On Monday night, the Institute of Economic Affairs hosted a panel discussion on “Labour and the economy: addressing the cost of living.” It was chaired by Mark Littlewood (Director General of the IEA) and featured Dan Hodges (Telegraph blogger and columnist), Paul Ormerod (economist, author and entrepreneur), John Rentoul (chief political commentator for the Independent on Sunday) and Gisela Stuart (Labour MP for Birmingham Edgbaston). Prospect was the media partner.
We are putting up a blog from one of the speakers every day this week.
The nature of the Labour party, and of almost all other social democrat parties in the west, has altered fundamentally since the Second World War. Although the name remains unchanged, Labour is now essentially the party of the public sector professional middle class. This explains why it is so hostile to reforms of public services. It reflects the interests of its members.
The Attlee government of the immediate postwar period was the most left-wing government that Britain has ever had. The country had just emerged from a highly centralised war economy, rationing was still in place, and belief in the efficacy of socialist planning was strong. Even by the time of the first Harold Wilson government (1964-70), “socialism” was still espoused by many in the Labour party.
We can usefully compare the size of the state in the economy now with what it was under Attlee and Wilson. Public expenditure is made up of the wages and salaries of those employed in the public sector, public investment, and benefits. It is the former that reflects the immediate claim on resources from national output.