Fifteen years ago this month, the global financial system was in turmoil. Banks were on the point of collapse and were only saved by a mixture of state ownership, injections of capital and frenetic efforts by central banks to pump cheap money into the system.
Gordon Brown was Britain’s prime minister at the time and won praise for the leadership he showed in preventing what was already destined to be a severe worldwide recession into something much worse. Even so, it was a close-run thing.
There has been no meaningful recovery in Britain since 2008. Instead, it has been a period of weak growth, flatlining living standards, a growing sense of insecurity and a widening of the gap between the haves and the have nots.
Since the global financial crisis, voters have moved to the left on economic issues, with polls showing strong support for the nationalisation of public utilities and for wealth taxes. The upshot of 15 years of stagnation has been an ebbing of support for capitalism itself.
But here’s the paradox. The public may be willing to embrace more leftwing ideas in principle but it has been reluctant to vote for them in elections. Jeremy Corbyn’s manifesto contained things – free broadband and higher taxes on the better off – that were designed to appeal to an electorate fed up with the system. Yet he went down to a thumping defeat. People might have been looking for change in 2019 but they lacked faith in Labour’s ability to achieve it.
In retrospect, it was not a bad election to lose. Boris Johnson’s honeymoon was soon cut short by the outbreak of Covid-19 in early 2020, and that pandemic led to a monster recession, a ballooning budget deficit and – as the economy recovered – the highest inflation in 40 years. The Tories have had to deal with one nasty economic shock after another, and a 20-point opinion poll deficit is the result.
For Labour, a poll lead of that size would have been beyond the wildest dreams of Sir Keir Starmer when he became leader in the spring of 2020. The assumption then was that it would be a long haul, lasting two parliaments, for the party to win again. This, though, is really the story of Tory self-destruction – Partygate, Liz Truss, a cost of living crisis, record NHS waiting lists. There is no real sense that voters are thirsting for a Labour government.
All of which poses a dilemma for Starmer and the shadow chancellor, Rachel Reeves, at Labour’s conference in Liverpool this week. Is it best to hunker down and so give the Conservatives little to attack? Or would it be better to go hard on a “time for a change” platform, seeking to exploit the fact that the Tories have been in power for the past 13 years?
Both have their risks. An ultra-cautious approach may persuade voters to buy Rishi Sunak’s argument that only the Conservatives will meet the demand for change. Yet, something more transformative may rekindle concerns about whether Labour can be trusted with the economy.
Reeves will try a bit of both this week. She says the four Labour defeats from 2010 call into question the appetite of voters for a left-radical approach, and that what they are really craving is security. She intends to focus on practical solutions to the issues she thinks worry people the most – such as energy bills and mortgage costs. Labour thinks there are lessons to be learned from Bidenomics in the US, with its emphasis on skills, recognition for trade unions and good, well-paid jobs.
The messages Reeves wants to impart this week are that Labour can be trusted to run the economy and has a serious plan for growth. She makes no apologies for banging on about the need for budget discipline, not because she wants to preside over a new era of austerity but because she thinks voters will find it harder to imagine her running the Treasury otherwise.
The state of the economy should make victory easier for Labour. Over the next few months, the rate at which wages are increasing will start to exceed the rate at which prices are rising. Yet, it will take time for any modest boost to living standards to be detected by workers, and even then – such is the apparent unhappiness with the government – it might not make much difference to the way people vote.
Meanwhile, the surprising resilience of the economy looks as if it will end in the coming months. Unemployment has started to rise, house prices are falling, money and credit growth is weakening, and there is little chance of either the Treasury or the Bank of England doing anything to counter growing recessionary pressures. Higher government borrowing costs limit Jeremy Hunt’s scope for pre-election tax cuts, while the Bank thinks interest rates need to stay high for some time in order to bring inflation back to its 2% target.
In one sense, those calling for Labour to be bolder are absolutely correct. The failings of the economic model that crashed and burned 15 years ago have never been properly addressed, and until they are the economy will continue to limp along. There are plenty of ideas out there – from a land value tax to a Green New Deal – which would make Britain a fairer, greener and better place to live. Labour’s approach, by contrast, is technocratic, managerial and based on the assumption that what looks like a broken economic model can be fixed.
Starmer and Reeves are convinced this is the best way to appeal to a country that badly wants to get rid of the Tories. Sad to say, they may well be right.
