Statecraft without statism: governing for shared prosperity in an age of austerity

The task is to seek material gains through a new, less transactional politics.

Whoever governs from 2015 will have to do more than repair the public finances, as tough as that will be. If shared growth is to be saved, an incoming administration will need to be radically reformist at the same time. This will mean fixing the structural failures that caused living standards to falter for all but the richest before 2008, restoring the three conditions of shared growth: fuller employment, a strong link from productivity to pay, and a sustainable welfare system for families. It will mean little less than re-crafting the state for new times.

Consider fuller employment. Simply returning the UK to a pre-crisis employment rate requires 850,000 more jobs. Even if the UK now emulates the strongest sustainable period of employment growth in the past 20 years –the late-1990s jobs boom – this will take until late 2016. We will not come close to this without steady growth.

But fuller employment won’t flow from growth alone. It will also require reform. The UK population aged 65 and over is growing twice as fast as the population aged 16–64, meaning unprecedented employment among over 65s is needed to stand still. And with soaring childcare costs undermining incentives to work, parents as well as older workers will need more support if people are to move into the new jobs we create.

What about productivity and pay? Anaemic demand has caused an unprecedented collapse in real wages and spikes in job insecurity. But around one in five UK workers were already paid below £7.50 an hour before 2008, trapped in sluggish swathes of our jobs market that have expanded over time. Meanwhile, the link from productivity to pay has eroded; only 18 per cent of pre-tax income now goes to the entire bottom half while 10 per cent goes to the top 1 per cent. None of this will change until growth returns.

But just as with employment, growth won’t be enough. Addressing low pay will require reform. In a society that is older, more unequal and increasingly online, the growth sectors of the future aren’t just hi-tech knowledge industries that create well-paid jobs but also low paying industries like social care, hospitality and logistics. The UK’s skills system and the structures in our jobs market don’t encourage good quality versions of these jobs. They need an overhaul.

Finally, what about welfare? How will families with children keep up with childless households as growth returns? No level of employment or wage growth can fulfil this function. Assuming that we don’t want to send children out to work, the task of sharing growth with larger households is necessarily one for the tax and benefit system – it’s one reason that tools like Child Benefit were created.

The squeeze on these forms of support is unlikely to end until growth returns. But even once a recovery takes hold, no-one seriously believes that today’s approach to family support is a sustainable settlement. In 2015, the UK will be left with two illogically separate systems of means-tested child support, Child Benefit and Universal Credit. Meanwhile, the coalition’s cuts work mainly by freezing and squeezing support rather than re-sculpting it. No party has yet set out which parts of the system should be protected or extended and which will need to be run down over time. Such decisions will be needed if the system is to be made sustainable.

So, ambitious reform is needed to save shared growth. How can this be delivered when there’s no money? One thing is clear: the answer can’t be to use the same approach as the last government, when so many major reforms relied heavily on a growing spending envelope, whether through large pay hikes for GPs’ extended opening hours, vast capital spending for early academies, or simply funding reductions in child poverty without contentious cuts elsewhere. Next time around, there won’t be money to oil the wheels.

In thinking about how to drive reform without money, a useful place to start is Jon Cruddas’s recent critique of New Labour’s statecraft. He argues that New Labour became managerial and bureaucratic, focusing overwhelmingly on material goals that under-emphasised culture, community and family and also became pre-occupied with state remedies. The result was a transactional approach to social problems like child poverty that had some major successes, for example, raising 1.1 million children above the poverty line, but that was also both too reliant on new spending, and too liable to lead to change with shallow roots.

The call for a richer, deeper statecraft – both less purely materialist and less instinctively statist – is a useful one when thinking about a post-2015 agenda on living standards. But it has both strengths and weaknesses. On the one hand, it must be right that shared growth won’t be saved unless progressives break away from a cold arithmetic of cash transfers and distributional charts to argue for more structural reforms. On the other hand, by far the greatest challenge we now face is a material one of falling living standards. Now is hardly the time to retreat into a post-materialist politics of pubs, patriotism and parks.

So the task is to seek material gains through a new, less transactional politics, obsessing less with static charts of winners and losers and more with economic empowerment through reform, embracing an instinct to spread power in the market. That means rejecting power hoarding in the central state, including policy solutions that see poverty reduction as something done for people rather than with them, and shifting away from cash transfers towards structural reforms like investment in pro-employment public services and the institutions in which they are provided.

What could that mean in practice? On employment, the priorities are services that give individuals and families more freedom to boost their own incomes through work, like childcare and elderly care, and fully functional re-employment and support services for older workers as extensive as traditional job search services are today.

What about pay? A minimalist approach of ‘skills supply plus a minimum wage’ has proven a grossly inadequate response to the modern challenge of low-wage labour. A fuller response would make the Low Pay Commission worthy of its name with a broader, more strategic remit, advising the government on how to reduce the extent of low pay and assessing the ‘affordable wage’ that major sectors could pay without employment effects. This would need to be backed with stronger sectoral institutions to address the coordination failures that stop UK employers from investing in skills, and particularly long-term training relationships with young people. It will also require detailed work to raise demand for skills – for example, through the greater use of occupational licences.

The long-term view must be grounded in a recognition that shared growth depends as much on reform as on recovery. Broad-based real income growth won’t return until its three foundation stones – fuller employment, a stronger link from productivity and pay, and a sustainable welfare system for families – are back in place. Achieving this in the austere environment of the next parliament will require a new way of governing. It is a no less material agenda than those pursued by progressives in the past. But it will need a richer, more confident and less statist approach to reform than the last government, requiring a statecraft that is appropriate for new times.

 

James Plunkett is director of policy at the Resolution Foundation. He writes in a personal capacity.

A fuller version of this article first appeared in the February issue of Juncture.

Jon Cruddas, the head of Labour's policy review, has criticised the last government for becoming too managerial and bureaucratic. Photograph: Getty Images.

James Plunkett is director of policy and development at the Resolution Foundation

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How English identity politics will shape the 2017 general election

"English" voters are more likely to vote Conservative and Ukip. But the Tories are playing identity politics in Scotland and Wales too. 

Recent polls have challenged some widely shared assumptions about the direction of UK elections. For some time each part of the UK has seemed to be evolving quite distinctly. Different political cultures in each nation were contested by different political parties and with different parties emerging victorious in each.

This view is now being challenged. Early general election surveys that show the Tories leading in Wales and taking up to a third of the vote in Scotland. At first sight, this looks a lot more like 1997 (though less enjoyable for Labour): an increasingly hegemonic mainland party only challenged sporadically and in certain places.

Is this, then, a return to "politics as normal"? Perhaps the Tories are becoming, once again, the Conservative and Unionist Party. Maybe identity politics is getting back into its box post Brexit, the decline of Ukip, and weak support for a second independence referendum. We won’t really know until the election is over. However, I doubt that we’ve seen the back of identity politics. It may actually bite more sharply than ever before.

Although there’s talk about "identity politics" as a new phenomenon, most votes have always been cast on a sense of "who do I identify with?" or "who will stand up for someone like us?" Many voters take little notice of the ideology and policy beloved of activists, often voting against their "objective interests" to support a party they trust. The new "identity politics" simply reflects the breakdown of long-established political identities, which were in turn based on social class and collective experiences. In their place, come new identities based around people, nations and place. Brexit was never really about the technocratic calculation of profit and loss, but about what sort of country we are becoming, and what we want to be. 

Most social democratic parties in Europe are struggling with this change. Labour is no different. At the start of the general election, it faces a perfect storm of changing identities. Its relationship with working-class voters continues to decline. This is not because the working class has disappeared, but because old industries, with their large workplaces, shared communities and strong unions are no longer there to generate a labour identity. 

Labour is badly adrift in England. The English electorate has become increasingly assertive (and increasingly English). The Brexit vote was most strongly endorsed by the voters who felt most intensely English. In the previous year’s general election, it was fear of Scottish National Party influence on a Labour minority government that almost certainly gave the Tories the English seats needed for an overall majority. In that same election, Labour’s support amongst "English only" voters was half its support amongst "British only" voters. The more "English" the voters, the more likely they were to vote Ukip or Conservative. It shouldn’t be a surprise if Ukip voters now go Tory. Those who think that Ukip somehow groomed Labour voters to become Tories are missing the crucial role that identity may be playing.

So strong are these issues that, until recently, it looked as though the next election - whenever it was called - would be an English election - fought almost entirely in English battlegrounds, on English issues, and by a Tory party that was, increasingly, an English National Conservative Party in all but name. Two powerful identity issues are confounding that assumption.

Brexit has brought a distinctly British issue into play. It is enabling the Tories to consolidate support as the Brexit party in England, and at the same time reach many Leave voters in Wales, and maybe Scotland too. This serendipitous consequence of David Cameron’s referendum doesn’t mean the Tories are yet fully transformed. The Conservative Party in England is indeed increasingly focused on England. Its members believe devolution has harmed England and are remarkably sanguine about a break up of the union. But the new ability to appeal to Leave voters outside England is a further problem for Labour. The Brexit issue also cuts both ways. Without a clear appeal cutting through to Leave and Remain voters, Labour will be under pressure from both sides.

North of the border, the Tories seemed to have found - by accident or design - the way to articulate a familial relationship between the party in Scotland and the party in England. Scottish Conservative leader Ruth Davidson appears to combine conservatism, unionism and distance from English politics more successfully than Scottish Labour, which must ride the two horses of "near home rule" and committed unionism. Scottish Labour has a perfectly good call for a reformed union, but it is undermined by the failure of Labour in England to mobilise enough popular support to make the prospect credible.

Identity politics is not, of course, the be all and end all of politics. Plenty of voters do cast their ballots on the traditional tests of leadership, economic competence, and policy. Labour’s campaign will have to make big inroads here too. But, paradoxically, Labour’s best chance of a strong result lies in taking identity politics head on, and not trying to shift the conversation onto bread and butter policy, as the leaked "talking points" seem to suggest. Plenty of voters will worry what Theresa May would do with the untrammelled power she seeks. Challenging her right or ability to speak for the nation, as Keir Starmer has done, is Labour’s best bet.

 

John Denham was a Labour MP from 1992 to 2015, and a Secretary of State 2007 to 2010. He is Director of the Centre for English Identity and Politics at Winchester University

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