A rare moment of political consensus is building as voices from across the worlds of politics, finance, faith, business and trade unions begin to sound the same note, calling for economic growth that is more inclusive.
What does this mean? Is it mere rhetoric? Empty words that leave us stuck with the status quo?
We do not think so. We are convinced that the argument for inclusive growth is now hitting critical mass and that’s why the vision, values and policies for an inclusive economy will sit at the core of the Labour party’s policy review.
It will be the lodestar for our plan of national renewal; our project to rebuild the opportunity economy, to rekindle aspiration, not just for some, but for all.
The 2008 financial crisis made it clearer than ever that the reconnection of wealth creation with social justice is not just a ‘nice to have’; it is the key to a better type of capitalism.
And it is not just us who say so. International organisations like the OECD, business school gurus, big business leaders, new gatherings like the Blueprint for Better Business, churches, faith groups, trade unions, civil society are converging on platforms to make the case for new values and ‘shared value’.
The neoliberal ideology that had a great many champions in the pre-crisis economy and that sparked the financial crash in 2008 is beginning to be drowned out by calls for honesty, trust and incentives to virtue. As Christine Lagarde put it last week in London, only ‘…by making capitalism more inclusive [can] we make capitalism more effective’.
Politicians on all sides must step up to the scale of the challenge – a challenge to the assumptions of both statist social democracy and neoliberalism.
So, Labour is determined to take the lead in forging a new alliance between business, government, unions and civil society, to hammer out the win-wins we need to build an economic model where a sense of vocation is renewed, where skilled work flourishes and stronger institutions build science, knowledge and innovation – and business prospers.
Today, citizens demand power over their future and the chance to flourish. Yet the reality of life is that average earnings are £1,600 lower per year than they were at the last election. On today’s path, most households will not restore the health of their pre-recession life until nearly 2020. What gains in productivity and creativity there have been in recent years have not been fairly shared. They have gone straight to those at the top.
So where are the win-wins in a future defined by a new common good, a future which is pro-company and pro-worker? For us, there are five.
First, both growth and productivity have to rise. This means the instigation of supply-side policy that boosts science and technology, encourages innovation and fosters R&D in business – both big and small. Innovation is the fastest way out of austerity.
In an age where science spend in the United Kingdom is slipping, as we fall behind our European neighbours and countries like Singapore and China, it is imperative that a long-term science strategy informs which industries we grow – ensuring we leave room for the sparks of brilliance that have transformed our country time and time again. Innovation is a catalyst for increasing productivity and exports.
Second, on the demand side, we all need bigger markets. New trade deals and single market reform in Europe are vital to growth and if we want to trade more, then we need trade-boosting infrastructure: airports, roads, ports, high-speed railway lines.
Today, our infrastructure is bursting at the seams. Our investment rate still lags the OECD average. The World Economic Forum ranks the UK 28th in the world on overall quality of infrastructure. Heathrow airport is at 99 per cent capacity. Congestion on our roads costs billions. Our rail network is jammed at peak hours. Demand for shipping is forecast to outstrip port capacity. If we want to trade more, then we need a new long-term approach to infrastructure as outlined in John Armitt’s review for the Labour party. We have got to fix these problems while keeping our pledge to balance the books in the next parliament, as well as securing value for money on the investments that government makes. If we want to trade more, then we need a new deal on infrastructure.
Third, we need a plan to deliver a financial system that delivers ‘patient capital’. A thirst for short term profits has driven dysfunctional corporate behaviour, it damages growth and jobs in the long term, and it limits the supply of capital for longer-term investment in both infrastructure and innovation. Financiers say it. Business says it. Central bankers say it. It is time to hammer out a new way forward.
Fourth, to match patient capital, we need productive workers and a labour market policy that is pro-work and pro-skill. Better-skilled workers are better-paid workers. The goal of full employment, a traditional Labour target, now, allegedly, has cross-party support. That is good. But the government has failed to match our plan for job guarantees to stop nearly a million young people and the long term unemployed drifting so far from the labour market. For this reason we eagerly anticipate a report from Mike Wright, chief executive of Jaguar Land Rover, which was recently commissioned by Ed Balls and Chuka Ummuna. He will set out the ways in which we can grow the manufacturing supply chain and skills base of the UK.
On top of this, we need more urgent, more radical steps to close the gap between the classroom and the career with a vocational education system that works. We need bigger, bolder action on apprenticeships and critically, a strong, accessible and clear vocational track to higher-level skills, creating choice and a diversity of routes for citizens young and old to fulfil their professional and personal potential.
Finally, let us remember healthy competition is a good thing. Labour will look at the competitive intensity of markets, especially the ease with which new high-growth market entrants can challenge the status quo. Broken markets foster oligopoly. They are bad for prices, bad for consumers and bad for suppliers – and they have to be fixed. Sometimes that means upsetting incumbents – but competition is good for business and good for jobs – especially those new businesses which create good jobs.
We will use government to work with business to ride the tide of change but also to ensure we give people security in an ever more complex world.
These are the components for a One Nation vision of national renewal: the creation of an inclusive economy that rewards hard work, empowers citizens to be the best that they can be and reconnects gains in productivity with pay and profit. It is pro-growth and it is pro shared growth. Above all else, it is an approach to our economy that works for the many, not just the few.
Liam Byrne MP is shadow minister for higher education. Jon Cruddas MP is Labour’s policy review coordinator
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