David Cameron needs a fourth way

May 1, 2008 seems to have set a new course in British politics. New Labour endured its worst local election results for over a generation, whilst the Conservatives appear on target to form the next government.

But while Labour has dramatically and deservedly lost popular support, it is not clear that David Cameron has won it. If anything, the local elections represent a wholesale repudiation of the policies of Blair and Brown rather than any endorsement of the New Conservatives. Moreover, since New Labour is little more than an intensification and extension of Thatcherism, what the voters were really rejecting was the legacy of the last 30 years and its governing ideology.

Ordinary British citizens are exasperated with contemporary politics: they voted in Mrs Thatcher to revive the economy and New Labour to revive the public sector, and now neither the market nor the state seems to work. The free market has hugely enriched the top 10 per cent and forced everybody else to work harder for less money while our public services subject us to ever larger amounts of taxation for an ever more incompetent service.

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The trouble for Cameron is that he has aligned himself with the New Labour project just as the voters have so demonstrably rejected it. Indeed, until Brown's 'election that never was' fiasco in the autumn, the Conservatives were essentially just promising to deliver - in a more professional and competent manner - an entirely New Labour agenda. The Conservatives locked in their own budget to Labour's spending plans and promised to be more Blairite than Blair in their approach to the public services. But the public have rejected Gordon Brown because the Thatcher/Blair legacy no longer delivers.

Indeed, from Northern Rock to Brown's asset price bubble economy, the ruinous legacy of New Labour is increasingly felt by the populace. Most people rely on wages to get by and, since salaries no longer cover the basic cost of living, people are forced to take on ever-increasing amounts of debt. Now the average household is in hock to the tune of 159 per cent of its gross disposable income. And since many have taken on mortgages, and are now facing a possible 20 per cent devaluation in property values, their problems are only going to get worse.

The poor have been trapped in a new insecure underclass with more than 20 per cent of all workers paid less than £6.67 an hour. The middle classes have joined this new proletariat with working families facing the impossible task of caring for their children while struggling to make ends meet on two insufficient incomes.

Cameron's greatest strengths are his intuitions. His work/life agenda allied with Iain Duncan Smith's 'broken society' analysis is a powerful recognition and critique of modern Britain. It opens up clear blue water with Labour's failing statist bureaucracy and offers the hope of a society worth living in.

But if the Conservatives are to deliver on this vision they have to think of economic and social alternatives to the prevailing order. They should be true to their claim to 'share the proceeds of growth'. Employee share ownership could and should become a Conservative priority. It would make good economic sense if more were encouraged to follow the John Lewis example whereby all employees are partners.

Likewise, an encouragement of local economies and small businesses could tackle the clone towns and ghost towns that now constitute Britain. To help young families, the Tories could let couples transfer tax allowances to each other - doubling the tax-free allowance to enable one adult to stay at home and care for their children.

The Conservatives have not yet captured the imagination or loyalty of the British electorate. They could, but they have to break with the Thatcher/Blair era legacy and map out a new vision of the good life.