The thinktank that helped forge the prime minister's pitch to the electorate has not run out of ideas yet
A small but significant anniversary in modern Conservative politics is celebrated on Wednesday evening: Policy Exchange, the most influential thinktank in Britain and the policy seedbed of compassionate Conservatism, marks its 10th anniversary. No champagne will be consumed. Instead, Francis Maude, the Cabinet Office minister and one of the thinktank's founders, will make a speech recalling how, back in 2002, Policy Exchange, under the aegis of its first director, Nick Boles, was conceived to fill an intellectual void on the centre right.
Probably more than any other organisation, the well-resourced brains trust has shaped Tory thinking – on elected police commissioners, Michael Gove's school reforms and the pupil premium. A small, influential pamphlet entitled Compassionate Conservatism, written by Jesse Norman and Janan Ganesh, tried to give the movement a philosophical base through the idea of a connected society. "Everyone in politics discussed the state and the market, but had neglected what lies in between – civil society and community," Ganesh recently said. "We thought the new battleground of politics would take place on that turf."
The 10th anniversary comes at a pivotal time for Tory party modernisers. With the departure from Downing Street of policy strategist Steve Hilton, the future shape of Conservatism seems to be in flux. The impression is that Hilton raged against the machine, and the machine, in the form of the civil service and the EU, won. That said, the cabinet secretary, Sir Jeremy Heywood, was at pains to deny on Monday that the civil service had been at loggerheads with Hilton, and said he was looking at letting more outsiders make policy so policy development in Whitehall could be outsourced.
Even before Hilton's departure, the age of austerity was gnawing away at the platforms – big and small – on which Cameroonism Mark 1 was constructed. The "big society", green politics, sharing the proceeds of growth, a quiet public service reform, data transparency and localism are now all under challenge. Even legal gay marriage, once the symbol of a different Conservatism, is being questioned.
Among Conservative MPs, it is the rightwing Free Enterprise group that appears to be making the running in advance of the budget. It is a sign of the challenge to welfare caused by austerity that senior ministers were on Monday openly at odds over how much wealthy taxpayers should suffer by losing the right to child benefit.
Cameron himself felt the need in his weekend speech to rebut the charge that austerity had trumped compassion. "It is only by taking tough and bold action that we will make our country stronger and fairer," he said. "True compassion isn't wearing your heart on your sleeve … it's rolling up those sleeves and taking the long-term decisions that will really change our country for the better."
And Maude, in his speech, will argue that it is possible to combine growth and compassion, and again contend that the party can only win if it has an appeal to non-traditional Tory voters.
Policy Exchange, as much as any thinktank, has a responsibility for creating that appeal. Judging by a talk given last week by its director, Neil O'Brien, suggestions that the Tory stream of ideas is drying up are premature. The intellectual self-confidence is as strong as ever.
One of O'Brien's themes is that most voters see values such as fairness though the prism of welfare. He argues: "People's ideas about fairness are much more about 'something for something' than about equality. There is very strong support for the idea that if you have been on unemployment benefits for a reasonably long period, you should be asked to do something in return for those benefits, like workfare. Eighty per cent of people, for instance, support the idea that if you are out of work for more than a year, you should be asked to do community work in return for your benefit."
He suggests claimants should be required to spend more time each day looking for work, and praised the Australian system where the only role of government is to make the initial assessment of a claimant, and then immediately hand that claimant over to specialist providers, rather than, as at present, after nine months or so.
He adds: "At present, jobcentre advisers are loathe to sanction people for not complying with the rules, for not going to job interviews, for not trying hard enough because they don't want to discourage people. Could we do something smart like they do in Australia where the sanction is not financial so if you don't play by the rules, you get given a card that has your benefits on it and that prevents you spending money on tobacco, gambling or drink ?"
More broadly, he argues, the right needed to think about how to restore the contributory principle – a form of unemployment insurance – which he said had been lost in the UK "almost in an absence of mind".
O'Brien also seems to recognise that growth and planning needs to be rethought. The Conservatives' planning reforms, especially "the new homes bonus" which gives councils the right to keep cash from new developments, already need revisiting since they are not themselves going to break the deadlock between the planners and the Nimbys.
O'Brien proposes giving "actual cash direct to those who are most affected by developments near them, rather than giving some kind of incentive to the local council. It is not much consolation to you if you have a housing estate built right next to you to know that the local council will have the money to build a development at the other end of the town."
He also suggests new garden cities, a sell-off of the most expensive social housing stock to build housing in cheaper areas, and allowing empty buildings in town centres to be converted to residential use without requiring local government consent. And he condemns perverse incentives in housing, arguing: "Since the 1977 Housing Act, the way to get social housing – which is often worth more than cash benefits, particularly if you live in inner London – is to be very dependent om state benefits."
Policy Exchange is also going to champion one of the most controversial issues in contemporary politics: the breakup of national pay bargaining in the public sector. O'Brien argues: "There is a huge public-sector pay premium in the less prosperous parts of the country – Yorkshire, the north-west, the north-east and Northern Ireland. People can see that it is unfair. You are effectively overpaying some people in some areas more than they need because the cost of living is so low, and you are underpaying people in expensive areas, leading to shortages and possibly poorer quality of teaching."
Suspicious that the Treasury will stall on this reform programme, Policy Exchange is looking at how to follow the example of Sweden, which moved from a centrally-set pay bargaining system to one in which public sector employees all have their own individual contracts.
Public sector reform does not stop there. Social enterprise, or profit-making schools, could speed the reduction in inadequate schools. Police inefficiency should be targeted. "In a lot of forces a third of the police do not make a single arrest in a year. The incentives in the police are set up in completely the wrong way. We have to break out of the paradigm that it is all about resources – it is not about how many police officers you have, it is how you use them and how efficient the police force is. Deployment trumps employment," O'Brien says.
The ideas, many foreign-based, keep flowing. O'Brien asks whether, just as police commissioners are elected, someone could be elected and made responsible for the entire criminal justice system, "so they could move money away from prison and put it into prevention".
Sure Start is also in O'Brien's firing line. "I find the evidence from the Sure Start programme incredibly depressing because the evidence, so far as there is a proper evaluation, is that it is not doing much to raise children's cognitive ability, so if we want to have real equality of opportunity we need to do something that is more effective."
He suggests the government might need to move from its existing child poverty measures to "a causes of poverty target" – tracking teen pregnancy and kids dropping out of schools or getting into trouble with the criminal justice system at an early stage.
Even the green agenda needs readdressing because, O'Brien says, the departed energy secretary Chris Huhne had been running a dirigiste, expensive agenda. Cleaner, cheaper energy is possible, O'Brien claims, since hundreds of millions could be saved if the government backed a market-based approach, rather than "backing particular expensive technologies" – by which he means wind power.
Guardian readers may not warm to all or most of this agenda, but few can say that, post-Hilton, the Conservatives are as yet intellectually exhausted.