There is a new consensus about the economy and – believe it or not – Labour called it first

Buried in the coalition’s austerity programme is the kernel of acceptance that, ultimately, government is the solution to economic malaise.

The Conservative Party’s dedication to the memory of Baroness Thatcher is hardly in doubt. Grief at her death earlier this year brought more unity to the party than any of the policies David Cameron has devised for that purpose. In case the point was missed (it wasn’t), a group of Tory backbenchers propose renaming the August bank holiday in honour of the Iron Lady (it won’t be).

But when it comes to influencing government policy, Mrs T is rivalled by the man who brought her down. Michael Heseltine may not enjoy the veneration of his party but he has the ear of its leaders. Earlier this year, he published a plan for stimulating growth by giving regions more control over spending. Chunks of the report have been adopted as government policy. Ask Treasury ministers and advisers about their economic strategy and the chances are that Heseltinian intervention will get a reference before Thatcherism.

Westminster has been so busy noticing the victory of the right in an argument about cuts it has barely clocked the left’s victory in an argument about the duty of the state to foster growth. There is cross-party agreement on the need to spend scarce resources on infrastructure. There is near consensus that the state should be doing more to nurture promising, innovative sectors of the economy. The discredited 1970s practice of “picking winners” has been adjusted and rebranded. It is now a “modern industrial strategy”. Every party will have one in its 2015 manifesto.

Not everyone has received the new wisdom. There are Conservatives who despise all state meddling and think that the only good government intervention is lighting a bonfire of employment rights and workplace protection. Osborne recognises the need to keep that wing of his party fed with meaty policy chunks but his own views are more nuanced.

Cabinet colleagues say the Chancellor privately accepts that Britain already has a liberal labour market and a relatively low-regulation economy. Future growth, in other words, will be spurred by government getting stuck in, not getting out of the way.

Osborne took a gamble on hard and fast cuts in the hope of fighting an election with a tamed deficit and booming economy. That move failed. But cynical risk-taking is not the same as ideological rigidity. Osborne’s allies say his urge to win is greater than his eagerness to parrot Thatcherite shibboleths.

The really zealous expressions of Conservatism are elsewhere, in Michael Gove’s campaign to prise schools away from localauthority control, for example, or in a welfare policy that sees help from the state as a cause of poverty rather than its alleviation. In a fiercely ideological field, economic management is one of the more pragmatic bits of the coalition agenda.

Labour detests the idea that Osborne is flexible. The Chancellor’s refusal to change course has been an opposition mantra. Any dabbling in pro-growth intervention is dismissed with scorn. Money for infrastructure, say shadow ministers, is dwarfed by earlier cuts to capital spending budgets. Funds aimed at supporting new businesses sit idle. If the coalition wanted local growth plans, why scrap regional development agencies? Vince Cable might fancy a new industrial policy but, says Labour, the real agenda is set by old Tory reflexes: tax cuts for the rich; devil take the hindmost.

There are obvious reasons for Ed Miliband and Ed Balls to depict Cameron and Osborne as captives of an outmoded and callous creed. At a glance, the cap fits. But by belittling the Tory conversion to active government, Labour misses the opportunity to claim a moral victory. Under the last government, Peter Mandelson led the interventionist revival with his call for a more “strategic state” to navigate chaotic forces of globalisation. In candid moments, Heseltinian Tories concede that Mandelson was right.

Neither Labour nor the Conservatives dare admit that their economic views are converging. The fortification of opposing trenches, separated by boggy no-man’s-land (aka the Lib Dems), has become a strategic necessity and a source of intellectual comfort. Yet the proximity is clear to anyone outside the two tribes. Labour has accepted that budgets must be cut, as the Tories said all along. The Tories are borrowing to keep the economy afloat, as Labour predicted they would.

Both want to spend on infrastructure and skills. Both are working their way towards a more vigorous industrial policy. Both are planning manifesto chapters on beefing-up consumer regulation to address the rage of people who feel permanently ripped off by banks, utilities, rail companies and pretty much every other essential service, many of which are in the private sector. The political pendulum is swinging towards more, not less, intervention in the economy. That should favour Labour – but before the opposition can take any credit for the new consensus, it has to prove that the consensus is there. That means recognising there is more to Tory economic policy than cuts.

Buried in the coalition’s austerity programme is the kernel of acceptance that, ultimately, government is the solution to economic malaise, not the cause. Miliband and Balls may not want to give the Chancellor credit for getting anything right but they also need to look as if they are winning some big arguments. Full-frontal attack is Labour’s default stance towards Osborne. Sometimes faint praise can be more damning.

David Cameron and Ed Miliband look on during the service to celebrate the 60th anniversary of the Coronation of Queen Elizabeth II at Westminster Abbey in London. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 01 July 2013 issue of the New Statesman, Brazil erupts

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.