‘A Labour government won’t have an easy start. We must plan for hard times’

Across the advanced economy nations, centre-left parties are governing in hard times. The Mile End Institute’s recent conference sought to assess the constraints that a prospective Labour government is likely to face in office, alongside the strategies required to overcome them.

Past Labour administrations were regularly castigated for not achieving more in office. The Wilson governments of the 1960s were vilified for not carrying out more far-reaching modernisation of the British economy, while the left decried the failure of Attlee’s ministers to nationalise strategic sectors of industry.

The Blair and Brown years are now widely interpreted as a missed political opportunity given the scale of the parliamentary majority those governments enjoyed, alongside the relatively benign economic and social headwinds that prevailed in the UK.

Nonetheless, there is a notable tendency to overestimate the political agency of Labour governments and a reluctance to acknowledge the barriers to radical economic and social reform that persist in the UK. It is important to address what the political historian, David Coates, referred to as, ‘the pattern of constraints likely to beset a Labour government’. We must address not only, ‘the aspirations of incoming governments’ but, ‘the barriers likely to be erected in their path’.

If the Labour party does secure a parliamentary majority at the next election under Keir Starmer, ministers will inevitably confront serious obstacles to the enactment of their programme. The first constraint relates to state capacity itself. The capabilities of British government have been substantially eroded over the last decade. The process of hollowing-out partly relates to the legacy of austerity and cost reduction in the public sector. The civil service was repeatedly cut back, reaching its lowest headcount in 2016; numbers began to rise again after the Brexit referendum but are still low by historical standards. The growing reliance on private sector management consultants in Whitehall underlines the erosion of internal capabilities required to implement key policies.

The second constraint is the nature of the economic inheritance that is bequeathed to an incoming government. The UK has been buffeted by successive structural shocks over the last decade, notably Brexit and Covid. The economy entered these crises already weakened by the 2008 financial crash and austerity. The effect has been to undermine the productive potential of the British economy, while exacerbating long-running inequalities. The threat of inflation meanwhile erodes household living standards and threatens to escalate industrial conflict, as workers battle to maintain real wages.

The problems posed for a Labour government are especially acute given the party’s institutional ties to the trade unions. Most significantly, Labour’s desire to maintain the confidence of debt markets and its ongoing commitment to an international political economy that emphasises the mobility of capital and finance threatens to circumscribe its key commitment to green and social investment.

The third constraint is politics itself, namely what voters are willing to accept and how far Labour is prepared to challenge them. Having experienced four successive defeats in the 1980s and 1990s, the party became increasingly pessimistic about the willingness of UK voters to pay more tax. The prevailing view was that citizens wanted European-quality public services combined with American taxation.

More recently, defeats since 2010 and the loss of the so-called ‘Red Wall’ in Northern England convinced many Labour politicians that the party has extremely limited room for manoeuvre on Europe. This outlook stems from a deeper underlying pessimism: a belief that Britain is, deep down, a Conservative country and that Labour’s temporary electoral success is merely a reflection of short-lived Tory unpopularity rather than an expression of any fundamental commitment to social democracy on the part of the electorate.

The fourth constraint is path dependency and the ‘stickiness’ of institutions which makes it particularly difficult to achieve structural reforms, notably in public services. For decades, policymakers have reiterated the importance of prevention in the NHS. Even so, many health services are still designed to remedy problems after the event.

Moreover, it is widely acknowledged that NHS England is too large and complex to be effectively managed from the centre; but shifting towards a decentralised delivery model has proved next to impossible. The education service has seen more innovation yet still remains wedded to a traditional model of curriculum design and teaching, while the potential gains from technology are yet to be realised. Achieving change in public services remains exceptionally challenging.

There is, nevertheless, a compelling argument that many constraints facing Labour governments are imagined as much as real. What is important is not to accept those constrictions as insurmountable, but to formulate viable political strategies to overcome them.

For example, on state capacity, Labour requires a strategy to strengthen the capabilities of the state as soon as it enters government. This isn’t simply a question of employing more civil servants or political advisers.

It chiefly concerns improving structures and systems, breaking down silos and focusing the whole of government on core policy priorities. It means substantive devolution away from the centre in England that tries to do and control too much.

In relation to the economy, Labour needs a long-term plan to create the fiscal headroom for substantively higher public investment in social infrastructure and the transition to net zero. The party’s main fiscal rule is to have UK debt falling as a share of national income after five years.

That commitment must not become a fiscal straightjacket when the main purpose of borrowing is not day to day spending but investment in the UK economy’s long-term productive capacity.

Labour government should where necessary alter accounting rules for state-owned assets while using fiscal transparency alongside the scrutiny of independent institutions such as the Office for Budget Responsibility to secure the confidence of market actors.

On politics, good policy necessarily depends on narrative and framing. For instance, voters may be willing to accept tax rises if it can be demonstrated they are needed to fulfil a coherent public purpose.

Yet Labour needs to consider how its policies can help to build new electoral constituencies and secure the allegiance of key voter groups, as the Conservatives did so ruthlessly under Thatcher.

And on institutional reform, Labour must not postpone crucial debates until it enters government. There is no alternative to conveying clarity about its plans. Reforms in public services are often viewed as a technocratic exercise, yet they are always deeply political: success depends on building enduring coalitions of support.

Even if economic circumstances temper Labour’s radicalism as it enters power, the party requires a governing strategy through which it can ratchet up the transformative scope of its programme, projecting forwards as the Thatcher governments did so effectively forty years ago.

This article first appeared on the Mile End Institute blog.