As each week passes, a new theory of Labour’s trouble emerges. It’s the comms. The values. The vibes. The policies. The leaflets. The tweets. The TikToks. While there is some truth to these critiques, they fail to explain why the party’s time in office has been so bumpy. The problem runs deeper – and further back – than many in the party are willing to admit.
This starts with the party’s “problem statement”, to use the jargon of management consultants – who will tell you that every plan has to start with one, including programmes for office. Problem statements are by their nature time-bound: if you go to the doctor with an ailment, they will always ask: “When did your symptoms begin?”
For many in Labour, the answer is the financial crisis of 2007-08. It’s too often presumed that our politics was “normal” and the country was on a good course until the crash. And that after that, things got weird – leading to Brexit and other undesirable outcomes. But what if this diagnosis is mistaken? What if the crisis didn’t create our problems, but merely accelerated them? And what if the real turning point came with the continuation of Thatcherism under Blair?
Contra John Bew in these pages recently, Thatcher’s revolution constitutes the last “great disruption” Britain has seen – and no-one, including the last Labour government, have touched it. That revolution had three key elements.
First, deindustrialisation. This destroyed strong working-class communities and was pursued with a vengeance by Thatcher. While this is a tale is as old as time, New Labour’s industrial track record receives less attention. As Rian Chad Whitton has argued, much more of our industrial decline happened later than standard accounts consider: after Thatcher’s time in office, from the millennium onwards, partly due to a sharp rise in industrial energy prices from 2004 onwards.
Second, privatisation. In 1985 water, energy, buses and trains were all under public control. Yet roughly a decade later, they had all been transferred to the private sector. The great national sell-off has reduced the public’s faith in the system, leading them to pay more for less, as Common Wealth have recently shown. These changes were largely left in place by New Labour.
Third, globalisation. As David Edgerton has argued, the opening of the UK economy to global forces was the very essence of Thatcherism. This meant a vast sell-off of British assets, often under the guise of “foreign direct investment”. International ownership of UK listed companies has increased from less than 5 per cent in the early 1980s to more than 50 per cent in 2022. This is an extraordinary change, meaning we are sending billions of pounds of profits overseas which could have gone to British workers. While such forces were put into motion during the 1980s, New Labour did little to stop the creation of this “vassal state”.
The longevity of Thatcher’s economic reforms explains why the politics of today looks a lot more like the politics of the 1990s and 2000s than people typically expect, and why they are less forged by the financial crisis than people generally believe.
Take populism. If the financial crisis was the true turning point we would expect to see populism only rise after 2008, but the drift away from mainstream politics was already underway. Through the 1990s and 2000s, far-right and far-left parties made increasing gains. The BNP made gains across in post-industrial heartlands, gaining footholds from Bradford to Barking. On the populist far-left, George Galloway was rampant, gaining councillors in East London, Birmingham and – again – Bradford. The geography is no coincidence – these places tend to have been most exposed to the new political economy of the 1980s, in particular their exposure to deindustrialisation.
Of course these parties remained relatively fringe – they never ran a council, and barely held parliamentary representation. Yet a new form of politics was being forged, not least in the rise of mainstream Euroscepticism. It’s easy to pretend that Reform is a post-crash phenomenon, but this is the time of Ukip coming third in European elections (2004) and gaining more than half a million votes at a general election (2005).
But what about migration? A common Westminster shorthand is that if the punch bowl hadn’t been taken away from the party, in the form of the Northern Rock collapse and everything that followed, then concerns about migration would have remained low. Yet consider this scenario: a Labour government faces a record number of asylum applications and a public backlash as a result, with many arriving illegally across the channel from a camp in Calais. Its response? To consider radical action on the ECHR, to deal with an incredible number of asylum applications – including looking at Australia’s offshoring processing.
Sound familiar? Of course – but this was Blair’s government in 2003, not Starmer’s. Following archival releases in 2023, we now know that his government was considering many similar measures to this one, while in many instances going much farther, including considering a detention camp on the Isle of Mull. As Dr Peter Walsh of the Migration Observatory put it when seeing the release, “Goodness, this is so similar to the debate we’re having now.”
Similarly, consider faith in the political class. Of late, this has become something of a Westminster obsession; it’s hard to move for podcasts, essays or pieces like this on the decline in trust. The simple answer generally goes something like “2008 crash, plus expenses scandal” as the explanation. Yet the data suggests something different: trust in politics has been falling for decades, with rising support for the idea that politicians are only in it for themselves.
But what about our economy – wasn’t that ticking along nicely? It’s common to see a chart shared in Westminster – GDP rising steadily every year until – poof! – the financial crisis. As a result, the task is to get Britain back to “pre-crash” status. Hence the calls from “growthers” and Yimbies to magically return to our pre-crash rate of growth. And in more respectable corners, such as the Resolution Foundation, an effort to reverse the “lost decade” seen since the crash.
But what happens if we lift the bonnet a little? We now know that, yes of course wages slowed down after the financial crisis, but that wage growth in the 1990s and 2000s was significantly poorer than during the decades of the post-war consensus. As Stephen Machin of the LSE writes, “In the 1960s, 1970s, 1980s, real wage growth was healthy at 3.0, 5.5 and 4.4 per cent a year. The 1990s saw this slow down to 1.6 per cent, and to a similar 1.7 per cent in the 2000s.”
The closer you look, the more the “great moderation” of the 1990s and 2000s looks anything but. Instead, you see the signs of the fault-lines that are central to our so-called post-crash politics: populism, collapsing trust in politics, migration centre-stage. Which can all be rooted back to Thatcher’s destructive economic programme and legacy.
Of course, the financial crisis did intensify the momentum behind these forces in our politics. And so did the policy choices that followed the crash, in particular austerity – which we know from academic research increased support for Brexit, for example. But they are continuations of trends that already existed; not ruptures from a previous paradigm, as is typically presented.
Indeed, while most of the political class took its eye off the ball, for those paying attention this was clear to see. I think this partly explains why the best analysts of the 1990s and 2000s wrote books that sound remarkably similar to those written in the so-called “post-crash” era. John Gray’s Post-Liberalism was published not in the wake of Brexit but in 1996. The Age of Insecurity by Larry Elliot was written more than two decades before the expression was used by the Prime Minister. Why does Labour still act as if its task is to return us to the stability and moderation of the 2000s?
One obvious reason is that the party was in office for much of this period. Can it be proud of its record? There are many ways to square this circle. The simplest is to acknowledge that New Labour successfully ameliorated the symptoms of Thatcher’s flawed political economy. The New Deal for Communities brought life back to some of the places most exposed to deindustrialisation. Regional Development Agencies, where they worked, brought public sector employment to improve living standards in the regions. Policies like Sure Start helped the least off the most.
But the proof was in the pudding – if New Labour had shifted our economy away from an over-reliance on services, in particular financial services, we would have been less exposed to the banking meltdown. In the end, we were one of the most affected economies in the world, with a scarring effect we have never recovered from.
If this all sounds too bitter a pill to swallow, consider this. One of Farage’s weaknesses is that he admires the politician – Thatcher – that has done the most damage to Britain in modern times. If Labour can shift the blame to long-term, deep economic changes that the Conservatives unleashed and which were then doubled down on by austerity, the party would be in a better position.
It can also provide some solace to those scratching their heads as to why the “change” offered by Labour’s manifesto has been so hard to deliver. Put simply, our problems have been allowed to fester for approaching 50 years. The repair job is going to take some time. Undoing Conservative mistakes of the last 15 years is sadly insufficient.
Instinctively, I think the public understand this – the sense we have been on the wrong path for some time is palpable. This explains our country’s deep nostalgia; a recent survey from Ipsos found that the public think the Britain of 1975 trumps that of 2025 across almost every metric, an extraordinary finding and putting us among the most nostalgic countries in the world.
Labour must channel this nostalgia to build a new Britain. When asked to choose between the social democracy of the post-war consensus and the hyper-individualism of modern Britain, it’s clear which side the public is on. At the same time, we need to paint our opponents as those stuck in the past – as those wedded to the outdated methods and practices that we have been trying for half a century, with increasingly poor results. Starmer has always been allergic to defining his project, but here’s a name for it: progressive nostalgia.
Nostalgia not for the 1990s and 2000s, which we have seen can’t only be returned to but had many undesirable features which are – critically –plaguing us today. But for the stability, security and working-class prosperity of the time, before Thatcher dismantled that Britain. Progressive not because we are wedded to a particular vein of liberal internationalism that was forged by the fall of the Berlin Wall. But because we are calling time on the outdated conservatism of the last 50 years: of deindustrialisation, privatisation and globalisation, which produced the political disaffection that plagues our country.
[Further reading: Karl Turner’s suspension exposes the confusion of Labour whips]
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Subscribe here to commentBut what if another consequence of Thatcherism is a class of professional politicians who see their Westminster years as a path to corporate employment, the prize they all aim for? By definition, they will do nothing to upset the apple cart. Also; any genuine alternative (Corbynism) will be relentlessly attacked and destroyed by the media and corporate political class. It would take a genuine revolution to overturn this and that will not happen.