How can we regain our credibility on the economy?

By Michael Stephenson

Gaining and retaining credibility for economic competence has always been hard-fought for the Labour Party. Equally, the media and the opposition are quick to tear down this reputation even when it is completely unfair (witness the record of Gordon Brown and Alistair Darling and their world renowned efforts in keeping our economy together in the midst of the worst global economic crisis for more than 60 years). And note the word “global” in that context. The Tories have got away with the idea that Labour was somehow at fault for a crisis that was caused by banks outside the UK.

Sadly, Labour has never been very good at defining their opponents on economic policy. Back in 1997 the newly elected Labour government never nailed the myth of the golden Tory economic legacy. Labour inherited a terrible set of economic indicators from the Major government but in the heady days of a new government they never seriously attempted to destroy the Tories’ credibility on the hard evidence.

Just as we have had to unfairly suffer the relentless drone of “the winter of discontent” for the last 3 decades, we are now having to claw back our economic credibility for a crisis we did not cause.

So where does that leave Labour on the question of its economic management credentials? The answer lies partly in the nature of the crisis we find ourselves in. Unlike previous recessions, the 2008 meltdown has caused people to look at the economy in a different way. For the first time in decades they are questioning the values of the financial institutions that affect them.

A key task for Labour is to take the narrative down a notch or two to a level that people can relate to. Rather than talk in large numbers about the impact of the credit crunch we need to be talking about how the economy affects people on an individual basis.

Part of that lies in simplifying the message and tying it to ideas that people can relate to in their everyday lives. But it also places an emphasis on Labour to set out ideas for an economy that allows people to have a say. And more importantly, illustrate to them that we have a plan to make markets work in their interest and build institutions that share their values.

Co-ops and mutuals are a key part of that. An idea whose time has come back, the co-operative approach is rooted in traditional Labour values but reflects the economic and social conditions of the 21st century. It is a perfect economic prescription for Labour in a post credit crunch world.

That is why Labour should commit fully to re-nationalising Northern Rock and un-do the damage the Tories did our mutual sector when they allowed building societies to become banks and sever the connection between customers (members rather than shareholders) and the institutions that are supposed to serve them.

It is why we should commit to further support for credit unions. Access to finance is one of the key challenges in economic recovery yet we have an under-developed credit union sector and many people (and businesses) are still unable to secure the finance they need to improve the quality of their lives or grow their businesses.

It is why we should consider a Financial Inclusion Act like the Community Re-investment Act in the US. Why can’t we place a community obligation on the banks? Why can’t we make them take account of the impact of their activities on local communities?

And it is why we should support and develop co-operative enterprises. If we want to learn the lesson of the past, we have to build a new genuine stakeholder economy. A different type of private sector made up of different types of enterprises, including a substantial number of co-operative enterprises in which members of the public have a say and share in their prosperity.

That would establish a credibility for economic management true to the ideals of the Labour movement and something the Tories would find hard to discredit.