An unexpected and welcome argument has broken out in the Labour party about how it ought to govern the United Kingdom. Prompted by the party’s serial electoral winner Tony Blair and then picked up by the prime minister, Keir Starmer, and two of his rivals for high office, Wes Streeting and Andy Burnham, the party has started thinking.
The first part of any viable plan for the future is a plausible account of the past. From Makerfield, where he is campaigning to be both the local MP and the prime minister, Burnham has suggested that the UK has been on the wrong path for 40 years, placing the rupture in the unlikely year of 1986. Given the mayor of Greater Manchester’s comments elsewhere about the deleterious effects of Thatcherism and neoliberalism, he most likely means that all British governments since Margaret Thatcher’s in 1979 have shared an underlying belief in the primacy of market power over the capacity of the state.
This does not stand much scrutiny as a historical claim. In fact, it is barely even a serviceable description of the Thatcher governments which, as the Marxism Today writers pointed out long ago, combined a commitment to the market with a strongly authoritarian use of the state. It is still less a good account of the New Labour governments, in which Burnham served, which have a windfall levy on the profits of utilities, a national minimum wage and a package of workers’ rights to their name.
George Osborne is known for his cuts to the public realm, but also for the national living wage and the devolved powers which Burnham enjoys wielding. In 2022 Rishi Sunak gave a Mais lecture as economically dry as anything since Nigel Lawson, but his main bequest as chancellor was mobilisation of public money to uphold employment during a pandemic. Recent British history has been a hybrid of styles, and reducing the error to a single cause implies, wrongly, that there is an easy answer.
The fundamental problem, though, is clear enough. The bargain that British politics once offered—that living standards would rise—has been broken. Even before the financial crash of 2008, the average worker’s wages were stagnant. Labour is more comfortable talking about distributing the fruits of growth than it is about generating growth. The chancellor, Rachel Reeves, conceded this year that there was a “valid argument” against her decision to raise national insurance for employers, increasing the burden on businesses. It is not impossible to raise living standards without growth, but it is a great deal more difficult.
The opposition between the markets and the state is misconceived. The state can kick-start market incentives
In our cover essay this month, Ravi Gurumurthy presents the theory and practice of a Labour growth plan, where growth comes from the ingenuity of new firms and by improving the productivity of established ones.
But this is not simply a matter of summoning the “animal spirits” of the private sector. Without a functioning housing market which allows smart young people to gather where the work is clustered, growth will be impaired. The government needs to become much more ruthless about overruling local objections to planning applications, and there has to be a path towards electrification so that energy costs come down. British rates of investment are far too low, even though there is abundant money, much of it in pensions and other savings. In each of these areas, the state can help to kick-start market incentives. The opposition between the market and the state is, in each case, misconceived.
Accepting this will be an ideological leap for Labour, but one it must take. If, instead, the party retreats into the slogans and nostrums of what Blair called its “comfort zone”, the British public will conclude that politics no longer works. The upshot of that will be a much less palatable government. It is good that Labour has started thinking. It now needs to act.
