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4 January 2016updated 08 Jan 2016 12:51pm

If we want to build a new economy, we have to recognise not everyone can work for the NHS

Labour has to move beyond abstraction and think about detail as far as a "better economy" is concerned, says Jonathan Reynolds. 

By jonathan Reynolds

Christmas. Traditionally a time for family, presents, good food and good company and, of course, a series of think pieces about the future of the Labour Party.

This season the principal offerings came from two speechwriters to former Labour leaders, Peter Hyman (Tony Blair) and Marc Stears (Ed Miliband). Both pieces are very good festive offerings, frank in their acknowledgment of what their employers got wrong as well as right, and are worth a look if you haven’t yet seen them.

One line in the Marc Stears piece particularly caught my attention: his recognition that the current British economic model is inadequate, in that it produces too much low-paid, insecure and unfulfilling work. He is surely right on this, and in his assertion that the core of Labour’s revival lies in formulating a coherent alternative. I actually think the vast majority of Labour opinion could unite around these points.

But I believe the major problem with this analysis is that the principal requirement to deliver such an alternative economic model – an understanding of how the state, business and the market economy might interact to produce the outcomes we desire – is fairly poor in the Labour Party. To put in brutally, we often give the impression that we’d prefer it if everyone could just work in the public sector, and ideally for the NHS. When we talk about self-employed people it’s often as if we believe they must have been forced into it. We pay scant attention to arguments around competitiveness, especially global competition, and even where the evidence of competition working well is all around us (have you seen how cheap broadband is these days?) we are reluctant to acknowledge it. For some “competition’ itself is a dirty word.

Amongst people who are more aware of these issues, our rhetoric still leads towards oversimplification: i.e. we might want to be on the side of small businesses, but not ‘big business’, even though some of the best industrial success stories in the UK come from the likes of Nissan. Or we might like manufacturing, but not financial services – despite the fact that nearly all the world-class manufacturers in the UK have diversified their business models to provide both. The result is we often look poorly informed, and sometimes just incoherent.

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I remember a meeting of senior personnel in the last Parliament where, after the collapse of a well-known retail business, we discussed how to get an intervention around the embryonic ‘responsible capitalism’ agenda into the news. The best anyone could come up with was re-floating an old policy from our manifesto, that takeovers should require a 75 per cent threshold of shareholders before going through. Now, there would be merits to reforming some aspects of takeover law, but if the impression we give is simply that we think takeovers are bad and we should legislate to make them harder, then we don’t even deserve to be on the pitch.

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Our obsession with our past also clouds our judgement. The nationalisation of industry post-1945 was largely based on the experience of wartime, where government intervention in production was essential. The form it took – the public corporation – was not a particularly left-wing institution, which is partly why the Tories found it so easy to live with. It was very much a product of its time. However, it’s abundantly clear such an approach wouldn’t work today. Witness the current state of the UK car industry, which effectively died out under public ownership yet is in tremendous health today – a result of private ownership, British management, a skilled workforce and a supportive, but not controlling, state. This has produced exactly the type of skilled well-paid jobs we all want to see more of.

The tragedy of this is that if Labour got it right in this area, we could easily outperform the Tories on the economy because we already have a number of built-in advantages: we are instinctively sympathetic towards public investment in infrastructure and skills, our approach to immigration isn’t governed by the dog-whistle, and the Labour movement is broadly united in favour of retaining EU membership.

Labour should be making the case that we can also outperform the Tories on competitiveness and investment, eventually even making the UK the largest economy in Europe. We should celebrate and work with the success we’ve seen the private sector deliver in sectors like automobiles, aerospace, pharmaceuticals and renewable energy, and the job creation that comes with that. We should recognise the huge contribution overseas investment has made to the UK, and scrap punitive restrictions on foreign students who want to come here to study. We should back international trade agreements when they reduce barriers to our exports (whilst not ceding sovereignty over public services or product regulation) and recognise that global trade has led to impressive reductions in global poverty.

We should also acknowledge that private sector job growth outside of the South East was not good enough under the last Labour government, and propose measures to remedy this – regional banks, an apprenticeship levy (already stolen by the Tories), and further investment in transport infrastructure. And we should actively embrace competition as the means to produce world-beating industries that can generate exports and prosperity.

This goal, of convincing people we can make the UK more prosperous, is also the only way to get a chance to make it fairer and more equitable. It is also the common thread that runs between 1945, 1964, and 1997, the times when Labour has won. But crucially this is not about making a compromise to win an election – it is about understanding how to deliver on classic Labour objectives. The problem with our manifesto in say, 1983, is not just that it was deeply unpopular, but also that it wouldn’t have worked – leaving the EU, imposing import duties and punitive taxation would actually have made unemployment and inequality worse. Understanding this, and getting it right again, is essential to all aspects of our future success.