Anyone looking at the most recent set of local election results can hardly avoid the conclusion that Labour is heading for power (if that was not already obvious enough).
Unsurprisingly, more attention is being paid to what Keir Starmer will do in power than to whether they will win the election.
For anyone hoping to get a sense of what he might do, Will Hutton’s new book is a good guide to the problems facing the UK as well as a range of potential solutions.
It should be taken seriously as a potential roadmap for Labour: At an event last month to discuss the book with Hutton and Alasdair Campbell, Keir Starmer showered praise on the book and its proposals.
Hutton, a former editor of The Observer, made his name in the run-up to the 1997 election with The State We’re In, a bestseller which detailed the litany of problems facing the UK after 18 years of Conservative rule.
The title of his new book, This Time No Mistakes, suggests not everything has gone to plan since then.
So what’s gone wrong?
As Starmer said at the event: “The economy is utterly busted…It’s not growing meaningfully anywhere”.
In fact, Hutton argues that the UK has as “much in common with a middle-income developing economy as with other developed countries”.
These sentiments reflect a feeling, dominant on the left but emerging on the right as well, that the UK’s growth model has failed since 2010.
The Resolution Foundation has suggested middle-income people in the UK are now 20 per cent poorer than their peers in Germany and nine per cent poorer than those in France, largely due to the UK’s sluggish growth since the financial crisis.
Hutton argues that austerity was a major driver of the UK’s underperformance. The impact of austerity was to “stifle what economic recovery there was, and certainly the ‘animal spirits’ that enliven a capitalist economy.”
More deeply, though—and here, Hutton echoes an ever-growing economic consensus—investment, both public and private, has been too low for too long. This has stymied productivity growth, which has never recovered to anything like its pre-financial crisis trend.
“The prerequisite for growth is investment that drives productivity,” Hutton writes. “Britain does not invest sufficiently”.
Throw in Brexit and all the disruption that followed and you have had all the makings of a stagnant economy.
Starmer described Britain’s economic stagnation as “the central question” for a Labour government, suggesting that an “agile state” would be at the heart of a Labour programme.
“We’ve got to fix the short-term but we’ve also got to fix the fundamentals. That will require – and here I think there’s some really interesting stuff in Will’s book – an agile state, a state that will say we’re going to say what the future looks like, a sense of mission and long-term change,” Starmer said.
So what did Hutton suggest?
Hutton’s wider aim is to fuse the progressive liberal tradition, represented by John Maynard Keynes and William Beveridge, with “the ethic of socialism.”
For Hutton, the ethic of socialism is not about state ownership. It is about fostering a sense of common purpose between the public and the private sector. This, he hopes, would harness rather than stifle capitalism’s creative energies.
“The real magic in economic growth and development comes from the interplay of the ‘We’ and the ‘I’, the marrying of public stimulus and business entrepreneurialism,” he writes.
In practice, this means state-led investment through public-private partnerships. Hutton argues that, with a little encouragement, this will crowd in private sector investment.
He argues: “A financial system that has never put its muscle behind the British economy must be induced to do so.”
Steps are already being taken in this direction, most notably with the Mansion House Compact. This will mandate pension funds to invest a certain portion of their assets in British unlisted high-growth companies.
Looking more broadly, though, there is a problem with state-led endeavours, a problem which Hutton notes. There are “very few public agencies to do the job”.
As he writes: “The British Business Bank has little power to lend independently on the scale necessary; the UK Infrastructure Bank is small and undercapitalised. Apart from the Pension Protection Fund and NEST, there are no public agencies in the savings and investment sector”.
“All have to be scaled up and new institutions invented to join their ranks,” Hutton concludes.
This is not an insurmountable problem, but it is probably an under-recognised one. When Labour gets into power, it cannot just pull a lever marked ‘investment’.
It will have to scale existing institutions and create new levers, both of which will take time and resources. How successful Labour is in building those levers will, to a large degree, determine its success.
This Time No Mistakes: How to Remake Britain, by Will Hutton, is out now, £25, Head of Zeus.