s why I think back to that first morning in Iraq and to my friends in uniform.
How do we ensure that the life chances that saw a child go from care to becoming a sergeant in the Royal Marines are open to everyone, even those who wouldn’t be right for the military?
How do we ensure that those who have so much to offer but who have found life hardest are able to take their place in our country?
It has to be by recognising an individual’s rights, and siding with them, but also recognising that community matters. And we all have responsibilities to each other.
And that means resetting the equation.
As a Conservative I am on the side of business because of what business does for the individual and the community.
It brings people together. It allows us to share effort and profit from our labours. It isn’t a good in itself, it is what results that we should champion and that means accountability. We need anchors connecting businesses to the community they serve. And the government has a role in this.
Community Conservatism is essential to working together in a changing world.
I am confident of the direction. We have seen a new generation embrace the opportunity to bring people together in groups to fix problems. We have seen a rise in individualism – not in a selfish way, but in an attempt to grow a new society based on innovation and opportunity.
We have seen a re-engagement with our local identity. So there is much to be hopeful for in coming years. There is a world of opportunity. And I am confident in our country and our people. That is what brought me in to politics. And this should be our focus in the exciting years ahead.
This speech was delivered for the Social Market Foundation on 07/11/2018 and hosted by Edelman UK.