It's time for Osborne to use the I word - 'Intervention'

We need the state to invest in business innovation and infrastructure that commercial investors fear

It's not looking good for Osborne. Output, employment, sectoral data and confidence all point to an economy either on the brink of recession or stuck deep in the doldrums. Inevitably, the debate about how to escape this very nasty patch intensifies and the battle lines dividing fiscal hawks from doves become ever more stark. But it is a debate that masks an even nastier truth for the UK economy. Even when we are through this crisis, we will still be an economy unfit to fight the big global economic battles ahead.

As a new paper published this week by IPPR and written by myself and David Nash shows, the UK is a serial under-performer compared to our competitors on those OECD, IMF and other international economic indicators which are most vital for successful competition in the global market.

On investment in business, on skills, on innovation and productivity, and on presence in emerging markets we are decidedly mediocre and, in some cases, worse than mediocre when compared to similar economies.

This should be troubling at any time but at a point when new, confident players from the East are striding into global markets and as business practices and markets are being turned upside-down by web technologies, fear and trepidation should be stalking Whitehall and the business world.

But because of the intense focus on the short-term crisis there is a real risk that once the economy is growing healthily again, a 'job done' mentality will seize policy-makers. It would hardly be a surprise. There is a long history of complacent back-slapping in British economic policy-making: Macmillan's "never had it so good" as inefficiency ate away at the economy, Nigel Lawson's self-satisfaction at rapid growth in the late 1980s just before the property market crashed under its own weight, and Gordon Brown praising the City to the skies in his 2007 Mansion House Speech while the credit crunch (and worse) rumbled in the distance.

A continuation of this ignoble tradition could prove equally disastrous now.

We can avoid the potential crisis of the future not just by acknowledging the threat but also by moving beyond ideological shibboleths about the state as the enemy of enterprise that has gripped government for too long. Instead we need a new pragmatism that learns from those economies that have long out-performed us on business investment, skills, innovation and exports. These are countries have a hugely healthy respect for the free market and intense competition as the main drivers of growth and innovation but also recognise that the market simply is not very good at delivering some of the fundamentals.

Germany, Japan, the Scandinavian economies and, yes, even the USA use the state to invest in business innovation and infrastructure that commercial investors fear. At their best, they take an active role in predicting skills needs and so can shape their education and training systems to get ahead of the curve. They positively target innovative firms not just with tax breaks but with world class generously funded research. And when firms want to export they get generous credit guarantees plus a whole range of other supports. In short, they intervene. Not out of some ideological love of the state but because it works. Of course, these economies have their own problems and they are far from perfect but on the measures mentioned above, they consistently do better than us.

Intervention has, of course, had a very bad name in the UK. This is partly because the Thatcherite world view became so successfully embedded into Whitehall and into Party political debate (even though Thatcher herself could be quite the intervener when she wanted). But it is also because intervention became confused in the public mind with the economic planning of the 1940s and 1950s when the focus was actually on controlling employment and prices, not on the modernisation of business, as it was in the rest of Europe. The only time when intervention was seriously tried in the 1960s, it was all too late and ill-conceived to save out-dated British business and it degenerated in the 1970s into support for lame duck firms and fading industries.

The intervention we need today should have a very different focus. It is not about predicting the economy of the future and plotting a path there. It needn't even be about identifying high growth sectors and giving them special support. It should focus instead on the very significant long-term weaknesses of the UK economy relative to our competitors by building a bold policy framework to address those weaknesses before it is too late and we find ourselves once again in decline mode. In short, it is the opposite of our tradition of complacency replaced by an embracing of the pragmatism and common sense displayed overseas.

Adam Lent is Associate Fellow at IPPR.

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Labour’s best general election bet is Keir Starmer

The shadow secretary for Brexit has the heart of a Remainer - but head of a pragmatic politician in Brexit Britain. 

In a different election, the shadow Brexit secretary Keir Starmer might have been written off as too quiet a man. Instead - as he set out his plans to scrap the Brexit white paper and offer EU citizens reassurance on “Day One” in the grand hall of the Institute of Civil Engineers - the audience burst into spontaneous applause. 

For voters now torn between their loyalty to Labour and Remain, Starmer is a reassuring figure. Although he says he respects the Brexit vote, the former director of public prosecutions is instinctively in favour of collaborating with Europe. He even wedges phrases like “regulatory alignment” into his speeches. When a journalist asked about the practicality of giving EU citizens right to remain before UK citizens abroad have received similar promises, he retorted: “The way you just described it is to use people as bargaining chips… We would not do that.”

He is also clear about the need for Parliament to vote on a Brexit deal in the autumn of 2018, for a transitional agreement to replace the cliff edge, and for membership of the single market and customs union to be back on the table. When pressed on the option of a second referendum, he said: “The whole point of trying to involve Parliament in the process is that when we get to the final vote, Parliament has had its say.” His main argument against a second referendum idea is that it doesn’t compare like with like, if a transitional deal is already in place. For Remainers, that doesn't sound like a blanket veto of #EUref2. 

Could Leave voters in the provinces warm to the London MP for Holborn and St Pancras? The answer seems to be no – The Daily Express, voice of the blue passport brigade, branded his speech “a plot”. But Starmer is at least respectful of the Brexit vote, as it stands. His speech was introduced by Jenny Chapman, MP for Darlington, who berated Westminster for their attitude to Leave voters, and declared: “I would not be standing here if the Labour Party were in anyway attempting to block Brexit.” Yes, Labour supporters who voted Leave may prefer a Brexiteer like Kate Hoey to Starmer,  but he's in the shadow Cabinet and she's on a boat with Nigel Farage. 

Then there’s the fact Starmer has done his homework. His argument is coherent. His speech was peppered with references to “businesses I spoke to”. He has travelled around the country. He accepts that Brexit means changing freedom of movement rules. Unlike Clive Lewis, often talked about as another leadership contender, he did not resign but voted for the Article 50 Bill. He is one of the rare shadow cabinet members before June 2016 who rejoined the front bench. This also matters as far as Labour members are concerned – a March poll found they disapproved of the way Labour has handled Brexit, but remain loyal to Jeremy Corbyn. 

Finally, for those voters who, like Brenda, reacted to news of a general election by complaining "Not ANOTHER one", Starmer has some of the same appeal as Theresa May - he seems competent and grown-up. While EU regulation may be intensely fascinating to Brexiteers and Brussels correspondents, I suspect that by 2019 most of the British public's overwhelming reaction to Brexit will be boredom. Starmer's willingness to step up to the job matters. 

Starmer may not have the grassroots touch of the Labour leader, nor the charisma of backbench dissidents like Chuka Umunna, but the party should make him the de facto face of the campaign.  In the hysterics of a Brexit election, a quiet man may be just what Labour needs.

What did Keir Starmer say? The key points of his speech

  • An immediate guarantee that all EU nationals currently living in the UK will see no change in their legal status as a result of Brexit, while seeking reciprocal measures for UK citizens in the EU. 
  • Replacing the Tories’ Great Repeal Bill with an EU Rights and Protections Bill which fully protects consumer, worker and environmental rights.
  • A replacement White Paper with a strong emphasis on retaining the benefits of the single market and the customs union. 
  • The devolution of any new powers that are transferred back from Brussels should go straight to the relevant devolved body, whether regional government in England or the devolved administrations in Scotland, Wales and Northern Ireland.
  • Parliament should be fully involved in the Brexit deal, and MPs should be able to vote on the deal in autumn 2018.
  • A commitment to seek to negotiate strong transitional arrangements when leaving the EU and to ensure there is no cliff-edge for the UK economy. 
  • An acceptance that freedom of movement will end with leaving the EU, but a commitment to prioritise jobs and economy in the negotiations.

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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