The most important political upheaval of the last few years has not taken place within the Conservative Party. The Conservative Party has merely evolved to take account of changing political circumstances, as we would expect. Nothing has changed substantially within the Party but it has adapted to a new environment, for good or ill.
The big change has been within the Liberal Democrats. Many Lib Dem thinkers have rediscovered economic liberalism a principled belief in economic freedom, though this is a change that is not welcomed by all in the party. Indeed, on some issues, such as public sector pensions, Lib Dem thinking is streets ahead of that of the Conservatives. In other areas, such as in education, and the level of taxation and government spending, there is little to choose between the Conservatives and leading thinkers in the Liberal Democrats. On welfare policy there is a growing common ground.
It is not that the Liberal Democrats are becoming more Conservative: the common ground is arising because they are rediscovering their liberalism.
So what? Why does this matter? Surely, the Lib Dems will not be the next governing party.
This change matters hugely. Firstly, there may be a hung parliament after the next election. If there is, a formal coalition between any two parties is unlikely. There is too much historical baggage for the Conservatives and Liberal Democrats to get together soon, and the Labour Partys big brother approach to crime and civil society is unpalatable to the Liberal Democrats. What will happen instead is that the largest party will form a government and the Liberal Democrats will support legislation on a case-by-case basis. This leaves an opportunity in some key areas for a minority Conservative government to bring in market-oriented reforms that are desperately needed if the most disadvantaged in our society are going to have the opportunities they deserve. This is especially so in education, but also in other areas such as policing, welfare and public sector pensions.
Even if the Conservatives are in a majority, the opposition that they face when trying to force through policies is important. Despite her huge majorities, Mrs. Thatcher could not make the Community Charge stick and never reduced public spending. She was always fighting on all fronts.
The need for a coherent programme of government that reduces taxation, removes swathes of regulations, returns education and healthcare to the people, and eliminates the financial incentives to households to fragment is urgent if our economy and communities are to be revived. If there is a Conservative government some of these radical reforms will be easy pickings because of the changed mood in the Liberal Democrats, and even of some on the Labour benches. There will be other reforms, which will be more widely opposed if the Conservatives are to implement them, and in which significant political capital will have to be invested. But, at the next election, for the first time since the war, there could be two parties standing on platforms which include significant anti-big-government elements. Furthermore, after the next election there will be two parties that contain a substantial proportion of instinctively liberal minds. This is not least due to the long-term work of the IEA in working to change the climate of intellectual opinion rather focusing on policy engineering as many of the other high-quality think tanks in Westminster do.
As a result of all this, after the next election, the climate might well be favourable towards the elected government taking a big step towards decisively re-ordering the relationship between the state and the people in a liberal direction. David Cameron needs to be ready to seize that opportunity.
For a guide to truly liberal economics see
Prohibitions  by John Meadowcroft.
House Magazine