There is an alternative: governments can do what markets cannot

To succeed in age of globalisation, British manufacturers need a government that rejects laissez faire Thatcherism.

In the wake of Baroness Thatcher’s funeral last week, there has been much revisiting of the 1980s and her legacy. Though there are disagreements as to the benefits of her approach, there is one thing on which we can all agree: for better or worse, she did change Britain.

One impact of the revolution her policies unleashed was that too much of our manufacturing base was undermined. Nevertheless, Britain remains the ninth largest manufacturer in the world today, and a global leader in many areas of advanced manufacturing. The best of British manufacturers have shown they can meet the challenge of global competition.

For example, since Labour’s establishment of the Automotive Council – and the continued backing of it by this government – Britain has confirmed itself as a great place to make cars. The sector has attracted investment on an unprecedented scale and is on track to break the record for car production set in 1972.

What it means to be a leading manufacturer is changing as well, as the divide between the service and manufacturing sectors has become blurred. Last week I visited Rolls Royce, a global leader in aerospace. The majority of Rolls Royce’s revenues are generated not from manufacturing but from after sales service contracts. This shows how the benefits of a strong manufacturing base can spill over into other sectors, generating more of those well paying and satisfying jobs that our economy needs.

So the potential is there to grow our manufacturing base further. But British manufacturers need a government that backs their ambition. They need a proper, modern industrial strategy – demanding in its ambition and effective in its execution. This is not something which sits comfortably with laissez faire Thatcherism.

George Osborne – a disciple of the laissez faire approach - promised a "march of the makers". But overall, and despite a significant fall in the value of the pound, the reality simply has not matched his rhetoric. The latest trade figures were terrible, with the recent fall in exports reflecting a downward pattern that started in October 2011 according to the ONS. Companies with cash lack the confidence to invest. Firms needing finance to expand can’t get it.

One of the maxims of the neoliberal economic revolution Thatcherism unleashed was that governments must be subservient to markets. There was, Mrs Thatcher said, "no alternative". Recent history warns of the limits of this approach. It is also becoming abundantly clear that globalisation, far from limiting the space for governments to act, is making such action more important. It is not surprising that northern European economies which have pursued industrial strategies and applied a different model to Thatcherism have largely maintained their shares of expanding global trade through policies that work together to reinforce areas of national strength. 

Governments can do what markets cannot: they can help firms work together to address shared problems over skills or R&D, even as these businesses compete fiercely for custom. Governments can give direction and support to the animal spirits that drive investment and innovation. Through strategic use of procurement powers, governments can provide clear market signals, allowing British-based firms like Bombardier, whose plant in Derby I have also recently visited, to develop the capabilities needed to win public contracts. Public contracts can be used, after all, to advance public goals: to train apprenticeships, to encourage innovation, and to boost local employment.

Baroness Thatcher’s passing has revived strong memories of a bygone era. Yes, she changed Britain, but changed circumstances mean our country’s economy now needs something different too - there is an alternative and we must grasp it. 

 

A Vauxhall employee works on a vehicle on the production line at the Vauxhall car factory in Ellesmere Port, north-west England. Photograph: Getty Images.

Chuka Umunna is Labour MP for Streatham and Chair of the All Party Parliamentary Group on Social Integration.

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.