Keir Starmer and his new shadow cabinet have taken charge of the Labour Party at a moment of great peril for the country. Their challenge is to offer patriotic opposition that binds Britain together in the face of Conservative chaos and confusion. Labour may lack power, but it can assume great moral authority if it speaks for the whole country, rather than partisan or sectional interests, and provides the challenge and support the government needs.
The highest priority is to address the immediate health and living standards emergency, and the new shadow cabinet is rightly pushing ministers to go further on supporting the NHS and getting money into people’s pockets. But Labour must also lay the ground for a strong and fast recovery, and make the moral and practical case for a new settlement to follow, with a different economic model and a stronger public realm.
On the economic front, the government has so far been trying to safeguard jobs and cashflow to help business bounce back fast after the lockdown. But nobody knows what happens after you deliberately close major parts of an advanced economy: we must hope for the best but prepare for the worst.
The 2020 crisis has been compared to a war. However, in economic terms it is not like the two great conflicts of the 20th century but the years that followed them, when the wartime economies were purposefully switched off. 1919 stands as an awful warning – not just because of Spanish flu but because it was the start of a period where Britain’s economy shrunk by a quarter and unemployment surged.
Inspired by John Maynard Keynes, the lesson was learned in 1945 and while economic activity decreased at the end of the second world war, full employment was maintained. In the recession to come, Labour must be similarly obsessed with jobs. Once again, old economic orthodoxies cannot be allowed to stand in the way of high employment.
As the lockdown eases, the party must call on ministers to boost demand by putting money directly into people’s pockets through social security (a solution that is more progressive and efficient than tax cuts). However, that is unlikely to be enough because in high-employment industries like retail and hospitality there will be no return to business as usual. Individual businesses will fail and whole sectors will employ fewer people. Ultimately this may be good for productivity but workers must not be left to suffer in the short term.
Labour should therefore press the government to guarantee people new jobs if their old ones disappear, just as Gordon Brown did on a modest scale after 2008. In social care, we know there is huge demand for labour that can be unlocked by adequate government spending. An activist government should also stand ready to create the green employment of the future now. Ministers can fast-forward green investments that require lots of jobs in every corner of the country and fund the training that new recruits will need.
This job creation must go hand in hand with a new pact with business. Regulatory, tax and governance reforms must expand business obligations towards society, environment and workers in exchange for the support that is coming now. Where firms receive specific bailouts, there is also the opportunity for the government to take equity shares to invest in a permanent sovereign wealth fund or to gift to employee ownership trusts.
A crisis that has proven the case for the welfare state must give rise to a new social settlement too. Resilient public services, the rebirth of social insurance and a reckoning on tax must become the new common sense that bridges political divides. Unlike in 1945, Labour cannot do any of this from government because the next election is too far away. It will only happen if Conservative politicians are convinced. Keir Starmer’s Labour Party must change the country through the force of its ideas.
This article is based on Andrew Harrop’s contribution to the new Fabian Review.