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Liam Byrne: “New Labour economics is history”

The former cabinet minister on why he hopes his new book on wealth inequality will overshadow “that wretched leaving note”.

By Anoosh Chakelian

During his 20 years in Westminster, Liam Byrne has been on a journey. “‘Journey’ is very kind!” he laughed, sitting cross-legged in an armchair in his House of Commons office.

This is the man who both guided Britain through the financial crash as chief secretary to the Treasury and trashed Labour’s reputation by leaving a note behind that quipped “I’m afraid there is no money”. The ex-tech entrepreneur who makes CEOs squirm in his role as chair of the Business Select Committee. The sensitive voice for fellow children of addicts who was found to have bullied his own staff. The Harvard Business School grad who steadily served on Jeremy Corbyn’s front bench.

He is also a former Blairite minister who rejects the consensus of that era. “New Labour economics is history,” Byrne declared, his old ministerial red box looking reproachfully on across the floor from him.

We met in his sky-lit garret room overlooking Portcullis House – a greenhouse with aphid MPs scuttling around below. Surrounding us were a Ukraine flag, Billy Bragg record, director’s chair and photographer’s umbrella. Framed family photos lined the room, and a library of Byrne’s own books and pamphlets were displayed on a bookcase – his very workspace betraying the restlessness of a politician who has been through an identity crisis. He poured us tea in mugs bearing pictures of his face – mine in black and white, his in sepia.

But snuggled in a black cardigan with his maroon-socked feet folded beneath him, Byrne seemed finally at ease with his place in the land of Labour – a party he joined at 15, so distressed was he by footage of police baton-charging striking miners in 1984 (something he still can’t watch today without weeping).

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“I started very much on the New Labour wing of British politics,” he said. “But we’ve always had these moments in our intellectual history where we’ve looked at the world and how it’s changing, and thought: ‘We’ve got to update our thinking.’”

After the Brexit referendum in 2016, Byrne, 53 – a child of Warrington then Harlow, the Essex new town of both postwar aspiration and betrayed utopian ideals – was exploring the world’s populist wave. He came across research linking high levels of wealth inequality to populist support. The “profound political consequences” of this struck him, in an economic establishment forever focused on income. The New Labour formula of redistribution and embrace of the “filthy rich” hadn’t worked.

“The kind of economics that inspired New Labour has to fundamentally change, because it led to economic prescriptions which have not delivered rising boats for all: it’s delivered a world of haves and have-nots and have-yachts,” Byrne admitted.

“We have to update the way we think about economics in light of new evidence – that is what I’ve tried to do, and I suppose why I broke with the New Labour tradition.”

In his new book, The Inequality of Wealth: Why it Matters and How to Fix it, he writes of his regret, as the shadow work and pensions secretary under Ed Miliband, trying to “out-toughen” the Tories on welfare by alluding to the “undeserving poor”. Today, he instead speaks of the “undeserving rich”: the rising proportion of those whose wealth is acquired through inheritance rather than hard work (only 21 per cent of the British public now feel financial fortune is down to the latter).

“At times in our [Labour’s] political history over the past 13 years, we could have actually pushed back about some of the nastier Tory rhetoric in the austerity years, and we should have had more self-confidence in our own beliefs,” Byrne said. “I felt that the role of politicians in actually leading public opinion was underdone at times.”

How does this all square with Keir Starmer’s and Rachel Reeves’s Labour, then, which mostly mirrors Conservative spending plans? This is a front bench so fixated on “costing” its commitments that it refuses to scrap the Tories’ two-child benefit cap, after all.

“They are just having to ruthlessly put everything through their own fiscal rules, and that is the right thing. But the Labour Party will expect a project that delivers a more equal country and makes food banks history, frankly, because that’s why we’re in politics and public life,” Byrne warned. “We’re here to build a more equal, fairer, freer society, and the Labour Party will expect to see that project unfold in the first term of the next Labour government.”

He hopes his book will help. With stat after shocking stat, he exposes a nation fiercely divided by wealth. The average wealth of an individual in the top 1 per cent increased 31 times more than that of those in the bottom 99 per cent between 2010-21. Overall wealth in the UK rose £4trn in the same period – nearly a quarter of which went just to the top 1 per cent.

And worse is to come, as baby boomers die and bequeath £5.5trn to their descendants – compounding wealth inequality. From “universal basic capital” (an automatic savings account for everyone, like the auto-enrol pension system) to a doctor-style Hippocratic oath for all who work in finance, Byrne has devised policies to mitigate our state of “inheritocracy” and broken markets.

He will present his ideas to Starmer and Reeves soon – and while he doesn’t expect them to catch on in opposition, he does urge the leadership to embrace them from day one of government.

“There is a bold three-term plan here, but you’re going to need to start working on it immediately in the first term if you’re to stand a hope of presenting a manifesto for a second term and a third term that is really going to change the future of the country,” Byrne cautioned.

Despite calls for wealth taxes from across the Labour Party, Reeves has refused to give way. Would equalising capital gains tax with income tax, which Byrne said would “bring in between £8bn-£10bn”, for example, really be too radical a promise?

“So radical, Nigel Lawson did it!” laughed Byrne. “Well, no. And the polling shows there is quite a lot of support for these ideas. The challenge is that, ahead of an election, the Conservatives will always play the politics of loss aversion – an idea from behavioural economics which basically shows people fear losses twice as much as they treasure gains.”

Yet the problem goes further than an unjust taxation system, according to Byrne. He is most concerned with the political and social influence bought by the wealthiest (what he calls “inconspicuous consumption”) – and the unfairness this entrenches.

“Lobbying, PPE contracts, Londongrad – corruption scandals are coming thick and fast now. The British public has a sixth sense for things that are going wrong: they can smell the rising risk of corruption a mile away. They’ve got a sense that the country’s rotting.”

With Fujitsu bosses facing Byrne’s Business Select Committee over the Post Office scandal (in which hundreds of people were wrongfully arrested because of a faulty accounting system run by the Japanese firm), he reflected on a “pattern of behaviour that stinks” among private contractors in government.

Yet Byrne has not always been a beacon of morality in public life himself. In 2022, he was suspended from the Commons for two days for bullying a staff member. “I’ve made mistakes, I have to own them,” he told me. But as the son of an alcoholic, he has learned more about himself through therapy. His father, who died in 2015, drank to cope with Byrne’s mother dying of cancer at 52.

“Children of alcoholics are perfectionists, they want to put the world to rights and they become very driven – but they can become emotionally insensitive to others, and they can behave a bit like a bull in a china shop, and I was definitely guilty of all of those sins, and I do definitely share many of those pathologies.”

Showing me a glamorous black-and-white photograph of his parents as a beaming young couple – his dad chewing a pipe, his mum in knee-high boots – he told me he felt like “a god-awful failure” because he couldn’t stop the one drinking or the other dying. As a Harlow council manager and schoolteacher, respectively, they were committed to public service – something Byrne himself sees as a “route to redemption”. Yet he will still “never feel good enough”, he confessed.

And what of his infamous Treasury note that Conservative politicians still brandish on the campaign trail today? “Politics is a rough trade,” Byrne writes of “that wretched leaving note”. He hopes his book will move the conversation on – as a blueprint for a wealth-owning democracy. “These are the notes I wish I had left.”

[See also: How Labour’s path to a majority has eased]

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