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17 May 2017

Leader: The return of the state

Whatever the outcome of the general election on 8 June, the next government will no longer treat the state as an illegitimate actor.

By New Statesman

In 2013, at the Lord Mayor’s Banquet in London, David Cameron declared that it was his mission to create a “leaner, more efficient state . . . not just now, but permanently”. It was the language of the orthodox Thatcherite. By contrast, in her first Conservative party conference speech in 2016, Theresa May repudiated this doctrine, denouncing the “libertarian right” as well as the “socialist left”. The Conservative Party manifesto, launched this week, is the most interventionist in its economic positioning since the collapse of the postwar consensus at the end of the 1970s. Mrs May’s party has pledged to cap energy bills, to build a new generation of council housing and to protect and enhance workers’ rights.

Labour’s manifesto is, as one would expect, even more interventionist: the party has vowed to renationalise the railways, the water industry, Royal Mail and the energy grid, to reinstate collective bargaining and to raise taxes on those earning more than £80,000. Jeremy Corbyn’s pledge to invest £250bn over the next decade in infrastructure caught our eye. The change would increase annual investment from 2 per cent of GDP to 3 per cent – the level at which it stood before George Osborne’s injudicious cuts in 2010. By borrowing at low rates, the UK can stimulate growth, improve productivity and increase living standards. Total investment in Britain stands at just 17 per cent of GDP, compared to 22 per cent in France, 20 per cent in Germany and 19 per cent in the United States. That is not good enough.

The interventionist turn in British politics can be traced back to the 2008 financial crisis, when the state rescued capitalism from itself as J M Keynes would have wished. Under the Brown administration, “industrial strategy” was rehabilitated and a programme of fiscal stimulus introduced.

Theresa May is sometimes accused of borrowing liberally from Ed Miliband’s 2015 Labour manifesto – but her interventionist instincts long pre-date this. In a speech to the ConservativeHome conference on 10 March 2013 she vowed to take on “vested interests in the private sector” and argued that “where businesses abuse their market position to keep prices high, we should be prepared to make sure the market works in the public interest”.

When the UK voted to leave the EU, Mrs May recognised the result reflected not merely anti-Brussels sentiment but a desire for profound economic and social change. “There has been a breakdown in trust,” she told Jason Cowley in her NS interview in February. “Wages have been stagnant but there are other aspects to it, too. There’s been a breakdown in trust in institutions that have always formed the core of our society. There’s a sense that business somehow has been playing by a different set of rules, which is unfair. Tax avoidance is one of the issues. I’m trying to show business the importance of recognising the roots in community and the impact that decisions have on a community. What I’m talking about is a wider sharing and signs of solidarity. I don’t tend to think about terms like a new social contract between the state and the citizen, but I do speak about responsibilities. There needs to be a new recognition of the role that the state can play.”

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As well as protecting existing workers’ rights, the Conservatives have pledged to introduce employee representation on company boards, to adopt new protections for “gig economy” workers and to offer a statutory right to leave for those wishing to care for a sick relative, for training or for mourning the death of a child.

Critics reasonably point to limitations: many cannot afford to take unpaid leave, and employment tribunal fees remain as high as £1,200. However, there is a significant tonal difference. Mr Cameron chose the venture capitalist Adrian Beecroft to lead a review of employment law; Mrs May appointed the former Labour adviser Matthew Taylor. Rather than pre-emptively dismissing the Prime Minister, opponents should challenge her to honour her pledges and try to understand why her communitarian politics might be appealing to so many.

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Governments have an indispensable role in redistributing wealth, challenging cartels, creating the good society and investing in national projects. Whatever the outcome of the general election on 8 June – and all indicators point to a comfortable majority for the Conservatives – it is to be welcomed that the next government will no longer treat the state as an illegitimate actor.