Progressive Futures

A political economy to heal Britain’s divisions

28 March 2018

Labour needs a clear economic vision if it hopes to win back power - one that goes beyond hi-tech industry to reach out to workers across the country to in sectors like retail and social care

Rachel Reeves
Tzido Sun / Shutterstock.com

Shortly after the 2017 general election, the academic David Runciman wrote:

What is striking about the result of this election is just how many divisions two-party politics now has to accommodate. The UK electorate is split between the old and the young, the educated and the less educated, the metropolitan and the provincial, the urban and the rural. The two main parties increasingly resemble loose coalitions of different interest and identity groups.

We could go on. Runciman neglects to mention, for instance, fissures around class, between homeowners and tenants, or between public and private sector workers. It is a formidable task, then, to even start thinking about how we bring the country together. And in the context of such a divided country, the most alarming outcome of all for the party of Labour was that our gains in Britain’s cities and university towns was offset by a loss of support among voters in parts of the country, like the West Midlands and the North East of England, most cut off from global growth.[1]

A great deal of discussion has been dedicated to the cultural aspect of these divides. Culture matters, and Labour has come to look and sound too much like a party that doesn’t always share the values or interests of voters in many of its traditional heartlands. We have struggled since the mid-2000s (at least) to articulate an inclusive and egalitarian politics that can speak to the things which often matter most to people: their family, their community, their country.

However, the key driver of these problems is Britain’s failing economic model. Over the past forty years, our economy has increasingly become one based around wealth extraction rather than wealth creation. The balance of power between capital and labour has shifted decisively away from working people. Businesses and markets became detached from communities and countries. Entire industries disappeared and left in their wake a legacy of unemployment, ill-health and community breakdown. Short-term shareholder returns came to prevail over all other considerations. Privatisation and outsourcing allowed the emergence of a crony capitalism which – temporarily – allowed companies like Carillion to thrive as corporate partners to the state.

What GDP growth there has been over the last decade has not been felt in real incomes. Andy Haldane, Chief Economist of the Bank of England, has charted how any post-2008 recovery has been restricted almost exclusively to London and the South East of England, those who are already asset-rich, home-owners, and those over fifty.[2] We have ended up with an economy that rewards those who already own wealth while making it ever harder for those who do not to obtain any. Meanwhile, the forty-year experience of globalisation, neoliberalism and automation has deprived communities of work, power over their circumstances and often a sense of belonging and identity. Faced with these changes, the central state has been too slow and too cautious in devolving to communities the real power they need to compensate.

Attempts to address our deep-rooted economic problems have been wrongheaded. Industrial policy – including this government’s own white paper, published in November – has prioritised high-tech, high-skilled sectors of the economy which may promise growth but employ relatively few people, are concentrated in London and the South East, and whose benefits won’t be felt by the majority. I am arguing for a new approach which instead concentrates on the everyday economy – those sectors like care and retail which are characterised by high employment, but too often low wages and low productivity, and upon which we depend for happy, healthy lives and communities. Crucially, these sectors are found in every part of the country, they disproportionately employ people in low-paid and precarious work, and they have considerable scope for improvements in productivity and working conditions.

In a new pamphlet, The Everyday Economy, I have set out what a transformative Labour agenda for the everyday economy could look like. This would stress the devolution of real decision-making, power and resources.

For one, a new unit for local-wealth building in 10 Downing Street, under the prime minister’s authority, could be charged with co-ordinating departments to support communities and local government exercising power for themselves. Following the lead of Preston city council, local authorities can work with ‘anchor institutions’ in their area – like hospitals, universities or major employers – to make sure the money they spend on procurement goes into the local economy, and to strike living wage deals. A British investment bank or decentralised citizens’ wealth fund – or, ultimately, a network of regional investment banks similar to the German Sparkassen – would be essential to provide access to patient capital for small and medium enterprises in all parts of the country, and decentralise our country’s wealth.

Government should put wages and productivity in the everyday economy front-and-centre of industrial strategy. How can we support sectors like care and retail in integrating new technology in a way that improves rather than displaces jobs, for instance? And new Royal Colleges for workers in sectors like care – to raise the esteem of these professions, advise on policy change, and ensure it is the people who know best that are setting standards for professional practice and training – could be another key ingredient in this mix. Likewise, ensuring a seat for employees on company boards will be essential to redressing the imbalance of power between capital and labour, and ensuring our companies take on board a broader range of considerations than short-term shareholder interests.

For Labour to broaden its appeal, win a majority and ultimately to entrench real, systematic change, we will need a vision that can bring the country together. An agenda built around the everyday economy will be central to that.

[1] Will Jennings and Gerry Stoker, ‘Tilting Towards the Cosmopolitan Axis?: Political Change in England and the 2017 General Election’, Political Quarterly, (No.88, 2017), pp.359-369.

[2] Andrew G. Haldane, ‘Whose Recovery’, speech given in Port Talbot, 30th June 2016, https://www.bankofengland.co.uk/-/media/boe/files/speech/2016/whose-recovery.pdf?la=en&hash=11C0C02AF21765A92854B0CA670EE85E8F900B9