In the final six months before 2010’s general election, something strange happened. Amid the global recession, the Labour government had intervened heroically to keep the economy afloat, spending whatever was necessary to stabilise the banks and to maintain consumer confidence and employment, investment and spending. Barely a week would go by without new investment – the VAT cut. The car scrappage scheme. Expansion of the Building Schools for the Future programme. Accelerated spending on infrastructure projects such as HS2.
And then, quite suddenly, the Tories started talking about the deficit. Was that really a thing? Seemingly out of nowhere, the party which just months earlier had pledged to match the Labour government’s spending plans was now saying that the priority ought to be sorting out the nation’s finances, through cuts in public spending if necessary.
Spooked by the sovereign debt crisis stalking Europe, a majority of voters bought into the argument. And despite the best efforts of Alistair Darling and Gordon Brown to show that it was possible to balance the books while protecting public services and safeguarding the recovery, and whatever the substance of the arguments on either side, it was too late. The winds of public economic debate had changed, and six years ago, Labour was dumped out of power where disastrously, we have remained ever since …
It is not the first time the winds have suddenly changed direction, capsizing the boat. In 1979 Margaret Thatcher correctly recognised that to the average voter, inflation was a greater fear than unemployment. In 1997, it was the Tories’ turn to be caught out, with them famously failing to acknowledge that the overriding economic priority for voters was no longer inflation or low taxes, but rather pay and investment in public services – ground which New Labour had made its own.
Time and time again the winds change. And whether in government or opposition, the party that tacks and uses the wind to get to where it wants to go, is the one that usually goes on to win.
The signs are that we could currently be undergoing such a change. As the debate continues within the Labour party about who exactly is to blame for the deficit, whether borrowing is bad or good, and how or if we are going to end austerity, the risk is that voters’ economic priorities are moving on.
Gone is George Osborne and his much heralded (though rarely met) fiscal targets. The deficit? So 2010. The problem is solved as far as many voters are concerned. There is even talk of – whisper it – infrastructure borrowing. This time, it is the Tory party showing a remarkable capacity to regenerate from within.
Oppositions do not set the terms of economic debate. Even governments only do in exceptional circumstances. Instead, it is up to both to answer the exam question set by the voters and to respond to the economic situation that presents itself. They have to demonstrate how they will deliver on what voters have identified as the overriding economic priority.
So what is the biggest economic challenge facing the British economy of 2016, around which the next big economic debate could well be framed?
There is a clear frontrunner: plummeting productivity. Or, to put it into plain English – we are working harder and making and earning less. We are 17 per cent less productive than the rest of the G7, with it taking the average Brit five days to produce the same amount as a French or German worker does in four. In effect, we all work an extra day each week, just to keep up.
And in case you think productivity is some abstract economic measurement, it is the indices most closely linked to living standards. According to the Trades Union Congress, since 2007, the average German worker has enjoyed a pay rise of 14 per cent. We, along with the Greeks, have taken a 10 per cent pay cut – the steepest fall in the developed world.
It is a direct result of the Tories’ response to the economic crisis, and their failure to tackle a BHS-style business culture in which shareholders and owners are more interested in making a fast buck by squeezing pay and cutting costs than they are in growing the business or investing in the people who work there.
Ultimately, the path to raising living standards for all – the core of Labour’s mission – means having a credible, coherent economic programme centred around improving Britain’s productivity.
The solutions are ones which any Labour voter ought to be comfortable with, and which a majority of voters will get behind in a general election – but only if they are convinced that the economic case for them is compelling.
Investment in skills and training, and prioritising early years education so that no talent is wasted. Incentives for business owners to invest in new technologies and modernise their practices. A system of unemployment insurance linked to contribution, freed of stigma and the dehumanising stench of the Victorian workhouse, that give workers the confidence and security they need to be mobile within the labour market. And modern employment practices like employee ownership and profit sharing to gives employees a stake and incentives to drive innovation and improvement within the business they work for.
Just as it was in 1997 and 2010, the winds of the economic argument are shifting. The Labour party can seize the argument, hammering the Tories for the economy created under their watch, or they risk becoming a sideshow, fighting yesterday’s battles while voters – led by Theresa May – move on.
Ben West is secretary of the Young Fabians. He tweets @benjeewest
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