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

  • 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!


  • Comment Featured Unions A fair sharing economy?

    A fair sharing economy?

    Despite the clunky delivery, it is good to see Labour talking about what challenges we will face as the world of work changes dramatically. For many people that change is pretty daunting: it isn’t just accelerating, it’s spinning off in new directions. The digital revolution is connecting people in ways we could never have imagined five years ago. There are robots seemingly waiting to take just about every manual job and algorithms eyeing up a lot of the white collar middle management […]

    Read more →
  • Comment Full text of Jeremy Corbyn’s email to Labour Party members about Syria

    Full text of Jeremy Corbyn’s email to Labour Party members about Syria

    On Thursday David Cameron set out his case in the House of Commons for a UK bombing campaign in Syria. We have all been horrified by the despicable attacks in Paris and are determined to see ISIS defeated. The issue now is whether what the Prime Minister is proposing strengthens, or undermines, our national security. I put a series of questions in response to the Prime Minister’s statement, raising concerns about his case that are on the minds of many […]

    Read more →
  • Featured News Uncategorized Corbyn turns to Labour Party members in Syria dispute

    Corbyn turns to Labour Party members in Syria dispute

    Jeremy Corbyn has emailed Labour Party members to ask their views on military action against Isis in Syria, as it has appears increasingly likely that the Shadow Cabinet will grant Labour MPs a free vote on the issue. In the email, the Labour Leader says that he does not “believe that the Prime Minister made a convincing case [on Thursday] that British airstrikes on Syria would strength our national security or reduce the threat from Isis.” “When I was elected […]

    Read more →
  • Featured News Tom Watson backs airstrikes against Isil and says he has a mandate as Deputy Leader

    Tom Watson backs airstrikes against Isil and says he has a mandate as Deputy Leader

    Tom Watson backed airstrikes against Isil in Syria today, putting himself at odds with Jeremy Corbyn. Watson said he agrees with the Shadow Foreign Secretary, Hilary Benn, that “there is an imminent terrorist threat being directed from Syria” that requires a military response. And he insisted in a BBC interview that he would not resign from the Shadow Cabinet if Labour MPs were denied a free vote on the issue, as he is “the Deputy Leader of the Labour Party […]

    Read more →
  • Featured News Unions Corbyn says “welcome home” as firefighters’ union reaffiliates to Labour

    Corbyn says “welcome home” as firefighters’ union reaffiliates to Labour

    The Fire Brigades Union have today voted to affiliate to the Labour Party – 11 years after breaking off ties. The decision was made at a special conference in Blackpool. The news that the union, which has 38,000 members, wants to rebuild links to Labour has been welcomed by Jeremy Corbyn who said the move “marks a milestone in the building of our new politics and our labour movement.” The FBU’s general secretary Matt Wrack, who is considered a left […]

    Read more →
Share with your friends