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Catastrophe averted?

The leaders of the rich countries went to Washington to save the world from sliding into deep recess

Vincent Cable

Shadow chancellor, Liberal Democrats

By the low standards of economic summitry, the G20 meeting rated quite high. There was a predictable, no doubt pre-written, communiqué, full of the usual banalities. And the meeting suffered from the absence of the world's most important politician, who hasn't yet taken up office. But, these necessary caveats aside, there were important achievements.

The first is that the meeting took place at all. The ludicrous pretence of the G8 (or G7) that the old western powers should set the global economic agenda has been punctured for good. On a purchasing power parity basis, China has the second-biggest economy in the world and India the fourth. It has been clear for some time that China is lender of last resort to the global system (by, in effect, underwriting US government paper) and the main source of global incremental demand (and commodity price inflation). The Chinese self-parody as the pupil sitting meekly at the feet of a dominant, but erring, master defies belief. It is obviously right that China, India and the other main non-G7 countries should be at the top table.

The second achievement was the clear realisation that unless governments hang together they will hang separately. Enough has been learned from interwar history for us to understand the follies of beggar-my-neighbour economics. Perhaps a warning shock was being sent across the bows of the incoming Obama administration not to reinvent the protectionist tariffs of the 1930s in a new guise, directed at China or Mexico in particular, or aiming to salvage the US auto industry through public subsidy. But this new-found concern for open markets has not yet communicated itself to EU or Indian or Chinese trade negotiators, who show no enthusiasm for lifting the block on trade liberalisation under the Doha round.

While trade policy is on the back burner, macroeconomic policy co-ordination is not. With a few exceptions - Germany notably - there is recognition of the need for aggressive monetary and fiscal policy and for large-scale intervention to recapitalise banks. These interventions can be and are being undertaken nationally. But governments acting in isolation attract critical attention from capital markets and currency speculators, as Gordon Brown is discovering. Structures like the G20 are the best safeguard against chaotic, unilateral action.

Will Hutton

Economic commentator

It was remarkable to gather so much economic and political power in one room to address a common agenda. That was the good news - along with commitments to co-ordinate fiscal expansion, to expand the lending power of the IMF and World Bank (Japan's $100bn loan to the IMF will increase the Fund's lending capacity by 40 per cent), to boost cross-border supervision, to tackle credit rating agencies, to reassess mad accounting rules and require member countries to attack the bonus culture in the financial services industry. A year ago such an agreement would have been inconceivable.

The bad news is that much of this is shutting the stable door after the horse has bolted. Four things have to be recognised: that the world has profound imbalances between high-saving, high-surplus areas in Asia and the Gulf and low-saving, structural deficit countries in the transatlantic economy (Germany excepted); that a system of floating exchange rates and private banks can no longer take the weight of recycling those savings; that unless the system is de-risked and the burden of adjustment is placed on deficit and surplus countries alike, the global system faces breakdown; and finally, that the business model used by the banks to recycle surpluses - securitisation and hedging in the $360trn global derivatives market - is broken.

In plain English, China must accept that its currency must appreciate; Britain and America, that they cannot run their economies on foreign savings; and all players that there has to be a system of semi-fixed exchange rates between the yen, the euro and the dollar.

One tough reality is that, for all their new economic weight, China, Brazil, Russia and India do not have fully convertible currencies - nor do they want to accept the discipline involved in having convertible currencies.

Ann Pettifor

Fellow, New Economics Foundation

Over the past decade, the Group of Eight leaders turned their exclusive annual meetings into jamborees. Rock concerts, protesters and celebrities added populist glitz. However, the real purpose of the meetings - international co-operation and co-ordination - was ducked. At last year's G8 Summit in Heiligendamm, Germany, George W Bush and Gordon Brown vetoed Angela Merkel's agenda item for co-operation over tighter international regulation and financial oversight of capital markets. That task, they argued then, could safely be delegated to "the invisible hand". Now that the fantastic, self-regulating machinery of free markets has proved grossly malfunctional, it is good to hear talk of enhanced co-operation and regulation.

But, in places, the joint statement issued by the 20 world leaders borders on the delusional. The phrase "We must . . . ensure . . . that a global crisis, such as this one, does not happen again" implies that they are avoiding the next war when they are still losing this one.

Even more questionable is the call for continued "economic growth". In a world of finite resources on a planet with limited capacity to absorb toxic emissions, and with bushfires encircling Los Angeles, we would have hoped that world leaders had some awareness of the threat of climate change and of the limits to economic growth. But no. The gravest threat to global security - our rapacious attitude to the earth's resources - is once again whipped up with talk of "market principles, open trade and economic growth".

Jesse Norman

Senior fellow at Policy Exchange

One might have thought the G20 summit a good moment for some straight talk from the Prime Minister. Instead, the political wind machine was cranked up to full blast. The summit would be a second Bretton Woods. Gordon Brown would forge a new global consensus on co-ordinated intervention to stimulate growth (while, of course, leading reforms to prevent the banking crisis from ever recurring). Luckily virtually none of this was true, or the summit would have been a hopeless failure. With fiscal measures already widely adopted, the G20 hardly needed Brown's leadership. No surprise that he returned empty-handed.

Labour has moved from despondency to a manic desperation to remain in office. The result is that the ever-fragile concept of truth in politics has wholly been cast aside. Thus the humiliating bank nationalisation has been dressed up as an act of far-seeing economic statesmanship. And a sensible warning from the shadow chancellor that current economic policy puts sterling at risk has been condemned for breaching an irrelevant semi-convention dating from the time of fixed exchange rates.

Alex Brummer

City editor, Daily Mail

There is a golden rule of international financial meetings. The larger the "G" number, in other words the more countries involved, the less likely it is that any worthwhile or binding decisions will be taken. So while it was wholly encouraging that the G20 summit brought a number of emerging market leaders to the top table of finance, including China, Brazil and Russia, there was never any real prospect of the event becoming the new Bretton Woods.

Furthermore, the summit took place in the final days of the lame duck administration of George Bush. Once it became clear Barack Obama was going nowhere near the confab, the event became even more of an irrelevance.

European leaders may like to blame Wall Street and Anglo-Saxon capitalism for the credit crunch and the recession now spreading through the Group of Seven like wildfire, but there is no hope of concerted international action without the new White House and Federal Reserve on board.

Almost all that was agreed could have been decided before the leaders left home. The commitment to reviving the Doha trade round is pure motherhood and apple pie. The prairie populists on Capitol Hill are unlikely to be enthusiastic.

At the core of the proposals was the commitment to use fiscal measures, tax cuts and public spending to kick-start global economies. But despite Gordon Brown's enthusiastic embrace of a new Keynesian big-spending approach - as advocated by Nobel prize-winner Paul Krugman - he neatly forgot to mention that such big-spending ways were only for those countries with a "policy framework conducive to fiscal sustainability". The UK with its ballooning budget deficit, which could hit £100bn or more next year, is clearly in no such position.

It is hard to fathom in what way the G20 was "historic", as the Prime Minister claimed in the Commons. There is little original in a bunch of old ideas designed to remove risk from the financial system and control executive pay. That is what regulators should have done before the banks ploughed into the iceberg.

James Buchan

Author and financial commentator

What is the Financial Stability Forum? What is "mitigating against pro-cyclicality in regulatory policy"? What, if anything, has the G20 summit in Washington on the weekend of the 15 November achieved?

Nothing very much, is the answer to all three questions. In the twilight of a discredited US administration, and with President-elect Barack Obama absent, the meeting was never likely to achieve a great deal or generate excitement in the US. Yet the final declaration, drafted with suspicious ease by the delegations on Saturday night, has something for everybody but not enough of anything to scare the financial horses.

Nicolas Sarkozy, the French president whose idea the whole thing was, gained some support for more institutional government of trade and finance, but no super-gendarme international of the type that has been directing financial traffic in the French imagination since the 17th century. As Jean-Pierre Robin wrote in the Figaro: "Those with fantasies of supranational supervision will need to change therapist." The US, jealous of its commercial sovereignty even when it is going about without its shirt, put paid to those Gallic dreams and also gained some platitudes about free trade.

The new commercial powers, not only Brazil, Russia, India and mainland China but also rich oil producers such as Saudi Arabia, received diplomatic recognition of their deep pockets. "The world's geopolitical structure has a new dimension," the Brazilian president, Luiz Inácio Lula da Silva, said. "There is no logic to making any political and economic decisions without the G20 members - developing countries must be part of the solution to the global financial crisis."

I suspect the winner is Gordon Brown. The next meeting will be held under his presidency in London in April. The Washington ragbag of proposals to reform or tinker with the current system, such as reminding us about the Financial Stability Form and mitigating against that regrettable pro-cyclicality in regulatory policy, appeals to his technical vanity and plays to his technical strengths.

Paul Mason

Economics editor, Newsnight

There was a sense in Washington, despite the throbbing engines and bulletproof glass, of powerlessness. The communiqué was stronger on the causes of the crisis than on co-ordinated solutions. Policymakers are right to stay focused on the near-term dangers: these are country-level debt default, the rising cost of borrowing for non-financial companies, rapid job losses and - via feedback - further destabilisation of the banking system. We are moving into the phase of fiscal stimulus but there are powerful technical arguments that say without "quantitative easing" - that is, printing money to stimulate demand - it doesn't work. The same people who told me it would come to recapitalisation, that the TARP (troubled assets relief programme) would not work, are now saying: nationalise the banks and print money.

Despite the urgency of the focus on near-term dangers, what was obvious at G20 was the lack of vision as to the future growth model of capitalism. The problem was seen as a failure of regulation; the solution a pretty weak brew of re-regulation that will get diluted even more as the lobbyists begin to have influence. But the problem is more fundamental: the growth model based on high debt instead of high wages has failed and will be hard to revive.

Peter Mandelson

Secretary of State for Business

We have been caught in a global whirlwind of extraordinary force.

It has brought with it a fear that has gripped the world economy and taken hold here at home. We are seeing it every day, with fear among consumers that is depressing demand; fear among banks that is inhibiting them from lending; fear among small- and medium-sized businesses that banks are just about to cut off their credit lines. The choice facing us and governments around the world is this: do we act decisively to counter and overcome this fear, or do we become paralysed by it and fail to act?

The government has already shown its willingness to take the bolder course as the first mover in setting about stabilising the banks. What is needed now is action to stimulate the demand essential for recovery. The UK economy, like economies in the rest of the world, needs a shot of adrenalin.

The Bank of England has already made a significant cut to interest rates. This monetary stimulus now needs to be matched by a fiscal stimulus. And because this is a global crisis this is best done if the benefit of the measures taken nationally is maximised by the same measures being taken around the world. That was the message from the international conference in Washington, as governments recognised the need to take the action necessary to stimulate their economies.

People will say, "But you are resorting to borrowing in order to deliver the stimulus that's needed." My answer to that is, what is the alternative? We certainly haven't heard one from the Conservatives.

David Cameron and George Osborne, trapped by their desire to oppose everything the government does, refuse to accept the scale of the challenge the world's economies now face and the prescribed international action. Their stance appears to be, if the rest of the world disagrees with us, it is because the rest of the world is wrong. The result is incoherence and an Opposition at sixes and sevens. One minute this is "do all it takes" and the next it is - as we heard this week - leave the recession to "take its course".

Sitting on our hands watching houses repossessed and businesses go to the wall is certainly not the approach being urged on me by people I have been speaking to up and down the country. They want their government to act to stimulate demand in the economy here and now. With all due prudence, that is what we are going to do.

Diane Coyle

Author and economist

The G20 meeting confirmed a robust and rapid response (by past standards) to recession, even in the US operating under a rump free-market administration. Policymakers around the world have been shaken to see the financial system at the brink of collapse - on their watch.

Yet it is difficult to predict how severe the recession will be. Bank lending to businesses and individuals is virtually frozen. In many (but not all) areas of the economy, activity has come to a halt. The last financial boom and bust, ending in 2001, had surprisingly little impact on jobs and growth, as the financial bubble had become increasingly untethered from anything real. Today's vicious circle of evaporating liquidity is much more serious, but lower interest rates and bigger government deficits will help. The underlying trends are easier to outline. Some challenges are clearly unaltered, such as climate change and our ageing society.

The technological opportunities are still there, too, in communications, the internet and biotechnology. Globalisation will be less driven by finance in future, but it will not be unwound. It would take a generation to turn back the clock on economic linkages, and the cultural impacts are permanent. In fact, the crisis has underlined our interdependence across national borders.

What has changed is the political economy of globalisation. In the triad of efficiency, fairness and freedom which dominates political choice in democracies, fairness will take priority in the years ahead, and the drive for ever greater productivity gains will retreat. The semi-nationalisation of the banks has started to shift the boundary between public and private domains; we will have to think more carefully about how to govern private choices that have big social spillovers. The G20 did not touch on this profound question of governance.

Iain Macwhirter

Political commentator

The G20 was largely a throat-clearing session and was never going to put in place the foundations of a new international financial system. Progress on the stalled Doha trade talks is encouraging but provides no guarantee that protectionism will not raise its head in the coming economic slump.

It is inevitable that countries faced with financial collapse will try to defend their economies by any means possible. Britain is already far down the road of "beggar my neighbour" economics by the "managed" devaluation of the pound, a crude attempt to boost UK industry by lowering the prices of British exports and creating a de facto tariff wall around imports from abroad. It won't work because Britain does not make much of anything any more except debt, and the world has plenty of that already.

But the collapse of the pound will seriously damage what is left of UK financial services. No one in their right minds would put money into the UK economy now, with the property market collapsing, UK banks insolvent and government borrowing likely to reach £100bn in the next 18 months.

Gordon Brown seems to believe that sterling is like the dollar, and that people will buy our dud pounds whatever the likely losses. However, as we are discovering, sterling is not a reserve currency and unlike the US we cannot force other countries to pay our debts. The future for our battered island is likely to be hyperinflation punctuated by appeals to the International Monetary Fund for emergency aid. Forget about spending our way out of recession - the UK government simply lacks the resources to fund the huge borrowing that would be required. Something will have to give. Brown will have cause to regret being so beastly to the Icelanders.

Richard Reeves

Director of Demos

James Carville, the hardened political aide to Bill Clinton, said that if he was reincarnated he'd want to come back as the bond market: "You can intimidate anybody." Right now it seems odd to think of any financial markets threatening anybody. But it is one of the ironies of the current economic situation that the capital markets still have some serious muscle.

Western governments, faced with recession, need to throw a lot of money at their ailing financial institutions - money that can be raised only by selling Treasury debt, mostly to the capital-rich investors of the Far East. For Gordon Brown, this is likely to become a more difficult sell, as Prudence is given the push and the pound takes a nosedive. Even national exchequers invite sceptical scrutiny in this new, nervous world.

The financial crisis is at heart a loss of faith. The word credit derives from the Latin credo - "I believe". When the Titanic of the financial world - in the shape of Lehman Brothers - was allowed to sink, the bonds of trust stretching around the world were snapped. In an instant, everyone stopped believing in each other.

A number of sensible measures should be on the agenda when the G20 reconvenes next year, including legislation to ensure bonuses in financial services are paid on the basis of five-year performance; new "pro-cyclical" provisioning rules requiring finance houses to increase their store of capital in economic upturns; and tougher, independent regulation of the rating agencies whose doe-eyed assessments of banks built on a mountain of paper helped get us in this mess.

There is, however, no quick technical fix for such a dramatic loss of confidence. Trust can be lost in the blink of a market-trader's eye - but it will take years to rebuild.

TEN THINGS THEY ACHIEVED

  • 1 Created a road map aimed at stabilising the world economy and overhauling the banking system with targets for the end of March 2009
  • 2 Advocated Keynesian big-spending
    “fiscal stimulus”
  • 3 Expanded from a small club making world decisions to recognise the importance of the economies of Brazil, Russia, India and China
  • 4 Agreed to reform international finance institutions, including better transparency and supervision of credit ratings agencies
  • 5 Agreed that the Financial Stability Forum should include emerging economies
  • 6 Banks and hedge funds to hold increased levels of capital and cash
  • 7 Recommended “supervisory colleges” for all major cross-border financial institutions
  • 8 Return to the Doha round – trade ministers to meet in Geneva next month
  • 9 Instructed G20 finance ministers to draw up plans and timeline
  • 10 Agreed to meet again, in London next April

. . . AND FIVE THEY DIDN’T

  • 1 Agree a future growth model for capitalism. Instead they reconfirmed their “shared belief in market principles”
  • 2 Agree detailed plans for regulatory reforms of banking
  • 3 Establish a plan of action for achieving the already endangered Millennium Development Goals
  • 4 Set up an international supervisory body with sufficient power to control global markets
  • 5 Halt the run on sterling, which fell sharply against the euro and dollar

Alyssa McDonald

This article first appeared in the 24 November 2008 issue of the New Statesman, How to get us out of this mess

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How can Labour refit itself for the modern world?

The events of 2016 were hammer blows for the left. But I still believe we can survive and thrive. Here's how. 

I was born in 1983. I have realised in the last year or two that I have taken for granted the onward march of social progress that I have seen throughout my life.

In part because of my own journey from a council estate in East London to a seat in the House of Commons, and in part because my adolescence took place during an economic boom and the advent of new technology, I had assumed that over time we would all become better off and, as the white wristbands told us, we would ‘Make Poverty History’.

In part, because of where I grew up: in a multicultural community in a global city. I’ve seen great advances in areas like race relations, disability rights and the role of women in our society. As the Labour government changed the law on LGBT equality they also changed hearts and minds and changed my life as a result. As a teenager struggling to reconcile my Christian faith and sexuality I finally began to feel comfortable in my own skin.

Martin Luther King famously said “the arc of the moral universe is long but it bends towards justice” and I have always believed that to be true.

But the last couple of years have shaken that conviction and I worry for the future of Britain.

In this piece, I want to try and make sense of what is happening to our country and offer some suggestions about what needs to be done.  

This is a time of unprecedented peace and global prosperity, yet also great anxiety and social upheaval.

The benefits of globalisation and economic growth are being unevenly distributed and people are acutely aware of their own relative disadvantage.

Across Europe and the United States of America, people are sending a clear message to their leaders: that they feel left behind, that they feel unheard and that they feel dislocated in a world that is changing around them. There’s something a little ironic about the emergence of a global movement against globalisation, but it’s not hard to understand what’s driving it.

Since the global financial crisis of 2008, the biggest gains have been made by the richest.

Since the 60s and 70s communities whose jobs have been reliant on their strengths in traditional manufacturing have been hollowed out through a combination of labour-saving technology and outsourcing elsewhere.

And young people across advanced economies face the prospect of growing up to be poorer than their parents.

At times of economic upheaval and with pressures on livelihoods, history tells us that people can become fearful and resentful.

In the United Kingdom, we saw that resentment writ large during the EU referendum campaign.

Resentment towards a political establishment that had let them down over many years. Over broken promises on issues like tuition fees, foreign follies like the war in Iraq and the MPs’ expenses scandal, which confirmed in people’s minds their worst suspicions that politicians are only in it for themselves.

Resentment towards the Square Mile, for its role in a financial crisis that left ordinary taxpayers picking up the bill for a mess that wasn’t of their making. 

Resentment towards immigration, because of a belief that foreign labour was taking jobs, undercutting pay and conditions and placing pressure on over-stretched public services.

‘Vote Leave, Take Control’. ‘Make America Great Again’. ‘Au nom du peuple’! The clarion calls of the political movements capitalising on the anxiety of people in the UK, USA and France.

Just this week, Marine Le Pen has declared that “the divide is not between left and right anymore but between patriots and globalists”. She would not be the first fascist in European history to turn an economic crisis into a political opportunity to inspire hatred.

But in identifying globalisation as the enemy within her sights she is striking a powerful chord.

The tragedy is that the Le Pens and the Trumps of this world, who play on people’s fears and society’s worst prejudices for electoral gain, also champion the very policies that will make their voters’ lives worse.

People like me on the centre-left of politics have a fight on our hands. Our job is to appeal to people’s hopes and aspirations by providing real answers to the challenges facing our country.

But for too long we’ve been out of office and out of answers.

Once again, the Labour Party is learning the hard way that winning elections matters and losing has consequences. 

Right now we need a government that will deal with the inequality driving people’s fears and insecurities.

This country has a lot going for it: the world’s sixth largest economy, 12 of the world’s top 100 universities, and third in the global innovation index.

But our country also faces some big economic challenges. We’ve had a decade of near-stagnant wage growth and falling living standards. We are lagging behind our neighbours as far as productivity is concerned, and our consumer spending is driven by credit card debt.

Meanwhile, demographic challenges mean a lower tax base, rising social care costs and even greater questions about how we pay for it: the number of pensioners will rise by a third to 17 million in 2041.

Whether you voted leave or remain in the referendum I think we can all agree that the decision to leave the European Union presents significant challenges for our economy.

We’re leaving the most advanced political and economic alliance in the world. As members of the single market and the customs union, as part of the largest free trade area in the world, we currently have unfettered access to a market of half a billion consumers. Moreover, it facilitates global trade – with more free trade agreements than the USA, China, Canada, Japan, Russia, India or Brazil.

Every single sector of our economy will be affected, in some way, by the deal that our Prime Minister does or doesn’t strike as she negotiates our exit from the European Union.

In the best of times, we would want to make sure that our future relationship with the European Union safeguards jobs and trade so that we could build on our economic strengths so that all our citizens could continue to enjoy rising prosperity and living standards.

But in times like these, where our economic recovery is fragile and where voters delivered a shock to the political establishment in large part due to the economic pain and misery they are experiencing, it is absolutely essential.

But instead, the government has chosen to prioritise concerns about immigration over our national economic interest.

I’ve lost count of the number of times I’ve heard calls for a ‘real debate on immigration’. They arrive like the seasons.

 Some in my party argue that we must take a tougher line on immigration to match the public mood.

But a ‘real debate’ requires some argument and, so here is mine: immigration is good for our economy and good for our society. Indeed, it becomes more important with an ageing society and a shrinking working age population.

Those who want less immigration must tell us how they intend to pay for public services and pensions and how they plan to grow our economy. Those of us who defend immigration must ensure that British workers receive the skills they need to find work and that we have sensible controls to manage migration.

There are a number of things we could do: provide a proper migration impact fund, to make sure that public services and infrastructure can cope with additional people, introduce better migration controls to deliver the global talent our economy actually needs, and seriously look at the options for a regional work permit system.

What we should not do is relegate the economy to the second division of concerns.

As far as I am concerned, any government that doesn’t make the economy the priority doesn’t deserve the trust of the British people.

But particularly at this moment, the absolute priority has got to be the economy – and not just in general terms, but in addressing the economic inequality that is fuelling people’s fears and anxieties.

We are at the start of a new industrial revolution that will be like globalisation on steroids.

The World Bank estimates that 57 per cent of jobs in OECD nations are susceptible to automation – rising to 69 per cent in India and 77 per cent in China.

In the report that paved the way for the modern welfare state, William Beveridge said that “a revolutionary moment in the world’s history is a time for revolutions, not for patching” – it was true then and it remains true today.

So just as the Attlee Government built the welfare state from the rubble of the Second World War, so too the Labour Party today should embrace the challenge of reshaping post-Brexit Britain, re-imagining social democracy to meet the big social and economic challenges of this century.  

Beveridge’s five giants of want, squalor, ignorance, disease and idleness have a modern relevance as we seek to eradicate poverty and reduce inequality, build the housing and infrastructure that our people and our economy need, equip people with education and lifelong skills for the 21st century, address the health and social care crisis and consider the future of work in the age of automation.

It’s clear that too many people on the right of politics remain fixated with the idea that government has little role to play in growing our economy and strengthening our society.

Just look at the ineptitude of Sajid Javid as Business Secretary, who banned the use of the words ‘industrial strategy’ in the Business department and planned some holiday time in Australia while the fate of British jobs in the steel industry was being sealed in India.

And even in my own party there are those who suffer with the strange affliction that sees a private sector providing eight in 10 jobs as a ‘necessary evil’, best summed up in that most lazy of soundbites: “public good, private bad”.   

As Attlee argued in his speech to the Labour Party conference in 1946: “It is social democracy which can set us free from the tyranny of economic power and preserve us, too, from the dangers of the absolute power of the state”.

What might a modern Beveridge report say about today’s world? Because his five giants are still very much alive. 

WANT

Beveridge himself might be surprised by the prevalence of UK poverty seventy years on from his original analysis of ‘want’ in our society. Four million children grow up today living in poverty – an average of 9 children in every classroom of 30. A combination of falling incomes, rising costs and welfare cuts has led the Institute for Fiscal Studies to predict a 50 per cent rise in relative child poverty by 2020.

The last time we saw such a sharp rise in child poverty was when I was growing up in the 1980s. But as a constituency MP, I am struck by how different the circumstances of my own upbringing were compared with the children I represent growing up in similar circumstances today.

I grew up in a single parent household on a council estate in Stepney in Tower Hamlets, East London. We didn’t have much. When my mum was able to find work, it was often poorly paid, temporary and casual, which made the support network of family living nearby in Wapping, Stepney Green and Bow essential for childcare – and occasionally raiding my Nan’s food cupboards if we were short. The benefits system put food in the fridge, helped with school uniform costs, fed me at school and kept a roof over my head at home.

I used to think I was unlucky. Not having the latest trainers or games console. Not being able to invite friends around to play because we were too embarrassed that our home wasn’t as nice as some of the kids from better off families. Going without electricity because the meter had run out, and so had the money.    

But then I look at the kids growing up with parents in the same circumstances today. They’re not in a council flat with security of tenure, they’re in unaffordable and shabby private rented accommodation. Or temporary bed and breakfast accommodation. Some of them are commuting to school to west London in the morning, because that’s where they came from before they found themselves homeless and placed by their local authority in Redbridge.

Their parents do a 2-3 hour round trip, twice a day, because their schooling is their only stability in life and they don’t know where they might move next. They’ve been moved away from family and friends – the vital support network that might help mum or dad to get a job that fits around school hours. They’re using foodbanks, because they don’t have enough money to eat.

For me, the state was my security net and my springboard. It meant I didn’t go hungry or homeless and it gave me the education I needed to be where I am today.

There is a tragic irony about the welfare debate in our country: the welfare system lacks public confidence, but it also fails the people who need it. Not just the kids like me, but disabled people who can’t work and face the bureaucracy and indignity of regular inquisitions by amateur pen pushers making judgements against the weight of medical evidence from qualified professionals. The pensioners for whom retirement feels more like a prison sentence than a reward for a life of hard work, because they don’t get the care they need to ensure a good quality of life in their final years. Those in work and in poverty: the worst of all worlds – working hard and having nothing to show for it.

As my colleague Dan Jarvis recently argued, what is most shocking about this state of failure, is that it costs so much. The Joseph Rowntree Foundation puts the cost of poverty to the public purse at £78bn.

I think we need to reimagine the welfare system from first principles.

A welfare system that acts as a safety net: preventing destitution and supporting people into work.

A welfare system that expects you to work: providing meaningful support to help people to reskill, retrain and find employment – and opportunities to give back to society through community action while job-hunting, building friendships, networks and skills in the process.

A welfare system that that works for those who can’t: providing a level of support to disabled people that gives them freedom, dignity and quality of life.

A welfare system that recognises contribution: so that if you’ve paid in, you can access greater government support to help with things like mortgage interest payments if you become unemployed.

A welfare system that makes work pay: so that the combination of in-work benefits, minimum wages and taxation policy will always prevent families from falling below the poverty line.  

Tackling poverty isn’t just a social policy. It’s a crime prevention policy, a health policy and an economic policy.

DISEASE

To tackle disease the original Beveridge Report laid the foundations for the Attlee Government to create the National Health Service. Next year it will be 70 years old. During that time, it has survived under-resourcing and attacks on its universal principles and although the word ‘crisis’ has been used often, to describe today’s NHS as in crisis is something of an understatement:  hospitals are struggling to cope with rising A&E admissions and delays to operations, clinics are overwhelmed, with an ageing workforce and insufficient pipeline of new GPs coming on-board and local authority cuts are compounding social care pressures, leading to avoidable hospital admissions, delayed discharges and poor quality of life for disabled and older people.

That’s why I support the view of my colleagues in Parliament – Labour’s Liz Kendall, the Lib Dems’ Norman Lamb and the Conservatives’ Dr Dan Poulter – that we need an independent commission on the future of health and social care. Labour created the NHS and now we should seek to build a new cross-party consensus around social care.  

IGNORANCE

Education has a powerful role to play, not just in tackling ‘ignorance’, but in tackling poverty and inequality. In addition, unlocking the talent and potential of every citizen is an economic necessity.

In the UK, we must meet that challenge in the context of an ageing society. This year marks the 20th anniversary of Learning Works, the seminal work on widening participation in further education and lifelong learning. Though I remain immensely proud of the educational record of the last Labour government, Helena Kennedy’s observation that “if at first you don’t succeed, you don’t succeed” remains true today.

The United Kingdom lags significantly behind our competitors on basic skills like literacy and numeracy. One in five adults in this country do not have the basic literacy skills that we expect of an 11 year old.

With more of the population expected to work longer, we need to make sure that they can re-skill and retrain. This is urgent. I meet too many constituents now in their fifties and sixties – able to work, unable to find a job, but unable to retire.

A modern Beveridge report would build a further education system that’s simple, easy to understand for learners and employers and joined-up. There needs to be a genuine and sustained commitment to widening participation in higher and degree level apprenticeships – just as the last Labour government led a sustained effort on widening participation in our universities.

We can’t rest on our laurels about the future of our school system, either.

I’m hesitant to propose more piecemeal curriculum reform. Our schools have had enough. Michael Gove was a big advocate of chaos theory in education policy and it certainly did what it said on the tin.

What a modern Beveridge would conclude though, is that a world class education system is about people: high quality leadership and well-trained educators who have freedom to experiment and build professional expertise. The early years of a child’s life remains one of the greatest predictors of their success at the age of 16, which is why greater investment in early years and high quality childcare for the poorest families must be a priority.

When we reach the latter stages of education, careers guidance in this country is abysmal. This is not just an economic issue, but a social justice one: so much of our individual success is reliant on good information, advice and guidance.  We need to start from scratch and make this a national mission involving an army of employers to give young people better advice about planning their futures and making informed choices.

We need to pay more attention to nurturing character and resilience, creativity and critical thinking to turn out young people ready to be good citizens and agile workers. School budget cuts that threaten the performing arts are a risk to this goal.

But it’s not just the arts that matter. Mathematics and science become more important in this century, not less, and our current performance isn’t good enough. We need to rethink pedagogical approaches to these subjects, making computing a fourth core science to prepare our new generation of digital natives to be digital creators; and making financial literacy a key part of the curriculum to tackle our country’s lackadaisical approach to personal debt, savings and pensions.

SQUALOR

In the aftermath of the Second World War, Beveridge’s “squalor” referred to the physical state of the country, and 75 years on we must re-commit to sharing the gains of national wealth across every part of the country.

If we’re to improve productivity and increase our citizens’ life chances, then we must improve national infrastructure and housing.

As IPPR North’s State of the North report in 2015 identified, the government’s pipeline infrastructure projects in London amounted to some £22 billion – one fifth of all UK spending – with just £14 billion allocated across the whole North of England for an area of some 15 million people – twice the size of Scotland.

In transport, £4,300 per commuter is spent in London each year compared to just £710 per commuter in the North generally; down to £580 in the South West and just £480 in the East Midlands. 

Improving regional productivity demands fairer UK investment in infrastructure to enable economic activity, reduce journey times and include the most isolated and deprived communities.

That means supporting the commitment to high speed rail - built by British steel and including Liverpool and the North East as priorities - plus also improving existing inter-city networks especially east-west.

Intra-regional train and bus investment must be priorities, too.

A regional renaissance must be led from within our towns and cities through a real commitment to devolution rather than by trying to pull levers in Westminster and Whitehall.

As a local councillor as well as a Member of Parliament, I know that decisions are made best when they are made closest to the communities they affect.  We need a radical redistribution of power across all of England’s regions with a presumption in favour of ceding power and budgets into the hands of local communities.

That must include the freedom for local authorities to borrow to invest. This week’s Housing White Paper was another missed opportunity to solve the housing crisis. More tinkering. More warm words about speeding up the planning process, getting tough on developers and helping first time buyers. But this crisis is about simple supply and demand. Local authorities have a better track record of balancing their books than their paymasters in the Treasury. It’s time to set them free to invest in a new generation of decent homes to buy and rent.  

IDLENESS

So a modern Beveridge Report would address the modern manifestations of want, ignorance, squalor and disease. That brings me to ‘idleness’ and its modern manifestation: the huge question mark hanging over the future of work.

Voltaire said that “Work saves a man from three great evils: boredom, vice and need”. But what happens in a future where the jobs of men and women are taken by robots?

That sounds like something from science fiction, but it is increasingly science fact. The scale of technological development – not just of processes but of artificial intelligence – is running at a pace that we are struggling to keep up with. As I have mentioned, some estimates suggest that up to two thirds of jobs could be at risk from automation in the decades to come.

Anxiety about the impact of automation on jobs isn’t a new phenomenon.

In 1589 a disappointed William Lee was surprised to learn that Queen Elizabeth I refused to grant a patent for his stocking frame knitting machine because it would, in the words of the Queen, “assuredly bring to them ruin by depriving them of employment, thus making them beggars”.

In the 19th century the Luddite Rebellion saw skilled artisan workers across Nottinghamshire, Yorkshire and Lancashire destroy the machines that threatened their livelihood as textile workers.

And in the 1930s John Maynard Keynes warned of the phenomenon of technological unemployment.

What makes the new industrial revolution – dubbed the Fourth Industrial Revolution – so different from the past is not simply the scale and pace of technological advancement, but also the scope.

The development of technology and learning algorithms that can perform tasks previously thought to be quintessentially human, like the driverless car, has generated a lively debate about the possibilities and risks of such developments.

We might see output up, prices down, quality and abundance.

But as Klaus Schwab of the World Economic Forum, has argued “in addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution”. 

There is no doubt that this new industrial revolution and new age of automated capital will have a significant impact on the labour market.

As Professor Andrew McAfee of M.I.T. has argued, “we’re going to see more and more things that look like science fiction and fewer and fewer things that look like jobs”.

We need to learn from our experience of globalisation. The debate is not about whether we want automation: it’s happening. The question is, will we embrace it, or become victims of it.

We’re a nation of creators, innovators and performers. Breakthroughs in science and technology have enormous potential to improve quality of life for everyone - and to help us better share and protect our increasingly endangered natural environment. But it will create winners and losers.

We’ve got to plan now for the challenges ahead. We need to invest in education and skills to prepare people for the future world of work, put in place social protections for people who lose their jobs and helping them to re-skill and retrain, and support communities affected by the loss of traditional industry, to avoid the intergenerational scarring effect we’ve seen during the decline of traditional manufacturing and heavy industry in mining and steel towns. 

We have to use our international alliances to prevent a race to the bottom, with new global agreements on employment rights and protections, standards and pay. We have to tackling grotesque pay inequality by publishing pay ratios and putting workers’ representatives on company boards.

Most importantly, we need to make sure that Britain is well-placed to reap the benefits of this new industrial revolution by increasing substantially our investment in our science base so that the UK continues to punch above our weight in the world in terms of science and innovation.

We need to lead the world on climate change, too. It is one of the greatest threats to the human race. We’ve got to do more than just our bit at reducing emissions. We’ve got to lead the world in green technology and industries, building a circular economy and developing new technology to reduce energy and resource consumption.

Paying for all this will require some difficult choices, but I think it’s time we slayed some shibboleths in any event. It is already clear that a shrinking tax base and greater concentration of wealth in capital assets makes the debate about how we tax wealth more pressing. This isn’t just a question of how we fund our public services, it is a basic question of fairness.

There are people generating huge amounts of wealth through good luck, rather than hard work: just look at the explosion of house prices, creating a two tier economic model where people will inherit hundreds of thousands – or even millions – without lifting a finger.

It is one of the key drivers behind intergenerational inequality. So we should be developing a new model for taxing wealth, not simply income, worrying less about how we tax the dead and more about how we fund the living, and asking those who haven’t earned their money to hand a bit more of it over to help those who have.

None of this is particularly easy or popular, which is why it’s so easy for politicians to park issues in the box marked ‘too difficult’.

Politics, by its nature, is notoriously short-termist. But if we don’t wrestle with these issues now, we will pay a far greater price later. 

Which brings me right back to the politics of the referendum and the vote in the House of Commons last week.

I know many remain voters would have preferred Labour MPs like me to take to the trenches this week and oppose the triggering article 50 at every twist and turn.

But we have to face the facts: a majority of voters in a majority of constituencies voted to leave the EU.

I wish it wasn’t so. I put plenty of shoe leather into campaigning for a different result and I still believe we would be stronger, safer and better off inside the EU. But imagine for a moment what would have happened the morning after the House of Commons blocked the result of a referendum in which 33.5 million people had voted.

Britain would have been plunged into a constitutional crisis. People would have taken to the streets. Riots would have been a distinct possibility.

Theresa May would have been forced to call a general election in which remain or leave would be the only question.

And the result would not have been the overturning of the referendum result, it would be a very different Parliament committed to the hardest of hard Brexits.

Let me be absolutely clear. I do not doubt the integrity or passion of any of those people ringing MPs pleading with us to vote a different way.

But if people think that overturning a vote at the ballot box by a vote in the parliamentary lobbies would reverse the outcome – I am afraid they are kidding themselves.

This referendum was lost because of a coalition of voters.

Sure, there have always been committed Eurosceptics who wanted out come what may. But the referendum was won thanks to millions of people who simply felt left behind, who felt unheard and who wanted to send a clear message.

These are the people at the sharp end of globalisation: the victims of economic inequality and social injustice.

And those of us who campaigned in areas where people turned out in their droves to vote leave heard the same phrase repeated again and again in response to our argument that Leaving the EU would make them worse off.

They simply replied “things can’t get worse than this”.

Sneering at people who voted Leave, or dismissing them as ignorant is part of the problem.

Across western democracies we are already seeing the consequences of what happens when people abandon their faith in mainstream politics. These are the conditions in which fear and prejudice and hatred thrive.

The only way to change course is to change our country.There is no trick and no shortcut to achieve change.

In politics, firstly, you have to earn the right to be heard. For Labour that means showing that we’ve listened and understood why so many people feel that we’ve left them behind for so long.

Secondly, you have to earn people’s trust, by showing you’ve got the answers to address their worries and anxieties, their hopes and their aspirations for them and their families.

Thirdly, when you’ve gained that trust you have to deliver. It’s not about striking a radical pose, it’s about making a radical change. Not just honouring pledges and listing achievements at party conferences. But by constantly striving to do better and be better. 

All photos: Getty