What is Labour’s narrative?

Without an effective story about the past, the present and the future, Labour will be unable to shape a new British political economy grounded in fairness

Matthew BishopAfter four years of the most radical Conservative government in living memory, many genies are out of bottles, much damage has been done, and we are still only in Act One of the play. If there is to be an Act Two, even greater violence is likely to be in store for the public realm.

It is time for Labour to get serious. We have nine months until the election, and the opinion polls are narrowing. Simply stumbling across the finishing line – or worse, losing – without offering a genuine alternative will be disastrous. Unfortunately, though, the Labour hierarchy is still dominated by orthodox Blairite (or Blair-lite) automatons for whom winning is all that matters.

Yet these are changed times. Ed Miliband appears to sense this instinctively. But I fear that, despite some encouraging – yet still extremely tentative – noises, such as those that came out of the recent policy forum in Milton Keynes, neither he nor his party have the courage to seize the moment decisively.

The first job is to stop re-fighting the battles of the early 1990s. Today’s voters are not worried about whether the party is sufficiently relaxed about people getting filthy rich. Rather, they are terrified about their own prospects: their £40,000 university debt; their job insecurity; their declining spending power; their inability to get on the housing ladder; and the likelihood of diminishing access to the social security – healthcare, pensions, unemployment relief – that their parents took for granted.  This is the new middle ground.

The second imperative is to set the record straight on the past. Ed Balls has (again, tentatively) begun to do this, but remains some way from achieving a truly ‘penetrating analysis’. As regards the evidence, though, it should be straightforward.  As Chancellor, Gordon Brown reduced the national debt to a lower level than he inherited in 1997, while spending more on capital investment.  Labour borrowed less in thirteen years than the Conservatives have done over the past four.  George Osborne’s stewardship of the economy has been catastrophic.  By the end of this parliament he will have borrowed at least £245 billion more than he promised at the beginning.  After being bequeathed a steadily growing economy after the crash (caused by an out-of-control banking sector that the Tories would have regulated even more lightly, not excessive government spending that, until late 2008, they were pledging to match), Osborne strangled it with confidence-draining pronouncements and senseless austerity.

Third, devise a convincing narrative about the present.  Conservative Britain is a nastier place than before, more unequal, replete with markets rigged to serve the interests of the rich and powerful, with everyday people forced into desperation and destitution. As Thomas Piketty has shown, this is a world in which capital lords it over people and the new barons of the rentier class – rather than the union leaders of right-wing demagoguery, who are actually the last line of defence against completely eviscerated living standards – profit from the misery of others unable to access and own capital.

Finally, and most critically, give us something to get excited about. To reiterate: this is 2014, not 1994. People are disgusted about the excesses of the rich and powerful.  So create a new political economy grounded in fairness, nothing more dangerously radical than that.

Begin with tax. It is outrageous that, for much of the elite, paying their dues to society is becoming optional. This is undermining the social bargain on which democracy rests. Even prominent conservative commentators, schooled in Smithian economics, and recognising that the success of a market economy depends on a fair distribution of risk and reward, are becoming increasingly vocal about this issue. Labour should be apoplectic: if J.K. Rowling can pay millions in tax to support a public realm that supported her in hard times, those who do not should be named, shamed and prosecuted by an expanded HMRC.

Next, develop an authentically ‘business-friendly’ economic policy. This should forcibly level the skewed playing field between genuinely entrepreneurial small and medium-sized firms, which pay their taxes and develop innovations, and the corporate monopolists that have cornered just about every ‘market’ in the British economy in order to extract rents by erecting steep barriers to entry. Labour should also challenge business to live up to its hype: make money by developing desirable products in markets which are actually free, not through financialisation or parasitically picking at the carcass of the state. It’s depressing that companies like Serco and G4S have become Britain’s most successful, largely through the privatisation and commodification of public wealth, rather than any obvious degree of competence, innovation or added value.

The truth is that much of our crony corporate sector is utterly corrupt, and Labour should surely not fear saying so, loudly. How, for example, can it be appropriate that hedge-funds, including one run by the Chancellor’s best man, have collectively made hundreds of millions in almost instant profit on the sale of the Royal Mail? So, let’s reset the balance between the state and the private sector. Put in place a simple test: where it is demonstrably cheaper for private actors to carry out state functions, then let them do so, but only if they are not registered offshore and pay their full taxes.  Where it is clearly detrimental to the public purse, as is evidently the case with the railways, let’s bring them back fully under public management. Indeed, the charge that Labour’s characteristically cautious plan to allow the public and private sectors to compete in managing rail franchises is somehow ‘anti-business’ is laughable; unless, that is, we accept that state-subsidised corporate monopolies designed to simultaneously fleece travellers and taxpayers are actually representative of a genuine market economy.

Finally, we need a fair housing policy. There are masses of frustrated and angry people in this tiny island – many on relatively high salaries – who are excluded from the housing market. Why should they subsidise the wealth of the rentier class, and watch as these same people use their capital to accumulate yet more and inflate the bubble yet further? We do need to build more, of course, but few, beyond those with vested interests, would shed tears at the removal of subsidies for landlords: let’s have no more offsetting mortgage interest against tax; capital gains tax on multiple properties should be swingeing; empty properties, especially in London, should be taxed out of existence; and a land value tax should be investigated seriously.

In sum, the political economy of a Labour Britain should be one in which hard work is genuinely rewarded; where everyone pays their fair share according to their ability to do so; where the public realm is run for people, not profit; where the state intervenes to ensure that markets do operate freely; and where rentierism and corporate monopolism are discouraged with vigour.

If such a narrative is not developed, and quickly, the alternative – whether Labour wins or not – is further consolidation of the deep neoliberalisation of the contemporary era: the complete dismembering of the NHS; profit-making schools; signing of the anti-democratic Transatlantic Trade and Investment Partnership (under which governments will be forced to outsource yet more state functions); and the very real threat that Britain might leave the EU.

This has all gone far enough. A line in the sand needs to be drawn. If Labour doesn’t draw it soon, there isn’t going to be much left to fight for.