Traditional terraced properties with the Canary Wharf skyline behind in Greenwich. Photograph: Getty Images.
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Only Labour can offer the long-term economic plan Britain needs

We will only sustain support for an open and dynamic market economy if we show that it can work for all, and not just some.

Indiscreet comments from warring cabinet ministers have dominated our political debate for the last week. But buried under the unseemly row between Michael Gove and Theresa May was another cabinet-level disclosure which was just as significant.

The previous Conservative chancellor Ken Clarke’s public admission that most people have "not yet felt any sense of recovery" blew apart the complacent claims of the current Chancellor that the economy is fixed and there’s no cost-of-living crisis. As the election results last month showed, Ken was right. Growing numbers of people do not think the economy or mainstream politics is working for them right now. In the face of stagnating living standards and growing insecurity, they want real but credible change, not more of the same.

This is a challenge for all mainstream parties. And unlike the Tories, it is a challenge that Labour is determined to rise to. Because, despite Ken Clarke’s candour, it’s clear that David Cameron and George Osborne still don’t think there is a problem to solve. The Conservatives seem to believe that simply repeating the line that their policies are working, because GDP growth has finally returned, will see them home and dry.

Put aside the fact their plan has so far totally failed to deliver what it promised – the books balanced by 2015, sustained rises in living standards, the AAA credit rating maintained, a re-balanced economy, and all being in this together. Looking forward, the challenge for all mainstream parties is that working people just don’t believe they will share in rising prosperity, whether that is affording a home, securing a better paid job or saving for a decent pension.

And they have good reason to be sceptical. The stagnation in real wage growth is not just a problem of the last few years. It started in Britain over a decade ago as rapid technological change and global trade pressures put the squeeze on middle and lower income households. And the UK is not alone – real living standards for middle and low income households have stagnated across the developed world.

While low-wage and unskilled employment has grown, research shows that traditionally middle-income jobs, in manufacturing and services, have fallen as a share of total employment across all OECD countries. And as the recent publicity around Google’s driverless car shows, labour-substituting technological change is, if anything, set to accelerate further.

The hard truth is that there is no quick fix – we have to earn our way to rising living standards for all. And we can’t turn our face against change and the world. Britain has always succeeded, and can only succeed in the future, as an open and internationalist and outward-facing trading nation, with enterprise, risk and innovation valued and rewarded.

But nor can we succeed through a race to the bottom - with British companies simply trying to compete on cost as people see their job security eroded and living standards decline. We can only succeed through a race to the top – backing British innovation and investing in the skills of all as we make our economy more dynamic and competitive, and earn our way to higher living standards for everyone.

That is why we need a real long-term economic plan to make the reforms needed now to ensure we have a strong and sustained recovery that is built to last and which delivers rising living standards for the many, not just a few at the top. First, on housing, we need to match rising demand for housing with rising supply. The next Labour government will get at least 200,000 new homes built a year by the end of the Parliament.

We need to commit to a new generation of new towns and give real Treasury guarantees to get them off the ground. We should be giving towns a right to grow and ensuring land with planning permission is built on quickly. We need to match a reformed Help to Buy scheme with a Help to Build scheme for small and medium-sized builders. And Sir Michael Lyons’ review for Labour will soon set out more of the reforms that need to be made.

If we fail to act now, not only will the aspirational majority who want to own their own homes find it ever harder to get on the ladder, but an imbalanced housing market also poses risks to the wider economy. A premature rise in interest rates to rein in the housing market in some parts of the country will have an impact on millions of families and businesses across the UK.

After warnings from the Bank of England and the IMF, the Chancellor will belatedly claim today that the government is acting. But when housebuilding under this government has reached the lowest peacetime levels since the 1920s, we need bold action now, not tinkering that is too little too late.

Second, we need more good jobs and to make work pay. That is why we will introduce a new gold standard vocational qualification for 18-year-olds and give control over apprenticeship spending to business to ensure every young person gets the skills they need. We will repeat the tax on bank bonuses to ensure every young person out of work for more than a year has a paid starter-job. And we will task the Low Pay Commission with ensuring we restore the lost value of the minimum wage, introduce incentives for employers to pay the non-statutory living wage and expand free childcare for working parents.

Third, we need to end the dither and delay not just on housing but our wider infrastructure. Sir John Armitt has set out a clear blueprint plan for an independent infrastructure commission which will make it harder for future governments to kick vital decisions, like the need to expand aviation capacity, into the long grass.

Fourth, we need to reform uncompetitive markets that are not working for consumers or businesses alike. In energy we have seen again this week why we need Ed Miliband’s reforms when falling wholesale costs have not been passed on to customers. In banking, net lending to businesses is down by £122bn under this Chancellor. Labour will ask the Competition and Markets Authority to report on how we can increase competition with new challenger banks, establish a proper Business Investment Bank and cut business rates for 1.5 million business properties.

Finally, we need reforms in Europe – not an arbitrary referendum for reasons of internal Tory party management which is creating huge business uncertainty - and to make sure immigration is fair and managed with strong borders and tough controls. That means being properly engaged in Europe, not with one foot in the exit door. And it means reforms to ensure that EU citizens seeking work here contribute to our economy and society.

As I argued four years ago, we should extend the period of time that people from new member states have to wait before being able to come to the United Kingdom to look for work. We will work to stop the payment of child benefits to those not resident in this country, consult on changing the rules on deporting someone who receives a custodial sentence shortly after arriving in the UK, and have called on the government to double the time that an EU migrant has to wait before being able to claim the basic jobseeker’s allowance.

This is Labour’s agenda for economic change. It stands in marked contrast to Tory ministers burying their heads in the sand, repeating a hollow mantra and hoping that more of the same will restore public trust. We will only sustain support for an open and dynamic market economy if we show that it can work for all, and not just some. That is the long-term economic plan Britain needs.

Ed Balls was formerly the shadow chancellor and MP for Morley and Outwood.

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Arsène Wenger: how can an intelligent manager preside over such a hollowed-out team?

The Arsenal manager faces a frustrating legacy.

Sport is obviously not all about winning, but it is about justified hope. That ­distinction has provided, until recently, a serious defence of Arsène Wenger’s Act II – the losing part. Arsenal haven’t won anything big for 13 years. But they have been close enough (and this is a personal view) to sustain the experience of investing emotionally in the story. Hope turning to disappointment is fine. It’s when the hope goes, that’s the problem.

Defeat takes many forms. In both 2010 and 2011, Arsenal lost over two legs to Barcelona in the Champions League. Yet these were rich and rewarding sporting experiences. In the two London fixtures of those ties, Arsenal drew 2-2 and won 2-1 against the most dazzling team in the world. Those nights reinvigorated my pride in sport. The Emirates Stadium had the best show in town. Defeat, when it arrived in Barcelona, was softened by gratitude. We’d been entertained, more than entertained.

Arsenal’s 5-1 surrender to Bayern Munich on 15 February was very different. In this capitulation by instalments, the fascination was macabre rather than dramatic. Having long given up on discerning signs of life, we began the post-mortem mid-match. As we pored over the entrails, the curiosity lay in the extent of the malady that had brought down the body. The same question, over and over: how could such an intelligent, deep-thinking manager preside over a hollowed-out team? How could failings so obvious to outsiders, the absence of steel and resilience, evade the judgement of the boss?

There is a saying in rugby union that forwards (the hard men) determine who wins, and the backs (the glamour boys) decide by how much. Here is a footballing equivalent: midfielders define matches, attacking players adorn them and defenders get the blame. Yet Arsenal’s players as good as vacated the midfield. It is hard to judge how well Bayern’s playmakers performed because they were operating in a vacuum; it looked like a morale-boosting training-ground drill, free from the annoying presence of opponents.

I have always been suspicious of the ­default English critique which posits that mentally fragile teams can be turned around by licensed on-field violence – a good kicking, basically. Sporting “character” takes many forms; physical assertiveness is only one dimension.

Still, it remains baffling, Wenger’s blind spot. He indulges artistry, especially the mercurial Mesut Özil, beyond the point where it serves the player. Yet he won’t protect the magicians by surrounding them with effective but down-to-earth talents. It has become a diet of collapsing soufflés.

What held back Wenger from buying the linchpin midfielder he has lacked for many years? Money is only part of the explanation. All added up, Arsenal do spend: their collective wage bill is the fourth-highest in the League. But Wenger has always been reluctant to lavish cash on a single star player, let alone a steely one. Rather two nice players than one great one.

The power of habit has become debilitating. Like a wealthy but conservative shopper who keeps going back to the same clothes shop, Wenger habituates the same strata of the transfer market. When he can’t get what he needs, he’s happy to come back home with something he’s already got, ­usually an elegant midfielder, tidy passer, gets bounced in big games, prone to going missing. Another button-down blue shirt for a drawer that is well stuffed.

It is almost universally accepted that, as a business, Arsenal are England’s leading club. Where their rivals rely on bailouts from oligarchs or highly leveraged debt, Arsenal took tough choices early and now appear financially secure – helped by their manager’s ability to engineer qualification for the Champions League every season while avoiding excessive transfer costs. Does that count for anything?

After the financial crisis, I had a revealing conversation with the owner of a private bank that had sailed through the turmoil. Being cautious and Swiss, he explained, he had always kept more capital reserves than the norm. As a result, the bank had made less money in boom years. “If I’d been a normal chief executive, I’d have been fired by the board,” he said. Instead, when the economic winds turned, he was much better placed than more bullish rivals. As a competitive strategy, his winning hand was only laid bare by the arrival of harder times.

In football, however, the crash never came. We all wrote that football’s insane spending couldn’t go on but the pace has only quickened. Even the Premier League’s bosses confessed to being surprised by the last extravagant round of television deals – the cash that eventually flows into the hands of managers and then the pockets of players and their agents.

By refusing to splash out on the players he needed, whatever the cost, Wenger was hedged for a downturn that never arrived.

What an irony it would be if football’s bust comes after he has departed. Imagine the scenario. The oligarchs move on, finding fresh ways of achieving fame, respectability and the protection achieved by entering the English establishment. The clubs loaded with debt are forced to cut their spending. Arsenal, benefiting from their solid business model, sail into an outright lead, mopping up star talent and trophies all round.

It’s often said that Wenger – early to invest in data analytics and worldwide scouts; a pioneer of player fitness and lifestyle – was overtaken by imitators. There is a second dimension to the question of time and circumstance. He helped to create and build Arsenal’s off-field robustness, even though football’s crazy economics haven’t yet proved its underlying value.

If the wind turns, Arsène Wenger may face a frustrating legacy: yesterday’s man and yet twice ahead of his time. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit