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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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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