Thoughts after Beckett – Part 2: nailing economic competence

This is the second of a few blogs I’m writing about the main findings of the Beckett Report into last year’s election loss, after the first on leadership. Next, trust on the economy.

There’s perhaps two main facets to our economic credibility. One is about Labour being seen to support a strong and growing private sector, and by extension all those whose livelihoods are tied to it – Margaret Beckett noted in the report that Labour lost badly to the Conservatives among private sector workers, a category of employment that continues to grow. As Jeremy Corbyn and Tom Watson have rightly noted, self-employment alone is set to overtake the public sector as a source of work. Peter Mandelson recently made an observation that the public aren’t much more sympathetic to big business than rank-and-file Labourites, but that they do expect us to make clear that we “understand the fundamentals of the market economy”, and there’s a particular case to align ourselves strongly with small businesses – to be the party of the FSB, not just the CBI. We must get out of the habit of thinking that to be pro-business is simply about Faustian pacts with capital – instead, we must be pro-business to be pro-worker.

In a blog for LFIG last summer, I made a few suggestions about how Labour can better reach out to businesses and those who work in them. While as social democrats we believe that adequate taxation and regulation are vital for a fair and functioning society, we must always make clear in our language that we are not flippant about the burden this can create for businesses (especially struggling SMEs), and that we strive for the right balance. We should be better at highlighting the ways in which public intervention can foster a strong private sector – the utility bills Ed Miliband sought to freeze hit small businesses just as hard as they hit families, and revitalised infrastructure and a British Investment Bank would’ve aided growth. 

I argued that while the dream of a moral economy may obligate Labour to call out companies like Sports Direct, we should also highlight good corporate citizenship in equal or greater measure, and I said we should continue the business stream of the Future Candidates Programme, if we wished to heed Stella Creasy’s call for a Labour party that is not just pro-business, but “of business”. Most of all though, I noted the words of an LFIG committee member who had argued that Labour needed to sound as passionate about wealth creation as we did about the NHS – in politics it is not just what you say, but how (and how often) you say it that makes clear your priorities.

The other part of our economic standing, the one that has cast a long shadow over Labour politics for well over five years and provoked endless division in our ranks, is of course fiscal credibility. This was shattered in the wake of the financial crisis of 2008, as Labour was forced to run up a deficit as Gordon Brown rightly fought to safeguard livelihoods and re-stimulate a tumbling economy – Britain still owes him a debt for making the right decisions in a crucial moment. However, in the run up to the 2010 election and in early months of the coalition, the Conservatives relentlessly embedded a persuasive narrative in the public consciousness about Labour ‘maxing out the credit card’, a claim at odds with the fact that the Conservatives themselves backed Brown’s investment in public services prior to the crisis (and with the fact that the Conservatives themselves had to run up sharp deficits after Black Wednesday, clearer proof as any that this is necessary in times of crisis, whatever the colour of the government).

Ever since, Labour has been divided between two main camps – those who felt Labour should correct the record, and those who felt we should ‘concede and move on’. Margaret Beckett covers the logic of the latter camp– the idea being that by the time Ed Miliband had won the Labour leadership, the Tory narrative and public anger at Labour were so entrenched that focusing on the future was a better course of action (interestingly, she also notes Labour was assuming the economy would have recovered somewhat by 2015, lessening the issue, but Tory economic mismanagement and premature cuts slowed the pace and kept the issue live). But the contrary view is that failing to handle the charge that Labour overspent meant Labour was left hamstrung – still now in 2016, the party remains lost on this.

Labour must nail this once and for all, but I suspect that the answer lies somewhere between Labour’s two camps. The issue is that in the public’s mind, the buck stops with the incumbent government when there is an economic calamity, and especially if the government had been in for over a decade, as Labour had by 2008. Therein lies the flaw of going for broke with a solely defensive counter-narrative – the appearance of a flat denial of any wrongdoing won’t wash with a public expecting humility from Labour, which continues to leave a space for the Tories’ account of where we fell down. Instead, we must give a reasonable defence of our record, reminding people of the years of economic growth Labour oversaw and Gordon Brown’s stellar, world-leading response to the crash, leavened with candid acknowledgements of where we could’ve been better. It helps that in some of the main areas where we can do this, we can segue into an argument that the Tories haven’t learnt the lessons of the crash at all.

As some leading Labour figures have said since last May, there is a good case that we should now commit to aim for surpluses in line with the Keynesian obligation to conserve in the good times, though I’m sceptical that this alone would’ve made a profound difference to either the economic or political reality of the crash (its often forgotten that Ireland and Spain ran pre-crisis surpluses, but that their structurally weak economies still left them facing severe deficits and painful austerity). 

Instead, we need a better articulation of One Nation themes around rebalancing the economy and empowering the regions, which were totally absent by the time of the 2015 short campaign. As Chuka Umunna acknowledged at the Fabians recently, Labour could have done more to rebalance the economy away from London and financial services, creating a German-style economy built to withstand economic shocks. For all the Tories’ Northern Powerhouse rhetoric, their failure to protect British steel is a vivid demonstration that their heart isn’t in this task, so opportunity remains. Simultaneously, we could’ve been stronger on City regulation – we should say so, especially at a time when the Tories are falling into old habits. Candidness about these things in our answer about our past record is relevant in the here and now, as they are still on people’s minds as speculation mounts about the shape of the world economy and how it may affect Britain.

But it’s not just about persuading the public – we must remind parts of the Labour movement itself that trust with the public’s money is worth having, as we still seem prone to believing that the only true form of radicalism is the sort of big-ticket spending commitments that provoke awkward questions on the doorstep about workability. Prudence and hard-nosed, evidence-based prioritisation are core requirements of social democracy, as our Scandinavian sister parties have always known. 

Imagine if someone came up to you and offered to take some of your money and invest it on your behalf – the only way in your right mind that you would agree is if you felt you knew that person and could trust their judgement. That’s what a social democratic party is, though – we believe in a vision where everyone pays a little more of their hard-earned cash into a system, on the promise of public goods and collective protection from factors beyond their control. In the years ahead, Labour may have to mount smart arguments in support of ring-fenced taxes if the NHS is to be sustained, for example. But if by 2020 they still don’t trust Labour to invest wisely, and instead continue to view us as well-intentioned but risky, they have no reason to want to put in. It is in those conditions that the Conservative language of ‘keeping your own money’ by scything back that ‘bloated state’ becomes seductive by default, and the hidden danger of the atomised ‘you’re on your own’ society their vision entails goes unopposed.

Trust is the prerequisite for us to bring our progressive vision alive again, so it’s something we must fight to regain. But as we saw last year, while stressing in a short campaign that the manifesto is costed is necessary, it was nowhere near sufficient and came far too late. Instead, from top to bottom, our entire tone and ethos must reflect that we get the gravity of what we are asking the public to believe in.