What would a One Nation recovery look like?

14th November, 2012 7:00 am

After the longest double recession since the Second World War, the economy is growing again. Whilst a growing economy is obviously better than a contracting one, the UK is far from out of the woods.  Two and half million people are out of work, one third of them have out of work for over a year, three million are ‘under-employed’ unable to get the hours they want, real wages have been falling for almost three years now, youth unemployment remains around the one million mark and the longer term picture is of an economy that has barely grown for two years.

Now is not the time to break out the bunting and declare the crisis over.

Since the fall of Northern Rock, over five years ago, the media have become so used to bad economic news that the bar for success has been set low. Any level of growth is now seemingly hailed as a victory for the Government and a vindication of its policies. In reality the ‘recovery’ is far from secure and as long as the squeeze on living standards persists this won’t feel like a recovery to most people.

The challenge facing the country is actually two-fold and runs much deeper than simply generating growth. We need not only to get the economy moving again, but to generate the ‘right’ kind of growth.  We can’t simply return to business as usual, instead we need to build a new economy.

In the years before the crash things started to go seriously wrong in the UK economy. Growth became more and more concentrated in too few sectors and too few regions. The gains from this growth were increasingly captured by too few people.

In the five years between 2003 and 2008, the years before the recession, the economy grew by 11% but median real wages (the pay, after price rises, of those in the middle) were stagnant. Over three decades of a liberalised economic model, the public finances became too dependent on tax revenues associated with a booming city and a frothy property market. Household debt rose as easy credit replaced rising pay packets.  London and the South East’s share of the economy rose steadily whilst the other regions and nations fell behind. The contribution of financial services to GDP rose from around 6% in the mid 1990s to 10% on the eve of the crash. The level of investment in the real economy was weak by international standards. By 2008 we had an unbalanced economy, one that was vulnerable to sudden shocks.

Most forecasters now believe that the economy is set to grow in 2013 and 2014. The latest forecasts from the CBI have growth at 1.4% in 2013 and 2.0% in 2014. This would be a very weak result – just two years ago the Government’s own independent Office for Budget Responsibly assumed growth would be 2.9% and 2.7% in those years.

More worrying than the weak headline growth numbers though are the forecasts for living standards and unemployment. The CBI sees no rise in real wages for another 18 months and unemployment still at 2.4 million at the end of 2014. This simply isn’t good enough.

A meaningful recovery, what could be thought of as a ‘One Nation recovery’, would be marked rising real wages for those in the middle and below. The policy challenge is not just to generate growth but to generate growth that is balanced across the UK, not concentrated in too few sectors, jobs rich and which doesn’t see most of the rewards flowing to those at the top.

Such growth won’t be achieved just by relying on the old levers of fiscal and monetary policy (important as they undoubtedly are), instead it will require wide spread reforms to the structure of the banking system, corporate governance, skills and training systems, a modern industrial policy, steps to support green growth and wider set of government interventions into how the labour market works to ensure we are generating the kind of better paying, higher skilled jobs that we need.

The debate now has to be about not just how we get the economy moving again but how we ensure that we get a better balanced, more resilient, fairer economy where the benefits of growth aren’t captured by those at the top.

Duncan Weldon is a Senior Economist at the TUC

This piece forms part of Jon Cruddas’s Guest Edit of LabourList

To report anything from the comment section, please e-mail [email protected]
  • Mr Arthur Cook

    A “One Nation recovery” would have one simple principle to guide thinking.
    This is that the economy is there to serve the people. It rejects the notion that the people are a “human resources” and a market which exists to serve the economy.
    It would abandon the Thatcher and Blairite neo-liberal mantra that “private is best” and recognise that “public-private” is simply a means of pouring taxpayers money into corporate pockets who then export their profits and a means of capturing a virtual monopoly which can then be used to fleece the powerless consumer and again export the profits. It would have an economy which recognises that coffee shops serve better coffee when their are 5 competing on the high street and recognise that “competition” and “private enterpise” in education and care of the elderly leaves the vulnerable exposed to minimum-waged untrained uncaring people who don’t want to do the job but have no choice because their purpose for being there is to earn profits for “Care-U-like co”
    Message for (New?) Labour. Forget “rebranding”…”marketing” and “communicating the message”. Before you start this you’d better ensure that you actually have a new message rather than a recycled Blaire agenda which failed and got you kicked out last time. Time for a change of direction NOT a new wrapper!

Latest

  • Comment Featured Thatcher wanted the ‘managed decline’ of Merseyside. I want to manage its renaissance

    Thatcher wanted the ‘managed decline’ of Merseyside. I want to manage its renaissance

    Back in the 1980s, Margaret Thatcher’s government came close to writing off Merseyside. There was a serious conversation about leaving our city and its neighbours to ‘managed decline’ and the tender mercies of her economic shock therapy. As her Chancellor at the time, Geoffrey Howe, patronisingly put it: ‘We must not expend all our limited resources in trying to make water flow uphill.’ We’ve come a long way since then. Since 2010, Labour has had the privilege of running Liverpool […]

    Read more →
  • Featured News Burnham emerges as LabourList readers’ favourite for Manchester Mayor

    Burnham emerges as LabourList readers’ favourite for Manchester Mayor

    Andy Burnham is LabourList readers’ favourite to become the Labour candidate for Mayor of Greater Manchester. The Shadow Home Secretary announced his candidacy last week, and is up against Ivan Lewis and Tony Lloyd to go into next year’s election. Of those who voted in our survey, 45 per cent opted for Burnham, who came second in last year’s leadership election. Tony Lloyd finished some way behind with 22 per cent, while Ivan Lewis received the support of 12 per cent […]

    Read more →
  • Comment Featured It’s not the shared economy, stupid – but it does require a collective response

    It’s not the shared economy, stupid – but it does require a collective response

    It is often described as the sharing economy. It sounds very cuddly. All of us on a patchwork sofa, sharing a nice cup of tea… Or it’s the gig economy – because Uber drivers are all creative artists enjoying their freedom to perform… I prefer to call it the new intermediaries economy. Not as cuddly or cool but more accurate. When you get into an Uber cab the driver is not sharing her car with you, she is selling you […]

    Read more →
  • Europe News Blair: Brexit would hit living standards of society’s poorest most

    Blair: Brexit would hit living standards of society’s poorest most

    Tony Blair has weighed in on the debate over Brexit, warning that leaving the European Union would hit living standards and hit the poorest in society most. The former Prime Minister appears to make an appeal to Labour supporters – seen as an important swing demographic in the vote – in two interventions today. While Blair is a divisive, and even simply unpopular, figure in the modern Labour Party, there are hopes that he is still seen as a political “big beast” and […]

    Read more →
  • Comment Featured Patronising people with patriotism will not win 2020

    Patronising people with patriotism will not win 2020

    Labour will need to win over the socially conservative voters of today in win in 2020 – but flag waving will not make up for a lack of credible policy on welfare and spending and a real understanding of the hardship faced by working people throughout the country. Widely reported research by Jon Cruddas this week suggested that since 2005, voters that were sympathetic to more socially conservative ideas have been increasingly more likely to select UKIP over Labour on […]

    Read more →
Share with your friends










Submit