Today marks the tenth anniversary of David Cameron’s arrival in Downing Street as Prime Minister. Following intense negotiations after the general election on 6th May, the 11th May 2010 saw the formation of the UK’s first Coalition Government since Churchill’s War Ministry, and its first ever to eventuate from an election result.
I can well remember the sense of uncertainty – expressed both publicly and privately – at how this comparatively untried style of Government would work, and how Conservative and Liberal Democrat Ministers would function alongside each other both in individual Departments and across the Cabinet table.
In fact, the overwhelming majority of interactions I had with Liberal Democrat Ministers throughout my time in the Northern Ireland Office and DEFRA were entirely professional, courteous and constructive.
We were, after all, united in our sense of the scale of the mess which we inherited from Labour and the crisis which our country faced. After a decade of Labour’s economic mismanagement, the UK had the largest structural deficit of any G7 economy by 2007.
In the wake of the financial crash, with tax receipts declining, public spending had risen to 47 per cent of GDP by 2009/10. By 2010, the UK was borrowing £300,000 per minute. It was simply neither sustainable nor morally defensible to continue taking on such vast levels of debt, expecting our children and grandchildren to pay for services that we had enjoyed.
Prudent management brought this situation under control. The current budget deficit, which had been over seven per cent of GDP in 2010, was reduced to just over three per cent by 2015. By 2019, there was a budget surplus.
Such a programme naturally entailed difficult decisions, but it is important to remember that it was done without the “austerity” and “savage cuts” of caricature. Indeed, overall public spending rose in cash terms every year, from £673 billion in 2010 to £759 billion in 2015. The budgets for key priorities were shielded: public health spending increased every year from 2010 to 2015, by an average of 1.3 per cent a year.
Deficit reduction was, naturally, the top priority, but the Coalition Government was far from a one-trick pony. Reducing the rate of corporation tax from 28 per cent in 2010 to 20 per cent in 2015 ensured that the economy grew and receipts increased from £31.6 million in the former to £43 million in the latter. Full-time employment rose by almost three million over the five years, and unemployment fell by a million.
The introduction of Universal Credit under Iain Duncan Smith was a key pillar in this success. From its introduction until 2015, the Government found that 71 per cent of new UC claimants were in work within nine months of their claim, compared to 63 per cent under the old Job Seeker’s Allowance. It also found that UC claimants earn on average more than did JSA claimants.
Michael Gove and Dominic Cummings also deserve particular credit for expanding the Academy schools introduced by the Blair Government with the introduction of Free Schools. More than 400 Free Schools were opened in England between 2010 and 2015, creating over 230,000 new school places, giving parents more choice over the type of education that their children receive and, crucially, improving standards. The New Schools Network has found that 31 per cent of Free Schools are rated as outstanding by Ofsted, compared to the 22 per cent national average.
That such important policy successes could be delivered in such trying economic circumstances was testament to the Coalition’s commitment to sound decision-making. In so doing, we could ensure that funds always remained available for important policy aims and front-line services.
I had almost immediate first-hand experience of this. I was appointed Secretary of State for Northern Ireland, having been the Shadow Secretary of State since 2007, and issues that were the responsibility of the Northern Ireland Office provided some of the sternest and most prominent early tests of the Coalition. It was clear that we had inherited a mess from Labour in three areas: Security, Saville and Savings.
The security situation was worsening due to a rising dissident threat. The police and security services were often forced to counter this with poor or outdated equipment. This was plainly unacceptable and, despite the economic hardship, we were able to introduce a £200 million increase in funding for security to re-equip PSNI other security services.
Labour had commissioned the Saville Inquiry in 1998 with a view to resolving a definitive version of the events of Bloody Sunday. Despite the £200 million cost, it had ducked the publication of the report, to the immense frustration of all involved. We made the immediate decision to publish it in good order as soon as possible.
The report was published on 15th June 2010. David Cameron addressed the House of Commons in his first major statement with international prominence as Prime Minister. In helping draft the Statement for the Prime Minister, I was immensely grateful for the support of my Special Adviser, Jonathan – now Lord – Caine. Jonathan has served six Northern Ireland Secretaries. He is one of the foremost experts on the politics of Northern Ireland, and has made an extraordinary contribution to its peace and prosperity.
The Saville Report was supposed to draw a line under the past. With the treatment of those who served during the Troubles still high on the political agenda, we must remember that it was only through their brave efforts to maintain the rule of law that the conditions for the peace process were created. We must redouble our efforts to ensure that no new prosecutions can be brought without compelling new evidence and the guarantee of a fair trial.
The third Labour mess which I inherited at the NIO was over savings. The Presbyterian Mutual Society had suffered badly during the financial crash and, despite setting up a Treasury “working group” to consider the issue, no compensation payments had been made to its investors under Gordon Brown.
I worked hard to ensure that the Treasury did pay, and George Osborne announced a £200 million package for the PMS in the first Spending Review in October 2010. Once again, the Coalition demonstrated that it was pragmatic rather than doctrinaire over the spending decisions it had to take, to the benefit of some 10,000 savers in Northern Ireland.
Later in 2010, I was deeply involved in the UK’s discussions to issue a bailout loan to the Republic of Ireland in a moment of dire need. We had no hesitation in providing some £7 billion for the bailout, including the £3.25 billion provided by the Loans to Ireland Act which passed through Parliament virtually unopposed and in a matter of days in December.
Standing up to the bullying of France and Germany, we were also staunch defenders of Ireland’s right to set a low rate of corporation tax, setting an example of good neighbourliness which EU Member States would do well to remember today.
The Irish loan catalysed an important move to devolve corporation tax rates to Stormont as part of our efforts to rebalance the Northern Ireland economy. When I was Secretary of State, I used the alarming figure that 77.6 per cent of Northern Ireland’s GDP was dependent on public spending. This was clearly wholly unsustainable.
The 12.5 per cent corporation tax rate has been the central driver of the Republic of Ireland’s spectacular growth in recent decades, attracting investors and creating jobs. Adopting similar strategies could be similarly transformative for the Northern Ireland economy, in effect turning the entire Province into an Enterprise Zone.
After I had established political unanimity in Northern Ireland, it is to the credit of my successor, Theresa Villiers, that the devolution of corporation tax made it to the Statute Book in 2015. It is a great pity that the new Executive, formed this January three years after the last Assembly collapsed, has chosen not to pursue it.
With the tumultuous events of the last few years and the crisis which we are currently facing, thoughts of the famous press conference in the rose garden might seem a lifetime ago. But, a decade on from its formation, the Coalition Government’s successes have laid robust foundations on which subsequent Governments have built.
Faced with the worst economic inheritance of any Government in a generation, its commitment to reducing the deficit ensured the UK’s continuing prosperity. It is only because of the decisions taken then that we have been in such a strong position to take the extraordinary steps of the last two months. As we look towards our recovery once again, we can take heart that prudent economic management coupled with embracing entrepreneurialism and innovation offer a resounding message of hope.