New Times,
New Thinking.

To forge a “New Britain”, Labour must rethink our economic system

The party pledges to unleash growth in its report on the UK’s political future, but it has missed the point about where financial power rests.

By Sarah Longlands

While the content of Labour’s report A New Britain: Renewing our Democracy and Rebuilding our Economy isn’t exactly brand new, it has been a novelty over the last few days to hear a politician of Gordon Brown’s calibre speaking about it. Here is a man who actually believes in what he is proposing, a refreshing contrast to the parade of prime ministerial egos we have had the misfortune to be ruled over by in recent… (checks diary) months.

Brown is, and always has been, a serious public servant who believes in the power of politics and democracy to create change for the better. His plan sets out in clear detail the terms of the relationship between the constituent parts of our democracy.

The document, which Keir Starmer launched yesterday, shows it understands that good economic development is underpinned by effective governance. It is also underpinned by the acknowledgment that devolution is key to supporting meaningful democratic participation, as well as in holding leaders to account. A very welcome set of recommendations acknowledge the crucial importance of local government in supporting economic prosperity, and include proposals to provide much greater financial stability. There are also tentative proposals for fiscal devolution and a radical-sounding proposal for “special local legislation”, which would enable local or regional authorities to promote legislation at Westminster. In particular, the commitments to constitutionally-supported social rights – including health, education, housing and a life free from poverty – are hugely important in terms of the freedoms an individual should be able to enjoy.

[See also: Labour’s fiscal paradox]

I worry, however, that Labour has missed the point about where power rests in the UK. While the party uses the report to call out “the dead hand of over-centralised decision-making”, largely absent is a critique of the economic model that aides and abets this sorry state of affairs. Unfortunately, this means that at times the report slips back into the 1990s lexicon of growth-led economic development: “unleashing the potential for growth”, “driving growth”, “economic powerhouses”.

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“A United Kingdom awash with a new economic dynamism,” is a particularly memorable line. To be fair, it’s the rhetoric you expect to find in this kind of document. It rings particularly hollow, however, at a time when places like Bolton, where I live, are more awash with despair and poverty than anything else, as food and heating bills mount.

A rebuild of the UK’s constitutional settlement will only succeed in spreading prosperity if it also faces up to the reality that power is being hoarded inside our economic system: in vested interests; financial architecture; and complex hierarchies of economic ownership. At the local level, this economic power means that proposals brought forward by Labour’s “local partnerships” will be evaluated not on social need but on economic viability. It also means that, unless they have the capacity and powers to regulate unscrupulous profiteering in the provision of children’s services and housing, local authorities will be unable to uphold the constitutionally supported social rights promised in these plans.

We desperately need a shift away from economic policy that relies on trickle-down economics towards an economy in which, as the report’s ambitions make clear, “the wealth of the nation is invested to create wealth everywhere”. Constitutional reform is an important means by which to achieve this goal, but it cannot sit in isolation. An effective system of regulation to decentralise the power of extractive capitalism is the other piece of the puzzle. That is how Labour can “unleash the potential” – to borrow a phrase – of our wealth to transform people’s lives.

[See also: I would never have been selected in Starmer’s Labour]

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