The corpse of New Labour cannot be resuscitated
“If Reeves and Starmer’s economics had been applied in 1945 the NHS would never have been launched nor a million council homes built.”
The Labour leadership clearly sees itself as an updated version of New Labour. Rachel Reeves has said that the ‘Labour playbook’ is ready and waiting for use. The same approach is being revisited. The message being given out is that a Labour government under Starmer will be ‘a safe pair of hands’ and business has nothing to fear from ‘his’ government. The New Labour staple of ‘partnership with business’ is being rolled out again together with ‘growth’ as a panacea.
To imagine that they can recreate an updated version of New Labour in completely different economic circumstances is delusional. It is a mission impossible. The transformation of the Labour Party into New Labour and its election into government in 1997 was at the height of neo-liberalism which appeared victorious across the globe. Blair turned Labour into a neo-liberal party which conceived of the ‘national interest’ as being served by making Britain a winner in the global market place. What did the decline of manufacturing matter? They were going to build “a knowledge economy”.
Whilst the Starmer leadership likes to pretend that all our problems today are just the result of what the Tories have done since 2010, in reality we are suffering the consequences of what New Labour did before it as well. New Labour had its share of responsibility for the great crash of 2007-8 which was the culmination of the Thatcher-Reagan counter-revolution. On the eve of the crash Gordon Brown was praising the innovative financial sector and predicting a new golden age. Later, even recognised this culpability to some extent in Beyond the Great Crash1. New Labour was a pro-privatisation party which (to name but a few)
- Supported the Tory policy of PFI, saddling trusts with huge debts;
- Opened the NHS to the private sector vultures;
- Promoted the growth of buy to let landlords and
- By their tax policy facilitated the asset stripping of private equity and its entry into the care home sector.
Today, facing what has been described as a ‘poly crisis’ which combines an existential environmental crisis, with an economic, social and political crisis, a rebooting of New Labour is bound to fail. It cannot bring ‘stability’ and ‘prosperity’ in one country, especially one which is suffering the consequences of Brexit.
All the talk of the economy as if it were a household (“we won’t be taking out the cheque book”) is crass. If Reeves and Starmer’s economics had been applied in 1945 the NHS would never have been launched or a million council homes built. This is not a facetious remark. They would have wanted to get the debt down.
The NHS and the council house building programme of the Atlee government were launched when national debt was 250% of GDP, two and a half times what it is today. The predicted annual cost of the NHS was £170 million yet in its first full year costs exceeded £305 million. Was this 79% ‘over-spend’ “inefficient”? Was it “fiscally irresponsible”? No, it was the result of the accumulation of need which had been unmet for decades.
£1 million a year was budgeted for opticians yet within a year the bill amounted to £32 million. Opponents of the NHS said this expenditure would lead to national ruin. It did not. It was only the Labour leadership’s support for the cold war and rearmament programme which led to cuts in spending and the introduction of charges for dentistry and spectacles2.
The current Labour leadership’s prime aim is ‘growth’. Yet growth per se is no solution to our problems. Just as GDP is only a measure economic activity, not a measure of social advance, growth can be a negative social and environmental factor.
Rachel Reeves assertion that we need the economy “firing on all cylinders” shows the degree to which the leadership fails to understand the nature of the crisis and what is needed to resolve it. If the nine big building companies increase economic activity, building homes at inflated prices which few can afford, what use is that? It is socially regressive.
The absence from the “five missions” of any reference to housing is staggering. It is common knowledge that capital investment in private housing has come at the expense of investment in productive and socially useful economic activity. The big house builders don’t build for social need but to maximise their profits. Billions of pounds have gone into investment in homes which aren’t even occupied. The growth of the private rented sector which New Labour promoted has created insecurity of tenure for most of the new generation and rents levels which are increasingly unaffordable.
Failure of privatisation
One of the key aspects of the ‘poly crisis’ is the abject failure of privatisation. Privatisation of the railways was meant to relieve the public purse of having to fund them. Yet the collapse of Railtrack meant that the public accounts have been saddled with £50 billion debt. Time after time as private companies fail, train operators have had to be sacked and the state step in.
The privatised water companies are poisoning the seas and rivers at the same time as they are handing out dividends to share holders. They are largely foreign owned (Thames Water is 32% owned by the Ontario Municipal Employees Retirement System as well as the Chinese sovereign investment fund and a subsidiary of the Abu Dhabi investment authority.) One of the essentials of life is a means of extracting profit to the detriment of the population and the environment. If the water companies had been restaurants they would have been closed down a long time ago.
The Labour leadership declares itself to be ‘pro-business’ but it does not differentiate between those small businesses3 which are often individuals working for themselves to earn a living, and/or maybe employing a few people, and the monopolies which dominate sectors such as retail, house building, banking and so on. As I have said elsewhere big business is not “a force for good in society” but “a force for exploiting workers and ripping off customers”. They have no programme to reign in private monopoly.
An overall balance sheet of New Labour (which is beyond the scope of this short article) is not a question of listing the pluses and minuses but an assessment of its general political orientation. Gordon Brown was very reluctant to nationalise Northern Rock, explaining that
“Tony Blair and I had spent twenty years building New Labour on the foundation of market competition, private enterprise and economic stability as the path to growth and I was not prepared to undermine that painstaking work with one instant decision.”
He had to bite the bullet but only socialised the losses of a private business which had made the same mistake as him, believing you could endlessly make money from money, ‘leveraging’ to a reckless degree.
In fact the ‘market competition’ that Brown revered was introduced into the NHS. They called it ‘contestability’ to make it sound more benign. His government encouraged private companies into the NHS, giving them guaranteed contracts. In other words, they were paid for work they didn’t do as well as that they did!4 That’s a parallel with some of the PPE contracts handed out by the Tories during the pandemic.
Driving back the boundaries of the market
What is fundamentally wrong with the economic approach of Reeves/Starmer is that they believe that the market can resolve our problems, deliver zero carbon and resolve the housing crisis. In reality to deal with the social and environmental problems we face it is necessary to drive back the boundaries of the market and move away from commodity production in a number of areas. For instance there is no way that the NHS crisis can be resolved by leaving homecare and domiciliary care in the hands of private companies seeking profit, which can only be extracted by
- Minimising staff numbers,
- Maintaining a workforce as cheap labour,
- Limiting staff in domiciliary care to short, inadequate home visits.
Care should not be a commodity. Likewise in the NHS the service should be publicly provided rather than allowing profit seekers to extract public money for shareholders instead of it being invested back in the service.
We have seen what the ‘efficiency’ of the private sector has looked like on the railways, in the water industry, in the profiteering of the big nine builders and their often shoddy workmanship which has made some home owners lives a misery. Private companies always measure ‘efficiency’ by the level of return, to the detriment of ‘externalities’; the social and economic costs.
New Labour helped to shape an economy in which neo-liberalism was embedded. Big business was allowed to feed off of the body of public services. Deregulation opened the way to materials made of petrol being placed onto the outside of buildings like Grenfell Tower.
The housing crisis was the result of New Labour’s promotion of buy to let landlords, the continuation of RTB and its refusal to fund council house building. After 13 years in government there were 655,000 less council and housing association homes available than in 1997.
The beds shortage in the NHS was in part the result of PFI, with new hospitals cutting bed numbers because of the high cost of private finance. In 2009 they invited McKinsey to investigate how £20 billion ‘savings’ could be made in the NHS by 2014. Ministers denied it but in July 2010 the coalition government published the non-existent McKinsey’s report to underline that plans for austerity were laid by New Labour.
It is more than 25 years since New Labour was elected. Disenchantment with Parliamentary politics and MPs was not just the result of the Iraq war, but the domestic politics of New Labour. After winning the highest vote in its history in 1997, within four years, it had ‘achieved’ the largest fall in turnout in history, from 71.3% to 59.4%, with the loss of 2.857 million votes, and that was before the Iraq war. The Party’s membership collapsed.
Today, top down control, with the members treated like foot-soldiers, awaiting their marching orders from on high, has driven out more than 200,000 members. A radical change will not be achieved by resurrecting the politics of New Labour. Fealty to the market, even with some regulation, will leave in place the rampant exploitation of workers and the fleecing of ‘consumers’ which neoliberalism gave us.
We read a lot now about Labour “managing expectations”. In 1997 New Labour kept to Tory spending limits for the first two years in government, something that previous Chancellor Ken Clarke said that he would not have done. It looks like something similar is being prepared. Faced with a generalised crisis of public services, nobody would expect any government to resolve the problems instantly. However, concentration on reducing the debt in an emergency, at the expense of social needs, is fundamentally mistaken. In a future article I’ll talk about the sort of governmental programme that is needed to address the social needs of the great majority of the population.
February 14th 2023
1“Of course, with a leveraged economy there would always be risk. But I and others felt that , if there was a diversification of risk spread across many institutions and through many instruments, we were in a better position. I now believe that this was the biggest and most far reaching mistake I and others made.”
2This was the occasion of Aneuran Bevan’s resignation from the government.
34 million businesses in the UK have no employees (comprising sole proprietorship and partnerships with only an owner(s) and companies with one employee) and 1.187 million with less than 10 employees. See the detail here.
4They set up a Commercial Directorate in the NHS in 2003 to promote greater involvement of the private sector. In 2008 4 big US private health companies were given access.