When two tribes go to war.  Now the contest for power begins.

At the end of January, the United Kingdom will leave the European Union.  When she does so, Dominic Cummings – the most powerful political advisor in a generation – will achieve his life’s purpose and political ambition.  According to insiders, his departure from politics will shortly follow. 

Two powerful factions are in fierce competition to become the dominant political force upon his departure.  The result of this internal power struggle will have a far greater impact on business and the economy than the pantomime of the General Election.

The election of 2019 will not be remembered as one where political pundits were bold.  Having tarnished their credibility by failing to predict the twists and turns of recent campaigns, few were prepared to call it with confidence.

But in reality, the result has surprised no one.  Boris Johnson is back in Downing Street and with a decent Commons majority.

As far as most of the Conservative Party are concerned, Boris has done his job and done it well.  Brexit is renegotiated and there’s a political mandate to deliver it.  His position is secure.

Boris is not an ideologue

Boris, however, has no desire to be the ideological powerhouse behind a programme of government.  Since his appointment to Downing Street, he has been happy to outsource strategic direction to advisors.  With the prize of power in sight, ministers were prepared to let him.

As a result, Dominic Cummings has wielded more power – and gained greater infamy – than any backroom advisor since Peter Mandelson, the Prince of Darkness himself.  But this arrangement is as unsustainable as it is unconstitutional.  Elected politicians, complete with healthy egos and buckets of ambition, were never going to play second fiddle to unelected advisors for long.

Luckily for them, Cummings has no intention of sticking around.  While it hasn’t been widely briefed, senior Conservative sources say that he is planning to exit centre stage once Brexit finally becomes a reality.  Few are encouraging him to think again.

Power vacuums never exist for long.  Even as we write, and as would-be ministers await phone calls that determine their future, two distinct coalitions are forming, determined to seize the political upper hand.

What does this mean for business and the economy?

As a consultancy committed to making the case for business, we’re keen to know what the next Parliament is going to mean for economic policy.

However, a detailed study of the Conservative manifesto will illuminate precisely nothing.  The 64-page document is barely a statement of intent.  It is hardly a programme for Government.

To understand what the next five years hold in store for business, we need to understand the factions that are forming, and the personalities that constitute them.

Two tribes go to war

The two factions competing for power today both have one thing in common.  They claim – at least privately – to be the torch bearers of Thatcherism.

Margaret Thatcher was pro-free market and populist.  She backed business but was cautious about immigration.  She believed in international trade and in defending national sovereignty.  Today’s Conservatives might wish to maintain this paradigm.  But they don’t have an economy with huge amounts of spare capacity to draw from.  North Sea Oil does not flow as it once did.

The two factions competing for power are a result of this inevitable fracturing of the Thatcherite coalition.

Faction 1: Vote leave popularists

This group is the heir to Cummings.  Many were involved in the Vote Leave campaign and see Brexit as an opportunity to reset the political right around a “bigger state” narrative.

This group are cautious about business – or, at least, big business.  They are obsessed with maintaining the support of the voter base which has just propelled them to office.  With this group at the helm, economic policy will be viewed through the lens of popularism.  A cut in corporation tax may fuel growth.  But how would it poll verses a few extra policemen?  Should this faction seize control, you can guess which approach would win.

Key players:

  • Michael Gove: the controversial figure who has gained a reputation as a social reformer in Tory circles. The former education secretary is now a firm believer in the ‘good that government can do’.  He gained a flare for banning things during his time at DEFRA and we can expect him to influence Government policy along similar lines.
  • Priti Patel: strong immigration controls are a priority for this faction and the Home Secretary will be commissioned to add an expressive narrative to a restrictive system. The needs of business will come a poor second to the desire to maintain political support across Yorkshire and the Midlands.
  • Esther McVey: the self-appointed champion of ‘blue collar Conservatism’ will continue to call for greater investment in public services. To the dismay of internationalists, expect to hear more talk of ‘pruning the aid budget’, and merging DfID with the FCO – if this group takes control of policy.

Faction 2: Telegraph tax cutters

Pro-market, small state and lovers of freedom.  This group are as committed to Brexit as their popularist counterparts – even if some ticked the box for remain in 2016.

More akin to much of the wider Conservative Party membership, Boris deliberately doffed his cap to them in his leadership campaign.  His commitment to cutting the top rate of income tax may seem like a distant memory, but you can rest assured that this group are unlikely to let the Prime Minister forget it.

Committed to freedom as both an intrinsic human right and a first-rate economic strategy, this Thatcherite clan favour economic policies that grow the economy, even in the face of popular appeal.  To the extent that this group can wrestle their share of power, tax cuts for all, lowering of corporation tax and cutting red tape are all back on the table.

Sound economic growth is paramount for this tribe.  While recognising the political headache it will involve, more liberal immigration policies will be sanctioned to free the hand of business.  And, while it’s never this clear cut in the Conservative Party, instincts in this clan will tend to be more socially liberal.

Key players:

  • Sajid Javid: the closest thing the current cabinet has to an ‘heir to Thatcher’. Expect the Chancellor to do all he can to fight for a cut in corporation tax. His personal story of social progression is hard to deny, and he is not minded to focus policy on giving people the ‘hand up’ that he himself managed to do without.  However, if recent interviews are anything to go by, even this tribe consists of few deficit hawks.  Borrowing is cheap, and even the small-staters are minded to take advantage of it.
  • Liz Truss: the cabinet’s only really vocal advocate of limited Government, Truss will almost certainly be moved from the trade brief. Where she ends up will serve as an early indicator of this faction’s chances of gaining influence.  Some speculate she will be dropped altogether.
  • Jeremy Hunt: he may have refused the job of defence secretary, but Hunt is simply too big to keep out of Government for long. His return to Government will strengthen this faction immensely.  A failure to do so could be a miscalculation that Boris lives to regret.

The peacemakers

Not every senior Conservative can be so easily classified as a member of these factions.  Any governing party requires negotiators and peacemakers.  Three politicians are well placed to occupy this ground effectively.

  • Andrea Leadsom: opinions differ around the fate of the business secretary. There is some speculation she will be dropped altogether.  However, having gained the respect of the Parliamentary party with her sizzling rebukes to John Bercow when leader of the house, she is also one of the few members of the Vote Leave team with impeccable pro-business credentials.   If Boris does keep her around, it will suggest he knows he needs a bridge builder.
  • Nicky Morgan: the former culture secretary has left the Commons. But is she leaving politics?  One of the driving forces between the only Brexit deal the brought leavers and Conservative remainers together, the Malthouse Compromise, her skills of diplomacy may be called upon once more.
  • Matt Hancock: about as left wing as Conservatives come and still secretly shattered by the result of the referendum. The health secretary has shown just what he is prepared to swallow to maintain Conservative Party unity (although a place in the cabinet probably sweetened the pill).  As the Johnson camp grow to increasingly trust him, he could end up playing a crucial role as a peacemaker between the two factions – precisely because he belongs to neither.

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