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I had this on Labour Uncut last week.
It is acknowledged that people do not join the Labour party simply to deliver leaflets or attend uninspiring meetings. This tends to go along with support for giving members more say on policy. But parties are vehicles of change, not forums for mass therapy. Party debate is a means to the end of building the world that Labour exists to create.
As our policy review continues, it’s worth reflecting on the “built to last” exercise undertaken by David Cameron after becoming the Tory leader. His government’s programme now appears anything but. His health policy is fudged, his police promises are broken, his public service reforms are rehashed and events have rapidly exposed his defence policy.
The biggest global economic crisis since the 1930s has left almost four in ten voters able to say: “I can’t imagine I’ll ever have the money I want to meet my needs.” Notwithstanding the conflation of wants and needs in this statement, this indicts Cameron’s ability to generate any feel good factor.
Running through many of the government’s failings is a refusal or inability to acknowledge the reality of Britain’s place in the world. They will not place the economic crisis of recent years in its proper global context for fear of distorting their framing of these events as entirely Labour’s fault (and the enduring strength of this frame is one of the government’s trump cards). They will not adapt their defence review to events that the foreign secretary has compared with the fall of the Berlin wall. They will not engage in a meaningful debate about the future of our continent because they are bored by Brussels, contemptuous of Athens and scared of Bill Cash. They will not concede that the UK’s position within global labour markets makes nonsense of their commitment to reduce annual immigration to the UK from “hundreds of thousands to tens of thousands”. This will, as all realities do, catch up with them.
Their immigration policy is just one instance of their being economical with the actualité. Their welfare policy is meant to be about getting people into work. Try telling that to women and council tenants who face perverse work incentives because of policy on tax credits and council housing. And, of course, we were promised “no more top down reform of the NHS” and we were given Andrew Lansley’s earthquake. Michael Gove’s schools reform has proceeded more smoothly than Lansley’s revolution. Could Gove’s relative success be because, as David Aaronovitch recently asked, “he has done pretty much what he told people before the election he would do?”
The implosion of his policy programme matters less to Cameron than it would do to Ed Miliband as prime minister. Cameron believes in nothing, but it is his nothing. It is his occupancy of number 10. It’s not about any bigger purpose. Ironically, gutting himself of principle makes his wholly pragmatic goal of remaining prime minister harder to secure. It makes his government more vulnerable to events. Pragmatism without principle isn’t pragmatic. It’s a ship without a compass. Margaret Thatcher u-turned as prime minister but by never lacking for direction these u-turns didn’t bring into question her fundamental purpose.
Miliband’s purpose is quite different, obviously. He should, nonetheless, ask: What lessons for our policy review can be learnt from the period between “built to last” and now?
The policy review should arrive at a programme that we’d be prepared to defend during the election and be capable of implementing in government. We would be reaping a whirlwind to indulge in any Lansley-like sleights of hand or to promise more than is deliverable, as the government has done on immigration.
Lansley’s reforms have jarred with Cameron’s personal identification with the NHS, which was central to his attempted Tory detoxification. Cameron was right to address negative perceptions attaching to his party, but health policy in government shows that this attempt lacked ballast. This cannot be absent as we tackle the negativity that attaches to us in various policy areas: welfare, immigration, the economy, taxation and “big government” in all its forms.
Not only do we need to show that we get it, but that we require genuinely effective and workable answers. We need also to decisively move beyond the little Englanderism of Cameron – explaining how we will prosper in the post crisis global economy, what kind of Europe should emerge post Eurozone calamity and what our role in the world ought to be post Arab spring.
Yes, robust, inclusive party debate is vital, but so much more so is having this process conclude with a programme that could meet these complex challenges and is genuinely built to last.
I had this on Labour Uncut a few weeks ago.
Tony Blair, according to his economics advisor as prime minister, isn’t much of an economist. In contrast – the only leader to take Labour to three general election victories – Blair is a politician par excellence. While others are better on economics, what Blair says and doesn’t say on the economy is politically insightful.
Let’s take four points made in his speech and the Q&A at a recent Progress event.
First, Labour should focus more on microeconomic debates and less on the macro-economy.
This seems an oddly technocratic point but reminds me of the view of Douglas Alexander and Jim Murphy that “Labour needs a draw on the deficit and a win on growth”. I suspect I took Alexander by surprise when I asked how we achieve this at a CLP dinner earlier this year.
I also suspect that Blair is giving his answer. We get a draw on the deficit by maintaining a strong line that closes it on the trajectory first specified by Alistair Darling. We get a win on growth not by making arguments about the economy as a whole but by crafting a series of bespoke policy offers sector by sector.
The combined impact of these offers would enable a win on growth and creates a series of talking points with business, which, as Blair stressed, matters because we won’t have this win until we have a phalanx of leading business people prepared to back us.
Second, these are distinct questions:
- How do we make sure the crisis never happens again?
- How do we get the economy moving again?
Separating these questions misses the golden thread of confidence. The economy won’t be moving again until we have confidence in a brighter future. We won’t have this until steps are seen to have been taken to mitigate the risk of the crisis of recent years repeating. Rock bottom public confidence attests that this isn’t coming from government.
There is opportunity in this for Labour. But we would create problems for ourselves if in reaching for this we undermine our deficit closure strategy or underplay the emphasis placed upon the tailored microeconomic offers suggested above. The priority should be these offers, rather than grasping for an elusive confidence bullet. As we roll out these offers, though, we should be thinking hard about what mix of financial, trade and fiscal policy that bullet might be composed of. We would be better placed to argue that our bullet is real on the back of some winning microeconomic arguments.
Third, the UK should join the euro when the economic conditions are right.
He’s been saying this for years. Yet the euro, at least as currently constituted, seems in contradiction with reality. As Italy looks ever more like a larger Greece, it threatens to make Lehman Brothers look like a tea party.
Blair, nonetheless, maintains that the geo-political clout of the UK would be maximised by euro membership. While this may or may not be true, euro membership now seems so far from the UK’s economic interest as to beg the question: What steps, if any, can a UK that remains outside the euro for at least the foreseeable future take to maximise our geo-political influence?
Targeting euro membership seems as 1990s as Britpop. Redolent of a time when BRICs were things you built housing bubbles with. Labour should, of course, continue to play a constructive role in the EU. However, we should also more strongly stress our support for updating the institutions of the global economy (e.g. the World Bank and IMF, including the global reserve currency advocated by Roger Bootle). Such reform would contribute towards minimising the chances of the crisis of recent years repeating. Labour advocacy would have us be the internationalist, far-sighted party that we should be.
Fourth, he rightly trumpeted his many achievements as prime minister.
While his government was characterised by much needed increases in public spending, unsustainably high tax revenues from the city afforded a large chunk of this. This un-sustainability goes a long way to explaining the deficit. These tax revenues were recycled through tax credits and similar but the distribution before this secondary redistribution was so skewed that many could only have the lives they wanted through accessing easy credit. This built up a stock of private debt that households are now struggling to pay down.
If a more equal distribution of income and wealth could be achieved without resort to secondary redistributions, these problems would be more containable. And Labour would have achieved its historic purpose. To serve this end, though, we need to return to government.
If done properly, thinking through and taking forward the ideas suggested by the economics of Blair can both make ourselves more electable and better able to realise our historic purpose in government.
I had this on Labour Uncut a few weeks ago:
“We know no spectacle so ridiculous as the British public in one of its periodical fits of morality”.
Denis MacShane sought to console speaker Martin by writing to him with the words of Thomas Babington Macaulay at the height of the expenses scandal. But was this quotation really appropriate?
Weren’t the British people right to be aggrieved by elected representatives defrauding them? Aren’t they also legitimately angry with, as Ed Miliband put it, “bankers who caused the global financial crisis” and “those on benefits who were abusing the system because they could work – but didn’t”? And can there be any doubt that the revulsion of the public against the News of the World is justified?
The spikes in outrage against fiddling politicians and phone-hacking journalists, as well as the slower burning resentment at welfare cheats and fat cat financiers, makes a nonsense of Macaulay. The people he mocks instinctively know right from wrong. And in this intuitive grasp we see ourselves for what we are: communitarians.
The philosopher Julian Baggini foreswore ivory towers and spent six months with the people of Rotherham before concluding that this is the philosophy of the English. It was, incidentally, in the same town that Gerry Robinson tried to “fix the NHS” and Jamie Oliver “taught the poor to cook”. This is a worldview that stresses the responsibilities of the individual to the community. Membership of the community entitles rights and privileges but responsibility demands that these be reciprocated.
We are a nation that wants to see itself made up of; hard working families who play by the rules. We want those who play by the rules to be supported and to get on. We want those who don’t to be punished. The ascendency of Thatcherism, with its win-at-whatever-cost individualism, has obscured the extent to which we see ourselves as members of social groups to which we owe allegiance and the execution of responsibility.
Those who can work have a responsibility to do so. Those who can work but don’t should be penalised. Law makers have a responsibility not to be law breakers. Just like everyone else, including journalists and bankers. And they should feel the full force of the law when in breach of it. These professions are, however, held to more exacting standards of responsibility than legal compliance alone. Their integrity demands more than this. The irresponsibility of hacking the phones of grieving families is about much more than breaking the law.
As Ed Miliband’s advisor Greg Beales tweeted last Wednesday: “Today Ed Miliband spoke for the country because David Cameron can’t. Very important moment”. Tony Blair drew applause from a Progress audience last Friday by saying: “Ed Miliband has shown real leadership this week”.
Cameron’s “catastrophic error of judgement in hiring Andy Coulson” ties him to the violators of the communitarian rulebook. Miliband, in contrast, has made himself a tributary for these rules. And followed this through to demands for the requisite punishments: the resignation of Rebekah Brooks, the referral of News International’s takeover of BSkyB to the competition commission. In doing so, he gave his leadership its biggest turbo-charge to date.
He had previously enjoyed one of his best days with a speech on responsibility that placed him on the right side of the rulebook on welfare and bankers. By throwing everything he could at News International Miliband generated a much bigger impact than that speech had. But he also took a bigger risk.
Because, beyond the fierce urgency of now, a risk is what being sanguine about schmoozing Murdoch – who will more than likely still be a major media player at the next election – amounts to. But smart politics is about calculated risk-taking – and, in a country of communitarians, respecting the rulebook. If the power of newspapers is as diminished as we are sometimes told and if the public standing of News International continues to decline, Murdoch’s bite shouldn’t be as feared as it has been. If Cameron keeps being on the wrong side of the rulebook, he won’t be the winner that Murdoch always looks to back.
The possibility, although still slim, that Murdoch is a busted flush and Cameron a loser suddenly appears real. If Miliband can maintain his forceful leadership on the issue, capturing the public mood then this will increase. It will require much more than a win in today’s Commons vote called by Labour or in the wider debate opened up by the News International revelations.
This debate threatens a rupture between Cameron and the people – and demonstrates that when Ed connects with popular instincts for right and wrong he can lead.
I had this on Labour Uncut yesterday. It was deemed a “must read” by Politics Home.
Stewart Lee describes David Cameron with his arm around Nick Clegg as being akin to “a bloke who has bred a prize pig”. The Liberal Democrats have been slaughtered to ten per cent in opinion polls and Cameron boasts of being “in a position in four years time where we win the general election and govern on our own”.
While Tories love this bullish talk, the plan for the “pigs” fight back is more obvious than that which will deliver Cameron this outcome. The NHS bill has shown what can be expected from the Liberal Democrats. Pick fights with their governing partners – even if this necessitates reneging on past commitments. Extract concessions. And present the outcomes as injecting Lib Dem sanity into the Tory madness.
In 2003, the Tories complained about the Liberal Democrats producing a “disreputable” campaign guide. It advised candidates to “be wicked, act shamelessly, stir endlessly”. The Tories might suspect that Lib Dem ministers have dusted it down. Chris Huhne seems eager to manoeuvre. He has attacked his Conservative colleagues as “rightwing ideologues”. He is, obviously, looking for a “win” on the environment.
Huhne’s constituency was Tory target seat number 12 last year. It is reported that Cameron will “not lift a finger to help” Huhne if he is found to have lied to the police. This disinclination may reflect bad feeling over the AV referendum. Huhne’s spoiling for a policy fight is unlikely to rebuild burning bridges.
Huhne retaining his seat through taking a joint Tory/Lib Dem ticket at the next election seems a diminished probability. As government policies are doing nothing to allow Cameron to make substantial inroads in the north of England, the prime minister looks intently upon Lib Dem seats like Huhne’s in the south.
With his scraps with government colleagues, Huhne seeks to retain his hold on his seat. Huhne won’t attack from the right in these inter-government confrontations. The Liberal Democrats are desperately trying to salvage their leftist identity from the wreckage of their entry into government. This boxes the Tories in to the right – limiting the extent to which the Cameron camp can be pitched on the centre.
Having devoured (but not properly understood) the Tony Blair books, this might unnerve Cameron. He wants to command the centre and shift it in his direction through reform, in contrast to the supposed failure of Blair’s first term. But nowhere in those books does it advise immediately firing out all your ideas, even if they are so half-baked they will inevitably fail to secure support and demand back tracking.
We know about the u-turns. The delayed white paper on public service reform also suggests that, while the Lib Dems are reduced to pettiness, the Tories are already scraping their ideas barrel. Tory ministers are risk-averse in assisting, because, as the likes of Andrew Lansley and Caroline Spelman attest, they will be hung out to dry if these risks don’t quickly come off.
There are threats and opportunities for Labour in these developments. We seem irrelevant when the debate plays out exclusively between two fractious governing parties. It is frustrating that, while it was long apparent that this was likely, the NHS bill has too often played out in this way. Huhne now threatens to extend this pattern to the environment. The need to insert ourselves into the national conversation places increased premiums on clear messaging and distinctiveness.
Senior Labour people insist that we “defend the record” of the last government. This cannot be at the expense of not learning the lessons of the last general election. We must not confuse babies with bathwaters in striking this balance. We’ve been too coy, for example, about the health gains we achieved by GP commissioning in government, which didn’t lose us any votes. Instead of being fearful of our own shadow, let’s take such good ideas to their logical conclusion. This won’t leave us in the same places as the government. It will, though, confirm Alan Milburn’s argument that only Labour can successfully reform public institutions.
Some examples of where this attitude might lead are: Labour believes that work should pay, so we want to rebalance taxation from income to wealth. Labour believes that power should be accountable to people, so we want a second chamber fully elected by PR. Labour believes that Britain is in Europe, so we will work constructively to create an EU that best enables the UK to adapt to twenty first century realities. Labour’s engagement with the EU is part of a belief in internationalism. This demands that we do not allow a narrow, ultimately self-defeating conception of national interest to stand between us and support for the kind of urgently needed reforms to global institutions championed by Mark Malloch Brown.
Advancement of these kinds of idea would show the country that we have the self-confidence to speak our truths about today’s biggest challenges. It would show the Lib Dems that if their core beliefs (on tax, the Lords, PR, Europe and global institutions) mean anything, that they could be better furthered under a Labour-led government than a Tory one. If we can secure the tactical objective of ensuring that Lib Dem MPs are inclined towards a Labour-led government, then the Tory/Lib Dem alliance cannot continue into a second parliament. If we can do this at the same time as achieving the strategic objectives of distinctiveness and relevance, then so much the better.
These strategic and tactical imperatives require candour about our beliefs and the policy conclusions to which they lead, rather than Clegg-bashing or any other form of personality driven politics.
Jonathan Todd is Labour Uncut’s economic columnist.
This is my contribution to the new Pragmatic Radicalism publication.
Politicians of all parties claim to favour rebalancing the economy; whether this is rebalancing from the public sector towards the private sector; from domestic consumption to exports; from finance towards manufacturing; or from London and the South towards the North and Midlands. These various kinds of rebalancing all enjoy broad political support but these consensuses risk being as glib as saying that all mainstream British politicians believe in, say, liberty. They mask deeper complexities and challenges, which must be overcome to achieve meaningful economic rebalancing. Labour should seek policies which will enable this, as well as language and demeanour that will allow us to reap the political benefit of tapping into the popular desire for a less financial-centric society and economy. We should, however, focus on the substantive issues and avoid puerile bashing of bankers. Let’s consider in turn each kind of rebalancing.
Rebalancing from the public to the private sector
The Office of Budget Responsibility (OBR) predicts that by the end of this parliament there will be 1.5 million more people working in the private sector and 400,000 fewer in the public sector. The political and economic strategy of the Government largely depends upon something of this order coming about. While their cuts are faster and deeper than is prudent, it is not inconceivable that extremely lax monetary conditions – rock bottom interest rates and quantitative easing – and a low pound allow something approximating to the OBR prediction to become real. Equally, there are many reasons why it may not; not least on-going instability in the eurozone.
It would be as unwise for Labour to be wholly pessimistic about the prospects for private sector recovery as it would be for the UK to gloat about troubles in the eurozone. Labour has to be the party of optimism, which should include being optimistic about the ingenuity of business, particularly if the Bank of England contains its fear of inflation and doesn’t raise interest rates too rapidly. Labour must avoid the perception that we see fiscal stimuli as the only motor of growth and monetary and exchange rate conditions as irrelevant. We should also acknowledge, through a credible deficit reduction programme, that a key reason for deficit reduction being important is that it reduces upward pressure on interest rates.
Part of this programme should involve a shift in the tax base to sharpen incentives towards hard work. This means less tax on income and more on wealth. A land tax could form part of this transition. It would do something to dampen the British tendencies towards property speculation and bubbles. It might also form part of a Labour drive towards tax simplification. Because taxation of land is simple it would be difficult to avoid. Labour could win friends from UK Uncut to the CBI with a considered drive towards tax simplification. UK Uncut should appreciate simplifications that make tax harder to avoid and the CBI should value simplifications that support economic growth. A land tax offset by reductions in taxation on employment would reduce the capacity of the rich to avoid taxation and increase the extent to which everyone keeps the fruits of their hard work. Tax simplification should not be owned by the right. It should be part of Labour’s arguments for rebalancing from the public and private sectors.
Rebalancing from domestic consumption to exports
The global recession has demonstrated the utility of exchange rate and monetary flexibility and vindicated the decision to keep the UK out of the Euro. It is far from certain, however, that policy thus far has successfully contained the banking and fiscal crisis in the eurozone. Given the importance of eurozone growth to UK growth, the UK should play a constructive role in arriving at such policy, while not confusing our responsibilities with those which properly belong with eurozone members. As debates about the future of the Euro and the EU are disentangled – or, as has been more the case to date, conflated – British interests are ill-served by the chair left vacant at the negotiating table by David Cameron.
The prime minister has been eager to champion trade with the BRICs (Brazil, Russia, India and China) and bored by Europe. Not realising the connection between the BRICs and the EU. In 2009 Ireland’s 4.5 million people accounted for more UK exports than the BRIC countries combined. It should be an economic priority for the UK to deepen our comparative advantages with the expanding middles classes of the BRICs. The development of these countries does much to explain the expectation of Gerard Lyons, chief economist at Standard Chartered, that the global economy will at least double in size between now and 2030.[1] However, the extent to which the UK benefits from this development depends on how quickly we advance trade with the BRICs. We need an EU that is recalibrated towards adaptation to a global economy that is increasingly driven by Asia. Cameron is too scared of Bill Cash to properly work towards such an EU. His carpet bagging of UK PLC to the BRICs counts for little next to this.
Rebalancing from finance to manufacturing
We need to be realistic about employment prospects in manufacturing. The UK’s manufacturing sector remains the sixth largest in the world by output but no manufacturing sector in the developed world, even in Germany, a country with a stronger modern manufacturing reputation than us, has been able to avoid a considerable long-term decline in manufacturing employment.
We should not give in to the presumption that finance and manufacturing cannot be complements. We should be asking: what kind of financial sector would be most complementary to manufacturing in particular and the wider economy in general? And how can public policy best encourage such a financial sector?
The objectives set for the Independent Commission on Banking – minimise systematic risk and moral hazard; promote competition in both retail and investment banking – are vital. George Osborne won’t hold the Commission to these objectives. But Labour should. We should also be advocating a financial sector that is as complementary as possible to the wider economy. This argument probably goes beyond the remit of the Commission but the work of the Commission gives Labour a chance to firmly place it within the national debate.
Alongside rock-solid retail banks we need a flourishing of nimble financial services firms that are prepared to provide capital to enterprising SMEs. Such firms must be developed in green manufacturing but they will be more likely to do so if a credible price for carbon can be established. At the moment the carbon price comes from the ineffective EU-ETS. This carbon trading scheme either needs meaningful reform or replacement by a carbon tax. Either approach should be taken forward at the EU level, rather than in the form of the cack-handed move towards a carbon price contained in Budget 2011. Again Cash haunts Cameron.
Rebalancing from London and the South towards the North and Midlands
As well as having sharp economic disparities between our regions the UK has one of the most centralised political systems in the democratic world. Labour should take ownership of the localism debate with the intention of creating forms of localism that reduce these disparities. This means holding localism proposals to the real localism standards proposed by IPPR – localism be effective and efficient; properly funded; at the heart of a drive for social justice; accompanied by a step-change in the transparency and accountability of local decision-making; and framed within a constitutional settlement between central and local government.[2]
Local government should be where the next generation of Labour leaders and ideas emerge. When we were last in opposition Lambeth was ill governed by Red Ted Knight. Now it pioneers the ground-breaking co-operative model. Liverpool was once troubled by Militant. It should soon have a resonant voice in national policy debates in the form of a Labour mayor. That Andrew Adonis, as Transport Secretary, reports battling to identify the views of great regional cities like Liverpool, while Transport for London made constant demands of him, is indicative of how skewed our national conversation has been.[3]
Regional cities haven’t only lacked voice in national debates. They have also lacked private sector employment. While Brighton and Milton Keynes both grew their private sector jobs bases by 25 per cent between 1998 and 2008, some cities slipped backwards: Stoke (-16 per cent), Blackburn (-12 per cent), Blackpool (-6 per cent).[4] The Government’s response – Enterprise Zones, Local Enterprise Partnerships (LEPs) and the Regional Growth Fund – is inadequate. The Regional Growth Fund is one quarter the size of the budget for the (now abolished) Regional Development Agencies (RDAs) in 2009/10.
The future of funds previously allocated by RDAs has been keenly debated. But these funds account for less than one per cent of total government spending in the regions.[5] Mainstream budgets, such as transport, skills and housing, are much larger. The principles of real localism should be applied to these budgets. The interface between LEPs and mayors remains to be worked out but the real localism case for devolving mainstream budgets to mayors, given their transparency and accountability, seems stronger than to LEPs.
Irrespective of whether it is to mayors or LEPs that mainstream budgets are devolved it is imperative that these resources are allocated to maximum incremental impact. This means working with the grain of markets, ironing out market failures and only intervening where there is a clear rationale for doing so. That many of these markets are global, both underlines the interconnectedness between the domestic and global economies and the scale of the challenge facing policy makers who are seeking to achieve on much reduced resources objectives that often proved sadly illusive during the New Labour boom. Yes, the resources available in the boom years were not always as well targeted as they could have been. Yes, real localism hasn’t been applied before and should enable better targeting. Nonetheless, it remains the case that politicians eulogise economic rebalancing, due to its popularity with voters, without acknowledging that it often runs contrary to the underlying drivers of our economy or facing up to the tough policy choices that will be required to make it more of a reality.
Conclusion
Voters are strikingly confused as to what Labour stands for.[6] Economic rebalancing, in every sense, given the ineffectual policy, lip service and lack of resources provided by the Government, can be a policy area commanded by Labour, in which we find new expression of our values of equality and fairness. But it raises many challenges, which the party’s policy review should seek to navigate. Only by rising to these challenges will Labour be able to move beyond the dismal record of politicians over-promising and under-delivering on economic rebalancing.
While the country almost aches for politicians capable of doing better than this, Labour will need to be bold reformers of both state and market to be these politicians. Applying real localism principles to mainstream budgets and fully realising the promise of mayors would, for example, be profound reforms of the state. Reforming the financial sector to make it as complementary as possible to the wider economy is as far reaching a reform of the market. Nothing less than such thoroughgoing state and market transformations will be needed for the UK to prosper in an increasingly Asian age.
