In 1996 Bill Clinton declared “the era of big government over”. Tony Blair spoke in similar tones. The British state could not “protect against the onslaught of globalisation”, could not “protect a workforce by regulation, a company by subsidy or an industry by tariffs”, the New Labour prime minister told the public.
Today’s world looks rather different. The financial crisis, the Covid-19 pandemic, the imperative of net zero, and war in Ukraine have driven a return of the state on both sides of the Atlantic. The Conservatives now preside over the highest taxes and public spending seen in decades. Joe Biden, the US president, has ditched the rhetoric of his Third Way predecessors and attempted to establish American governance along more European lines. Tariff barriers are back, economies are “decoupling” and governments are promoting domestic industries to create shorter, more resilient supply chains.
Keir Starmer’s gave his speech outlining his vision for a future Labour government in this context. He promised “national renewal” based around “national missions”, to be announced in the coming weeks. Starmer would lead a “bold, reforming government” based on an “agile, active state”, creating “a greener, more dynamic country, with an economy that works for everyone”. The Tories’ “hands-off approach to the economy does not work”, he said; it was characterised by a “sticking plaster politics” of “last-minute, expensive fixes”.
But along with the Labour leader’s more statist rhetoric was a caveat: “We won’t be able to spend our way out of [the government’s] mess.” The “active state” was not code for Labour getting out its “big government cheque book”. Instead of splashing the cash, national renewal is to be based on a devolution of powers away from Westminster. There will be new powers for local authorities over transport, culture and skills. There’ll be new devolution deals and a new elected second chamber of nations and regions, mooted in Gordon Brown’s review of Britain’s constitutional settlement. Westminster was too used to hoarding power for itself, maintaining the UK’s accolade as one of the most centralised and most regionally imbalanced countries of the advanced industrialised world – two embarrassing records that are deeply related.
“For all the talk of levelling up, nothing ever happens,” Starmer said. “Westminster must give power away.”
The ambition is a noble one, and there’s no doubt that the concentration of power in the corridors of Whitehall has contributed to years of skewed investment, misplaced focus, policy churn and inordinate disparities in productivity, wealth, health and opportunity. Local communities and their immediate representatives are able to identify and ameliorate their own problems far more effectively than politicians and civil servants in faraway government departments.
But national renewal will not come cheap. The Unite union has already responded to Starmer’s speech asking for clarity over whether Labour will simply administer another round of austerity. We must hope it will not. Fulfilling any kind of “national missions” worth striving for will require public investment on a massive scale to halt the declining state of the public realm and the multiple crises that have emerged in the NHS, housing, transport and elsewhere. Devolution is welcome, but constitutional fixes cannot be used as a cheaper substitute for the kind of robust government investment that will be required for a Green Industrial Revolution, a programme of mass council-house building, or the sustained capital spending on health and social care needed to reduce waiting lists and restore a functioning service.
This doesn’t require a reckless eschewal of “sound money” in the fashion of Liz Truss and Kwasi Kwarteng, but prudential borrowing for capital investment and the raising of taxes on wealth, corporate super-profits and higher incomes to pay for day-to-day costs.
The era of big government is back and Starmer’s Labour should grasp the opportunity to create the “bold, reforming government” and “agile, active state” that the times require. Simply tinkering with more devolved bodies won’t cut it.