‘ To achieve good growth in every postcode, look to centre left governments overseas’

Andy Burnham is right to put achieving growth at the centre of his mission for Government. Without it, progressive politics becomes a permanent exercise in dividing up scarcity.

A serious growth agenda must move beyond aspiration alone and into the uncomfortable business of reform. New analysis from the Prosperity Alliance shows how social democratic governments have turned economic fortunes around. It should be required reading for anyone who wants Britain to escape low growth and low productivity, and rebuild confidence in what governments on the left can achieve.

New Zealand in the 1980s is one example. Prime Minister David Lange and his Finance Minister, Roger Douglas, came to power after Robert Muldoon’s National Party government had left behind high inflation, weak public finances, and a heavily controlled economy.

READ MORE: ‘A ten-point plan for ending trickle-down economics’

Lange and Douglas came into office promising to overhaul Muldoon’s failing control economy. They opened up product markets, reformed tax, removed subsidies and built a more credible fiscal and monetary framework.

They used Labour’s language of fairness to show that controls and protections had become a shelter for insiders, not a defence of the public. Burnham should do the same in Britain. The strongest answer to populists on left and right is a growth agenda that takes on vested interests – be they systems or organisations – because working people are losing out.

Sweden in the early 1990s offers another lesson. A banking crisis, rising unemployment, and a deficit of 12 per cent of GDP threatened the Swedish social model itself. Carl Bildt, the centre-right Prime Minister, handled the acute phase of the crisis with Social Democratic support. 

But it was Göran Persson, first as Minister of Finance and then as Social Democratic Prime Minister, who made fiscal discipline a social democratic cause. The point was not restraint for its own sake, but a stronger state able to protect the services and security working families relied on.

His argument was straightforward. A welfare state cannot survive if its foundations are permanently weak. Sweden reformed its budget process, rebuilt its pension system, and put its public finances on a more sustainable path. At the same time, they protected education and childcare, because the point of fiscal discipline was not to pare back the Swedish model but to save the services that help people work, raise families and build better lives.

Germany gives the hardest lesson. In the early 2000s, the country was being called “the sick man of Europe”. Five million people were unemployed. The centre-left SPD-Green Government, led by Gerhard Schröder of the Social Democratic Party as Chancellor, with his SPD colleague Wolfgang Clement as Federal Minister for Economics and Labour, concluded that a welfare and employment system designed for a different economic era was no longer working.

The Hartz reforms remain controversial. Nobody should pretend that every detail belongs in Britain. But the central point remains – there was a system that needed to be redesigned so it helped people into work, rather than simply managing long-term exclusion from it.

Schröder paid an enormous political price. Yet the reforms endured because they changed incentives, rebuilt institutions and made reversal harder than continuation. When Angela Merkel later became Chancellor, she retained the architecture rather than tearing it up.

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The common lesson is that the left can deliver growth when it is willing to overhaul a failing economic model, not simply manage it more sympathetically. Each leader diagnosed the failure, prepared reforms big enough to change it, spent political capital to get them through and argued that reform served a wider social purpose. 

For Burnham and Britain, the message is clear. A growth agenda has to take on vested interests, weak incentives and broken institutions that hold the country back. When a British business that has developed new tech in the green energy sector tells me it is easier to deploy in Morrocco or Estonia than in the UK, we know something is broken. The left wins when it changes a status quo that no longer enables opportunity for British businesses or for British people, not when it defends it.

None of this is easy. Every major economic change creates losers as well as winners. Those who benefit from – or are comfortable with – the current system will say any change is reckless, or that reform is moving too quickly. But Britain cannot build the homes, labs, railways, clean energy projects and growing businesses it needs if every difficult decision is met simply with “not now” or “it’s too difficult”.

There is nothing progressive about accepting low growth. It means workers grafting more without feeling better off, taxes rising while services still feel under pressure, and new homes and hospitals promised but never materialising. 

Burnham is right to call for growth in every postcode. The task now is to turn that ambition into a reforming agenda that removes the barriers holding Britain back and makes working people feel the benefits of growth again.

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