The chancellor's conference speech contained a theory about how Britain is changing—and what the state should do about it

GEORGE OSBORNE has just completed his speech to the Conservative Party conference. The activists in the hall issued luke-warm applause as the chancellor rattled through the facts of his party's election victory in May and Britain's economic recovery—to all intents and purposes walking them through the case for his election as the next Conservative leader. In the speech he roamed widely. It was prime ministerial, even if the delivery could have done with a polish. Yet what struck me most was not the battle to succeed David Cameron, but Mr Osborne's policy announcements in two areas: infrastructure and devolution. Both were in-part reheated versions of previously unveiled policies. The government, the chancellor explained, would relax planning restrictions on brownfield sites, let housing associations borrow to build, speed up progress on infrastructure and let councils keep business rates (a business tax). But he also went farther: announcing that Andrew Adonis, one of New Labour's most dynamic ministers, would head a new commission overseeing improvements to roads, railways and the like; that local government pension funds would be consolidated into larger beasts capable of underwriting investments in infrastructure; and that the government's housing budget would be directed "towards new homes for sale" (more details to come, I am told). Most notably he said that the Treasury would no longer set a single, uniform business rate and that cities with mayors would have the freedom to hypothecate rates rises for infrastructure improvements. These annoucements came in different parts of the speech but they belonged together; as a whole, they comprise a theory of how Britain is changing and what the state should do about it. This is revealed by a glance at the counter-arguments. Those who want planning rules to stay tight and infrastructure developments to proceed slowly claim that Britain should do more to use its existing stock of housing and infrastructure. Young people are forced out of the London housing market? Let them move to Hull. Trains between Manchester and Liverpool overcrowded? Cornwall is quiet at this time of year. Meanwhile the argument against liberalising business rates rests on (not invalid) concerns about equality. Letting councils capture local private-sector growth is a boon for thriving places like Leeds, Milton Keynes and Cambridge; much less so for struggling, post-industrial towns where businesses are closing and the young and entrepreneurial are leaving: Wolverhampton, Blackpool, Great Yarmouth.

What Mr Osborne is saying, then, is: allow the failing places to fail, but help people move to the boomtowns. Mothball Wolverhampton, Blackpool and Great Yarmouth and make it easier for Leeds, Milton Keynes and Cambridge (not to mention London and Manchester) to build bypasses, new railway stations, housing estates, tramlinks and cycle lanes. Why? Britain's strength lies in city-based clusters of service industries, many employing university graduates; such places, in other words, possess the alchemical mix that allows them to capture the advantages of globalisation. Where places are failing it is usually because they are too small, too out of the way or too low-skilled. In government Labour's answer was to let the boomtowns boom, cream off the benefit in taxes and pass it down to places without an invite to the party. Mr Osborne's answer is different: work with the grain of economic change, not against it. Pump up the places doing well and help people in the places doing less well to relocate there and throw themselves into the forwards churn of globalisation, rather than merely compensating them for it. This carries the additional benefit of raising the national growth rate (research suggests that the biggest single reason for the gap in GDP per capita between America and Europe is that the former has more big cities); in an interview with Prospect, Jim O'Neill, a former banker now in the chancellor's ministerial team, estimated that focusing on the big cities would "translate into an additional 0.2 per cent of GDP growth on average per year up to 2030." Much of the broader thinking behind the move is articulated in this paper from Policy Exchange (Mr Osborne's favourite think-tank) in 2008.

A canny Labour Party would see in this approach a golden opportunity. After all, smoothing this transition requires much more than the policies annouced by the chancellor. A whole political programme suggests itself, constructed around the imperative of giving people in declining areas the chance to tap into the benefits of the global changes convulsing Britain. If people need to move from declining areas to booming ones, how can the state underwrite the risks of that shift, how can it help people adapt their skills accordingly, how can it adapt public services to make entitlements more portable? Yet the early indications suggest that the party will merely turn its nose up at Mr Osborne's announcements. Last week I accused Labour of being intellectually conservative. Consider its reaction to the chancellor's speech the definitive proof.