Growth prospects

Whatever the outcome of the Brexit talks, in one respect the UK needs to become a lot more European. It is time to make a decisive break with 35 years of mid-Atlantic neo-liberal economics and to be a more normal European economy.

Compared to Britain, our near neighbours in north west Europe have greater productivity, less inequality, more investment, higher incomes, more stable job markets, stronger welfare states and longer life expectancies.

These are the economies the free-market Brexiteers want us to move away from. The left’s economic mission must be to go the other way, to steer Britain’s variety of capitalism towards those of our continental partners.

Jeremy Corbyn had fun this month when he told Morgan Stanley: “You’re right, we are a threat.” But the truth is that Labour’s economic pitch is not Latin American socialist populism but European social democracy. It looks radical only because British economic discourse has become so warped. The party’s ambitions are ordinary in a European context and they can be achieved through purposeful, consistent, long-term industrial and economic leadership, with government and business working in partnership.

In fiscal policy, seven years of Osbornomics has so twisted our debate that Labour is greeted with scepticism when it advances the most orthodox of economic propositions. Its plans for a surge in public investment – for infrastructure and housing – make it the pro-growth party. It must have more self-confidence when it explains that borrowing to fund productive investments pays for itself in tax receipts and in time reduces debt as a share of GDP.

Similarly, when a viable business is nationalised new debts are offset by new assets and the public balance sheet is unaffected. There is nothing especially radical about wanting to adjust our mixed economy so that public, municipal and mutual businesses play a rather larger role.

The test should be what is best for our economic, environmental and social sustainability, without presuming that public, shared or private ownership is best. The left should prioritise the creation of public sector challengers in energy, housebuilding and public service supply-chains as well as re-socialising utilities in cases where competition is clearly failing.

Labour also needs to start a new conversation about skills during working life, because Britain will not prosper if it only invests in educating the young. Under the banner of the National Education Service, the left can offer a deal to British business, with more employer involvement, more public support but also new obligations to upskill existing workers.

How those skills are used will be critical however. For Britain’s productivity problems are largely explained by the huge variability in the productivity of individual firms, even in the same sectors and regions.

When the Tories think about industrial strategy their focus is mainly on advanced innovation among high achieving companies. The left’s economic mission must be to improve the productivity of every firm, in every sector and community. That will take hands-on support for managers and public-led coordination within sectors, supply chains and local economies.

This can be supported not just by a new offer on workforce skills, but also by new rights and new powers for employees. A higher minimum wage, more union bargaining power and worker involvement, and a return to European labour market standards will force struggling businesses to rethink their business models and invest in their people. These are not just social policies for redistribution and justice, they are economic policies for growth.

After Brexit and austerity, the Conservatives are no longer the pro-business party. The left’s European alternative is good for business and good for Britain.