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Rachel Reeves, the shadow chancellor, is right about one thing at least. This is a kind of 1979 moment, a point in time where Britain’s economic predicament seems so irredeemably dire that it ought to provide the political will and electoral support needed to actually do something about it. But don’t hold your breath.
On many of the accepted yardsticks of economic performance – unemployment, inflation, labour market participation and even growth – Britain’s position does not appear so bad relative to other “high income” economies, all of which are floundering in some way or other.
Yet the fact is that living standards have barely improved since the global financial crisis 15 years ago, the longest such hiatus in real income growth ever recorded. It matters not that others have done almost as badly.
Something is desperately wrong, and voters know it. Many of Britain’s overseas competitors have noticed it, too. People sometimes come up to me at conferences abroad and ask, with faux sympathy, what has become of our country, which is now frequently characterised as almost third world.
This may be a gross exaggeration, though scarcely so to judge by the mounting litter in my neighbourhood. In any case, you’d be a fool to think there wasn’t at least something in it.
In this sense, the comparison with 1979 – when the UK economy, paralysed by union militancy and policy ineptitude, appeared to be slipping beneath the waves – is a reasonable one.
The question is whether Reeves and the rest of Labour’s high command offer solutions. In summoning up the spirit of Margaret Thatcher, Reeves does not of course intend to replicate her.
Indeed, what she promises is in some respects the very reverse of the liberalising agenda that Thatcher unleashed. Where Thatcher acted to curb the power of the unions, Labour pledges to bolster their influence anew.
Labour’s plans for enhanced employment rights also appear to be the antithesis of one of Thatcher’s key reforms, seen ever since as a major competitive advantage for the UK economy – a relatively flexible labour market.
It’s in Labour’s DNA to tax and regulate, and I’d be amazed if this has changed.
The rhetoric of economic transformation is then an entirely appropriate one; it’s just the substance where questions have to be asked.
But with one notable exception, assuming that Labour does what it says. That exception is planning reform, which I’ll come to shortly.
For the moment, the Prime Minister, Rishi Sunak, refuses to accept that there is anything fundamentally wrong. Our plan is working, he repeatedly insists. The economy “really has turned the corner”, he vainly protests as he tries to shift the political debate away from culture war irrelevances and his own party’s appalling position in the polls back to the things that really matter.
Up to a point, he’s right. Inflation is coming down, soon to be followed by interest rates. Energy bills are falling, and business and consumer confidence is rising. Real wages have also returned to growth.
Unfortunately, this is all quite short term, cyclical stuff which doesn’t do much to detract from the certainty of rising taxes, grossly inadequate housing supply, and failing public services. Underpinning it all is a still shamefully low rate of productivity growth which shows few signs of improvement.
This makes Reeves’s commitment to planning reform reasonably encouraging. From David Cameron onwards, many Tories have attempted to tackle Britain’s byzantine planning restrictions, and each in turn has failed in the face of powerful vested interests and a natural desire not to upset core electoral support in the Tory shires.
As I’ve remarked many times before, for the Conservatives planning is a classic case of the Juncker curse, named after the former European Commission President Jean-Claude Juncker; we know what has to be done, we just don’t know how to get re-elected afterwards.
And yet liberalisation of planning constraints is a key precondition to improving the performance of the UK economy, as well as to answering the undersupply in the housing market from which so many of the nation’s other complaints stem.
Happily for Labour, it is perfectly placed to tread where the Conservative Party dare not go with let-rip housing, industrial and infrastructure development. It loses few if any votes by freeing up the system to allow such an onslaught.
For Starmer and Reeves, this could be their Thatcher moment, driving a great swathe through the myriad obstacles and constraints that lie in the way of development – not overmighty trade unions and monopolistic practice in this case, but the perhaps equally resistant force of protective Nimbyism.
Labour’s problem is that all such “supply-side” reform takes a long time to deliver. This shouldn’t stop Reeves from trying, but if banking on instant economic dividends, she’ll be sadly disappointed.
In this sense, too, the comparison with 1979 is not entirely out of place. Thatcher inherited an utterly poisonous legacy; the therapy applied was so painful in its consequences that it might have lost her the next election were it not for the Falklands War, a split in the Labour Party and the dishevelled figure of Michael Foot as leader of the Opposition.
Thatcher eventually did much to restore Britain’s pride in itself, as well as its reputation as a country you could do business in and with. There followed a period of above-trend growth that was to last well into the New Labour years.
But it took a while and was not without its faults. Thatcher was highly effective in getting rid of old, unproductive industries, but beyond the City – which was to become an outstanding success story – and the rebirth of the car industry under foreign management, she was not so good at galvanising new industries to step into the shoes of the uncompetitive.
Plans for a new fleet of nuclear power stations, which if enacted would have stood the country in very good stead for today’s world, were abandoned in favour of the “dash for gas”; and the windfall of North Sea oil was largely squandered.
A ghastly inheritance likewise awaits Starmer and Reeves – in their case one of crushing over-indebtedness, already-high taxation, bankrupt local authorities, uncontrolled immigration and the hopeless mess that is the NHS.
Yet the grand pledge by Reeves in last night’s Mais lecture of “a new chapter in Britain’s economic history” is likely to fall flat. Reassuringly, she promises to match the Tories pound for pound on tax and spend, but besides the push-me-pull-you of planning reform on the one hand and beefed up workers’ rights on the other, there’s little else on offer.
The electoral strategy is instead to commit to as little as possible, and then stand idly by and watch as the Tories repeatedly shoot themselves in the foot.
Pretty effective it is proving too, to judge by the polls. When dealing with a busted flush, there isn’t a lot you have to do. Thatcher had a plan, but is the same true of Labour?
Labour only has one tool to stop Britain’s collapse into a third world country
The Opposition is perfectly placed to tread where the Conservative Party dares not go