The challenges we face are not the same as in 1997, nor is the economic position

The last time Labour went from opposition to power in 1997, we were able to harness a wave of economic growth as Britain surged back from Thatcherite economics and the aftermath of the John Major/Norman Lamont debacle in the first half of the 90s. The incoming picture, however, is likely to be very different and much more difficult (assuming Labour wins in 2024). This reflects not just the current economic crisis due to Tory mismanagement but also more than a decade of underinvestment, poor planning and incoherent government. We may well also be facing the aftermath of a long recession, as the Bank of England has projected.

Throughout our history, the Labour Party has had a central mission to make people’s lives better across the country. Much of that has been through investing and spending money – and the NHS serves as a shining example of that. The difference in 2024 is that the mess we will inherit is so bad that, while an incoming Labour government will borrow to both invest and spend on necessary services, the financial and economic environment will impose limits. As we saw with the shambles created by Liz Truss and Kwarsi Kwarteng, trying to push past those limits risks damaging working people’s mortgages and pensions. Moreover, we know from the recent budget that the Tories are itching to make the threat of excess spending an electoral battleground; it’s the last card they have.

It’s very tempting to try and ignore this spending constraint. Austerity and underinvestment over a long period have caused great damage to our people and our economy and they desperately need help. Traditionally, we would have looked to spend and invest to meet these needs. But I believe we don’t need to fall into this Tory trap. Government still has enormous power to make a positive difference to people’s lives, even if we can’t spend as much as we ideally need. Moreover, by embracing the power of government in this way, we can actually make an impact on people’s lives more quickly while in parallel we address the long-term economic challenges that a Labour government will inherit.

This is why I’ve written The Role of Modern Government, published by Progressive Britain last week, to lay out a framework to start to think about all the ways we can use the government to make a positive difference. And, by the way, we don’t even cover everything; we focus on central government, for example, when we know that much be done also through community power and civic institutions. But drawing on my own experience in finance and markets, and in environmental and social investing, we’ve focused on ten separate areas of opportunity including creation and crucially enforcement of regulation, the structure of regulators, industrial and competition policy and procurement.

This may sound dry, but in reality these areas have a massive impact on our lives, and it’s essential that our thinking catches up with how technology, companies economies and markets have evolved. We want to build a growing economy founded on innovation, with good growing businesses that can create jobs and treat their workers well – and strong industrial and competition policy can facilitate that, for example. Let me just illustrate further with a few examples drawn from the paper.

On regulation itself, Labour has already said it will reform the regulations around work, who counts as a ‘worker’ and what this means – but there’s much more that can be done. The government generally declines to prosecute companies who underpay the minimum wage, for example, with only 14 prosecutions nationally between 2010 and 2020. The civil fines it does impose averaged in 2017-18 as only being worth 90% of the value of wages withheld and the estimated detection rate is only 13%. This encourages disreputable firms to treat such small fines and weak enforcement as a ‘cost of doing business’ for a firm that can offset the profits from their illegal activity. Large, visible fines and vigorous enforcement would quickly change their behaviours. A similar approach would work for tackling issues like the theft of tips in the hospitality industry.

We also advocate strongly for a root-and-branch review of the regulation and regulators covering the industries and utilities that affect all our lives. High profile issues, from the collapse of energy company Bulb (which cost taxpayers £6.5bn) to water companies polluting rivers and waterways with seeming impunity show that something isn’t working. Under the Tories, ironically, many regulators have often been people who do not believe in regulation at all or have been too deeply rooted in the industries they regulate, reflected in the term ‘regulatory capture’. It is unsurprising, therefore, that the situation across so many utilities has degraded. But Labour has the opportunity to turn the situation around if it takes the regulation seriously and properly supports the bodies that enforce them. No-one is ‘watching the watchmen’ – and we should change that.

And on tax, for example, without changing the basis of taxation in any way, the government can increase tax revenue overall by adopting policies that discourage avoidance strategies. Labour will abolish ‘non-dom’ status and it should consider going further and following the example of the US and insisting that a condition of retaining a British passport even while abroad is to file UK tax returns. It is completely reasonable to take the view that citizenship has both rights and responsibilities. In terms of corporate taxation, a Labour government could similarly insist that a condition of supplying services to the UK government is that a company is not artificially avoiding paying tax in the UK.

The challenges facing Britain at the next election are not the same as they were in 1997, nor is the economic position, but the same urgent need to restore and revitalise the country is there. Investment is important but – as we saw with the Truss/Kwarteng shambles – whether we like it or not, the markets will impose limits on what any government can spend and borrow. The Tories would like nothing more than to be able to run a scare campaign in the next election over excessive Labour spending. It doesn’t have to be this way; there is so much that an imaginative Labour government can do and achieve without spending money. By thinking broadly and creatively about the levers we have available, we can still make a huge difference to people’s lives and more quickly as well.