In a speech this week, Keir Starmer made a key distinction between his approach and that of his predecessors. Previous economic strategies “focused on growing the pie in any way possible, then redistributing”, he said, ‘”but this is not strong, secure and fair growth”. Too many communities, he argued, are left locked out of the benefits of growth, breaking a contract between the economy and the electorate that redistribution cannot repair.
As chief executive of the Centre for Progressive Policy (CPP), a think tank dedicated to inclusive economic growth, this recognition feels long overdue. At CPP, we believe economic growth and people’s livelihoods should be considered together, rather than separately. We advocate for economic strategies that deliver social benefits, spreading economic gain more fairly between people and places.
It is clear our stagnant economy needs a plan for growth, so it’s no surprise both the main political parties in Westminster are focusing on it, albeit in starkly different ways.
Starmer’s speech was determinedly pro-business, with private enterprise held up as the driver of prosperity and not the enemy of the state – a clear distancing from former leader Jeremy Corbyn and the Momentum wing of the Labour Party. It was also a subtle shift away from New Labour’s economic model. Peter Mandelson famously declared that the government was “intensely relaxed about people getting filthy rich” so long as they paid their taxes. The idea being that those taxes funded social and economic policies that changed the lives of many, from tax credits to Sure Start Centres.
Yet benefitting from a growing economy is not the same as participating in one. And while a strong safety net is vital, it should not be a replacement for a strong, inclusive economy that connects people to opportunities to participate.
Redistributive models are also vulnerable to changes in political will. When the Conservatives gained power in 2010 much of New Labour’s safety net was shredded in the name of austerity. Insecure, low-paid work pervaded our economy. One party’s pursuit for social justice is another’s fiscal recklessness.
If Labour is to gain the electorate’s trust as the party of growth, it needs to flesh out its vision in more detail and be bolder in its choice of policies to get there. It must prioritise investment in education and skills across the country, reversing the impact of the pandemic on the attainment gap and training the workforce out of our low-skilled, low productivity malaise. How, for example, could the current tight labour market be an opportunity to test new ways of fast-tracking skills for the people, places and sectors where they are needed most? Our traditional, clunky and chronically underfunded further education “employer engagement” model is not working.
The legacy of 2008 and the false narratives around Labour’s role in causing the financial crisis loom large. Combine the tightrope walk required now to clamp down on inflation while delivering “growth, growth, growth” and it is no coincidence that financial responsibility is the first of Starmer’s five new principles for government. But the challenges are so great that incrementalism, however confident or competent, won’t cut it. A radical inclusive growth strategy is needed.
Will Labour be honest with voters in saying that, in order to deliver strong public services to power our economy, rules for public investment may need to change? Will it set out the trade-offs we face in alleviating costs of living today and creating inclusive, sustainable growth over the long term? How far will Labour go in devolving economic power to elected mayors and combined authorities in England? How might the culture and expectations of Whitehall and Westminster need to be overhauled to support this?
Talk of tackling regional disparities is cheap. If Labour wants to own levelling up – a real possibility, given there has been near radio silence from both Tory front runners on Johnson’s flagship agenda – it must be clear what is on the table for devolution, and what it will mean locally. Would-be PMs, Tory or Labour, who don’t properly consider the role of places and of devolution cannot hope to deliver sustainable economic growth.
Rishi Sunak and Liz Truss will spend the summer tearing chunks out of each other in a bid to offer 1980s-style solutions to 1970s-style problems. This may work for Tory members, but the idea that deregulation and tax cuts can dig us out of the sluggish-growth, high-inflation situation we now find ourselves in is deluded. We are living in a time of rising inequality, with a cost-of-living crisis that threatens widespread hardship this winter. The flaws in our existing model are – once again – painfully clear. We cannot cling to the hope that growth will trickle down. Labour has an opportunity that it must not waste.