The challenge facing Labour

Don’t let the Tories win the argument on the management of public services.

I'm afraid in my previous post I gestured rather airily in the direction of some "fundamental questions of political economy" that the candidates for the Labour leadership need to answer, without specifying what those questions might be. I don't think I'd be able to better for clarity or precision Chris Dillow's account of the challenge facing Labour as it tries to determine what a post-New Labour version of social democracy might look like.

Dillow offers five reasons why New Labour's conception of social democracy is dead. I'd like to draw your attention here to two of those reasons. First, he points out that Labour's "promise of macroeconomic stability" was false (John Gray said something similar in the piece about Ralph Miliband that I discussed yesterday):

Macroeconomic stability was mere good luck which has passed, not something which it is in the power of governments to create.

The challenge for an intelligent left is to ask: how can we protect the worst-off from macroeconomic fluctuations, given that macro management is insufficient? This requires either more use of insurance markets, or a welfare state that puts a higher weight upon reducing risk than upon incentives.

Gray, of course, was fairly pessimistic about the ability of a future Labour government to "protect the worst-off from macroeconomic fluctuations". But he and Dillow agree that figuring whether and how it is possible to do this in the "globalised world" to which Tony Blair's memoir is, in part, a deluded incantation is a task the centre left needs to take very seriously.

Second, Dillow makes a point about managerialism and the public sector (something David Miliband and Jon Cruddas allude to in their Guardian piece that I also blogged about yesterday):

The inefficiencies in the public sector generated by top-down management might have been tolerable when no one worried about government borrowing. However, even though concern about the deficit is grotesquely overblown, this is not the world we'll live in in the foreseeable future. Governments will have to pay more attention to value for money. This requires that public-sector workers be empowered, as they know best where inefficiencies really lie. But New Labour's managerialism prevented it from seeing this.

The critique of managerialism is something that the left has allowed the Tories (for whom it goes proxy for an assault on the public sector tout court) to take ownership of and it's time it wrested it back.

Jonathan Derbyshire is Managing Editor of Prospect. He was formerly Culture Editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.