THE BLOG
07/07/2011 19:08 BST | Updated 07/09/2011 06:12 BST

The Biggest Challenge for the Tory Party: Telling the Truth

Sitting opposite Labour members has been an instructive experience over the last fourteen months. For them debt - and the accumulation of it - is an alien concept. To every cut they shout "shame"; to every saving they accuse us of attacking the vulnerable and dispossessed. But to the central question of the national finances, they offer little comment - other than a repetition of whatever Ed Balls is offering from his wonderland that day.

Sitting opposite Labour members has been an instructive experience over the last fourteen months. For them debt - and the accumulation of it - is an alien concept. To every cut they shout "shame"; to every saving they accuse us of attacking the vulnerable and dispossessed. But to the central question of the national finances, they offer little comment - other than a repetition of whatever Ed Balls is offering from his wonderland that day.

They behave like a coach-load of biddies unleashed on a Las Vegas slot machine arcade: the only conclusion to any play, win or lose, is to insert another coin. At some point, they reason, all will come well - and the money will pour out onto their shoes.

Except that it doesn't work like that in home economics, nor in the not-unrelated job of managing the finances of the nation. Putting money in the machine will not produce a windfall: it just means you've got even less than when you went in.

In their heart of hearts, I suspect many of them know it: their sullen faces admit to the failure of the model to which they have cleaved for years. Yet to say so openly would be to apostatize on a lifetime of political belief. Rather than risk heresy, they sit there - emptily worshipping a god that has died at their feet.

So much for the socialists. But we conservatives have a problem of our own. We may have started to win the battle on the deficit but the far larger war on debt has not even been joined.

Let's zoom forward to 2016. This is the year that the chancellor and the Office for Budget Responsibility predicts we will have closed the gap between national spending and income.

Well done us. For the first time since 2002 - fourteen years - we will be living within our means.

The Labour Party look forward to this moment with not a little glee. The Tories will have done the hard bit and they'll be able to slip the cheque book out of your pocket and starting spending again.

More frightening is the fact that many on my own side believe the same thing. They are all wrong. 2016 is merely the end of the beginning. The real slog will have only just begun.

In five years time our national debt will be somewhere north of 80% of GDP. On current projections that'll be roughly level with France and quite a bit worse than Germany. Of the big economies, only the USA will be more indebted and they, of course, have the mighty dollar to discount what they owe.

At the same time, China, India and Brazil - with projected gross debt to GDP ratios of 10%, 62% and 59% respectively - will be paying significantly less in interest payments just at the point when they move up to meet us on the value chain. Millions of graduates will pour forth from their universities, able to set up businesses that - in China's case - will make use of infrastructure well ahead of anything we will possess. Maybe the first sod will have been turned on the High Speed 2 but that is equivalent to an extension to the Docklands Light Railway in Chinese terms.

It's not only that we'll be paying more interest as a proportion of our economic output and investing less in growth. We're also going to be carrying with us the costs of a welfare state that none of our new competitors will share. And this is for certain: as they start to develop a proper system of guaranteed pensions, healthcare, sickness and unemployment support, it will be along the marketised lines that we are so wary of adopting ourselves.

In short, we will be asking the productive part of the economy, business, to compete in what will be the most competitive global environment this country has ever seen, with one arm tied behind its back. And if we expect to be able to tax employment and profit as we currently do, we will have to kiss goodbye to the businesses who generate our nation's wealth.

Where do Tory truths come into this? Well, it's really what we are not saying that is the nub of it. Here's a topical example: we now have just over four working people to support each state pensioner, the slimmest ratio the UK has ever seen. Even with the government's accelerated timetable for the increase of the state pension age, that figure falls to under three within forty years time. If the state pension is unaffordable now, what then? Have we explained that to everyone my age, who on current plans will be retiring at just that point?

Before too long we on the right are going to have to own up to the fact that we must live quite differently, and receive far less from the state, that our parents have come to expect. That is not a statement of political intent: it is the reality of the world as it will soon be.

The Labour Party may be comfortable lying to themselves. We Tories must not fail to explain to the people what challenges, post-2016, we will all face.