Piers Digby compares the economic success of the last Labour government to the unrealistic economic pledges made by Conservative leadership candidates, and suggests how Labour can benefit from this.
Looking back, the most impressive part of New Labour’s many achievements was the United Kingdom’s record on growth. From 1997 until the onset of the financial crisis in 2008, UK GDP grew at a steady yearly average of 2.7%. That’s good for ordinary Brits, who get to walk away with about 2.7% more in their pocket every year, and it’s good for the government, because that’s 2.7% more GDP which falls taxable and provides the revenue for schools, hospitals, the police, transport, the environment, welfare – you name it. Wherever you stand in the Labour Party, it all gets easier with growth, and the red rose grew fiercely.
This was no accident. New Labour had a comprehensive policy plan for growth. Huge amounts of money were poured into education, particularly in early years and through Sure Start, leading to a more skilled and productive workforce. The Bank of England was given independence and the mandate to target a stable, low inflation economy, giving people the security to invest. The introduction of minimum wage and tax credits helped lift many working people out of poverty, and gave them a disposable income to fuel historically-deprived areas. The power of the state was vital in achieving this, working hand in hand with business.
Following Labour’s defeat in the 2010 election, the Conservatives then changed course and set about cutting back the state. Their goal was a United Kingdom that spent less per person. But try as they might, state spending as a percentage of GDP remained remarkably resilient. In 2019, the last pre-pandemic year, state spending as a percentage of GDP stood at 39.1% - barely different to the 39.6% it was at in 2007 after ten years of Labour government. Why had austerity failed so miserably?
The answer has two parts. Firstly, the United Kingdom’s GDP growth remained tepid. By 2017, GDP per capita was scarcely any different than it had been in 2007. Austerity lopped the head from any green shoots of recovery. With a failing NHS, people spent more time sick and off work. As employment rights were cut back, workers entered a new and insecure job market where self-improvement was too expensive and too risky. Attacks on local transport meant finding a new job in reasonable travel distance became ever harder. As the Conservatives cut back the state, they cut back GDP back with it.
Secondly, Britain has changed. We are an older population, with more people in need of social care, more people in hospital beds, and more people retired and beyond the easy reach of tax. We are in an environmental crisis, where easy growth driven by fossil fuels risks wildfires in the future- the present has already seen the United Kingdom reach a sweltering 40°C. And we are in an uncertain world, where Russian troops commit atrocities in Ukraine and threaten Europe’s energy security. All these make growth even harder to come by, and make having a clear plan for growth ever more important.
This leaves us with the tragedy that has been the Conservative leadership debates. We have seen five Conservative candidates called up on stage and challenged on the cost of living crisis. Not a single one had a plan. Liz Truss signed up to cutting corporation tax – without any thought for whether companies would set those profits to improving productivity, or simply lob the money back to shareholders. Rishi Sunak hung his hat on the opportunities of Brexit – which makes you wonder what exactly he was doing in his job since Brexit actually happened. And Penny Mordaunt was the worst of all, with no plan whatsoever despite standing to be the leader of our country.
The Conservatives find themselves as the modern-day Othello: having pluck’d the rose, they cannot give the economy vital growth again. It needs must wither.
This gives Sir Keir Starmer’s Labour its chance. Economic competence has long been seen as Labour’s weak point, and a fatal one for many voters. But the Conservatives have comfortably demonstrated their failings, and voters will be turning to re-examine Labour. Rachel Reeves’ address to Bury at the start of this year shows the red rose can blossom again. Re-establishing a clear industrial strategy, driving energy costs down with a revolution green technology, and reviving local high streets by revamping the ineffective and outdated business rates system – Labour has plans for growth, and with it, a plan for electoral victory.
Piers Digby is a barrister and a Labour activist of over a decade, grown in Wales and working in London. He is a Young Fabian member. Opinions here are given in a personal capacity. Piers tweets at @pmgdigby.