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18 February 2021updated 20 Aug 2021 9:17am

Keir Starmer has an economic policy. What he doesn’t have is a strategy

Labour has a clear social democratic position, but it is unclear how or if the party plans to regain electoral credibility.

By Stephen Bush

Keir Starmer’s biggest success is that for the first time since the 2008 financial crisis, Labour have a leader with decent approval ratings. His personal ratings are better than David Cameron’s at an equivalent period and beaten only by Tony Blair’s (albeit quite comfortably beaten by Blair’s). His biggest failure, however, is that Labour’s ratings on economic competence have remained where they have been since the financial crisis.

His big speech on the economy had two main tasks: to set out the broad outline of Labour economic thinking under his leadership and to establish the beginnings of a plan to rebuild its reputation for economic credibility. It did the former better than the latter: it continued the approach set out in Anneliese Dodds’ Mais Lecture, to essentially offer orthodox social democracy in a reassuring tone of voice. But it’s less clear what Starmer’s plan is for how to address Labour’s credibility problem on the economy.

The fiscal framework he and Dodds are proposing is virtually identical to the one that John McDonnell adopted in April 2016, and, like him, their strategy for fixing the party’s economic credibility problem is to use the word “credibility” a lot. One important difference is that the consensus among economists and global economic organisations has moved towards Labour’s thinking, so the party can, if it wishes, spin that it has “moved to the centre” while staying in the exact same place. It may be that the now continual backdrop of criticism of Starmer from his left flank, and the BBC’s tendency to cover policy primarily as theatre, means that regardless of whether Labour wants to say that it is moving to the centre on economics, this will be the headline it generates in any case.

[Hear more from Stephen on the New Statesman podcast]

But most voters don’t really know what “moving to the centre” means and there is no reason to believe that doing so will fix the party’s problem, particularly in this case, when the actual policy framework remains unchanged. The party’s big bet at the moment seems to be that Rishi Sunak’s orthodox economic instincts ultimately triumph over Boris Johnson’s impulses to spend, and spend freely. That bet may come off: but it may not.

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One problem is, however, that while it is easy to identify what Labour needs to do in order to win – to change perceptions of its handling of the economy – it is difficult to identify a foolproof strategy to achieve that. The difficult truth for Labour is the last two moments when perceptions of a party’s economic credibility were aided by economic crises: the Conservative government’s exit from the Exchange Rate Mechanism in 1992 and the global financial crisis in 2007-08. The coronavirus recession has not – yet – had a similar impact.

Added to that is something that superficially seems like an asset to Labour: the shift in fiscal thinking across most of the economic profession and global institutions. In different ways, Blair and Cameron demonstrated change by abandoning positions that their parties had held and moving towards the political consensus. Labour under Starmer has a different problem: it has a series of positions on which it is closer to the economic consensus than its opponents. If it were to move away from them, it would face the unlovely situation of being criticised from Labour’s left and right flanks for abandoning sensible economic positions, while moving away from the positions of the IMF, IFS and the OECD and much of the economics profession. If it stays where it is then the party can’t really demonstrate “change”: and without demonstrating change, how can it demonstrate its credibility?

And that’s the worrying part of Starmer’s speech: it’s not that it’s unclear how he plans to tackle Labour’s economic credibility problem. It’s that it is unclear that there is a way to tackle Labour’s economic credibility problem.