Friday, July 24, 2015

If, as it did, the recent general election presented the electorate with a dismal choice, the sense of dismay has only been exacerbated by the process of choosing the next leader of the Labour party. Having lost two consecutive elections, Labour is now in complete disarray, having apparently lost all sense of identity. Of the four candidates for the leadership, three offer moderation - a sense of drift that places them somewhere to the left of the Conservatives, but bereft of any true mission. The other offers a return to a left wing agenda that fails to address the issues of the day, and that fails to offer any prospect whatsoever of gaining power.

Some of Labour's grand ideas of the past have been implemented, have proved successful, and have been appropriated by other parties. The minimum wage was initially met with great hostility by the Conservatives, but with the recent announcement of a national living wage the idea of a wage floor has become uncontentious. The National Health Service is another example of a great Labour idea that has come to be 'owned' by all parties. For Labour to have fought the last election largely on a fancied Conservative threat to the health service appeared patently absurd to impartial observers. These are big ideas that succeeded. They were tried out, came through, and - backed by the evidence - they became depoliticised and are now part of the fabric of the country. Some other ideas, for example, nationalisation, were not so successful. In those cases, backed by the evidence, the trials were reversed, and, though there may be arguments about the detail of how privatisations were conducted, few people would argue in favour of a wholesale return. With the evidence that comes from trying things out, some issues leave the political arena and become essentially technocratic. We move on.

But while we move on, the values on which grand political movements are constructed remain the same. I shall focus on three such values that have, across the generations, characterised the Labour party.

The first concerns aspiration and social mobility. My parent's generation was the first to have access to a full secondary education, and the first (without access to parental wealth) to be able to progress to a higher education. This enabled them to break through economic and social barriers in a way that was simply not possible for previous generations. This is something with which the Labour movement has been associated from its early days. The modern union movement in the UK can be dated to the creation of the Trades Union Congress at Manchester's Mechanics' Institute in 1868. The Mechanics' Institutes typified a range of organisations that promoted adult education amongst working people. This was a business-friendly approach - indeed the Institute was set up by business leaders who noted the gains to their own companies that would arise from a better trained workforce. But it was also one that enabled social mobility, allowing workers from humble backgrounds to aspire to great things. It ensured the best for the country by enabling the best for each individual. The modern Labour party retains its commitment to help those who are disadvantaged, but has become less focused than it once was on answering the question: help to do what? The answer, surely, has to be: help to develop, to transform and to succeed. And the leadership candidates should all be asking themselves, and answering, questions about how the education system can be reinvigorated so that social mobility and aspiration are once more fostered. Today's Sutton Trust report suggests that current policy does not always help. So much remains to be done. There should be no tension between individuals' aspirations and business success; and Labour should find ways of promoting both.

The second area in which Labour values are pertinent is that of ownership. This is a difficult area for the party because ownership of the means of production has been such a totemic issue in the past. There is a natural aversion to wealth endowment arising from accidents of birth, not least because it hinders the kind of social mobility to which I alluded earlier. But the large nationalised industries of the past demonstrated that concentrating ownership in the hands of the state was disadvantageous in other respects; governments, as the owners of state industries, do not necessarily serve their peoples as best they might. And monopoly power begets inefficiency, whether that power is concentrated in the hands of capitalists or the state. Thatcher's dream of a property owning democracy, where the major privatisations led to large numbers of share owning individuals, had merit in spreading wealth widely. But inevitably many shareholders were passive, and many others sold their stocks so that once again ownership became concentrated. Clearly public ownership is not a panacea, but equally a free market in the ownership of companies has delivered problems. Will Hutton has identified the early sale of embryonic businesses, often to overseas investors, as a major impediment to the realisation of benefits from innovation. Solutions to the problem of ownership, ensuring that all stakeholders maintain an interest in business, perhaps involving various kinds of golden share arrangement, need exploring. While not returning to tried and failed solutions in this space, the Labour party thus has much to offer in the general arena of ownership. In a week in which the Financial Times has been acquired by Nikkei, it is easy to focus minds on how important this issue of ownership can be.

Thirdly, social protection is another area that has been central to Labour values. This has proved to be a highly controversial issue in the last week, with the party's leadership facing rebellion over its demands that MPs should abstain in a parliamentary vote about welfare cuts. Protecting the poor while ensuring that aspiration is rewarded is fundamental. Less fundamental should be the means by which this is done. A number of shibboleths therefore need, at minimum, to be opened up to debate. So, for example, most observers would agree that people who are unemployed through not fault of their own should receive some support. Whether this should be done through the tax and benefits system or through a system of compulsory private insurance (with no claims discounts to finesse moral hazard issues) is another matter. Likewise, few would argue against a universal health service, but whether this is paid for through the tax system or through a private insurance system is not - or at least should not be - fundamental. The important thing is surely that those with few resources receive sufficient support to ensure that they can insure themselves. The basic income proposal is radical, and in pure form might not be affordable, but with modification it might provide one possible avenue for welfare reform that deserves investigation. At the very least, it poses a question that deserves to be asked.

The whole issue of benefits is made more difficult by the fact that the current system is clearly broken. In-work benefits essentially supplement the earnings of many workers, distorting the operation of the labour market. The current government has regarded this as a latent subsidy to firms, allowing them to pay low wages, and it has responded by hiking the minimum wage. It is easy to sympathise with the government's frustration, but it remains the case that the minimum wage is a very blunt tool to use in the alleviation of poverty, since poverty affects households and not the individual recipients of (minimum) wages. Moreover, the ageing population presents challenges to the current system that successive governments have swept under the carpet. There is an opportunity for radical thinking to address this. In a nutshell, prospective Labour leaders should not be so defensive about the current system of welfare support that they fail to recognise the need for a root and branch review.

All of the above areas concern core Labour values. They are areas where we should not be thinking of returning to old, tried, tested (and proven or not) ideas, but where we seek solutions for today. It is profoundly depressing that most of the Labour leadership candidates are offering what is essentially a Tory-lite prospectus. People will only vote for that if they become disillusioned with the competence (as opposed to the underlying philosophy) of the real thing; that seems a ludicrous gamble to take. The fourth candidate at least has the merit of offering the electorate some choice - even though it is a choice they will not find appealing. The contest - and, possibly, the electorate of 2020 - is crying out for some ideas that define an identity for the Labour party, and for the country, of today and tomorrow. It can be done. It just needs someone who has the qualities of a leader. And, unfortunately, that looks like being someone outside the current group of contestants.