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High impact

Labour cannot go into the next election with wild spending promises. It needs to offer ambitious but low-cost social democracy, argues Andrew Harrop.



Think tanks like the Fabian Society spend our days coming up with new ways for governments to spend money. Over the summer we proposed a long-term roadmap for rebuilding social security that would slash poverty. It came with a price tag in the tens of billions.

Right now, however, Labour cannot sign up to any fresh plans for big, permanent spending increases because we are about to see the highest tax rises in two generations. The revenue hike of £40bn announced by Boris Johnson to start in six months’ time is almost as much as Jeremy Corbyn proposed in 2017 for the whole of a parliament.

After raising taxes so much, the electorate is entitled to expect results and there is good reason to doubt the Tories can deliver on NHS backlogs, schools catch-up or better social care. Before Labour promises any more, it must hold the government to account to ensure this extra money is well used.

When the next election comes there is unlikely to be much appetite for further tax rises to pay for spending. Genuinely time-limited measures and capital spending can be funded by borrowing. But to regain economic trust Labour must promise that ordinary spending will not be funded from debt when the economy is doing well.

Therefore permanent increases in day-to-day expenditure should only be pledged to the extent that Labour has credible plans to grow revenues which do not increase the tax burden of ordinary wage-earners and pensioners. All non-capital spending promises must be matched by serious and specific proposals for tax rises on the very wealthy or businesses exploiting loopholes.

That means Labour will have to prioritise ruthlessly when it comes to making firm spending commitments. Other ideas for expenditure will have to become long-term ambitions that are contingent on how the economy performs, including most of what needs to be done to fight poverty.

The party will not be able to repeat recent activist-friendly promises like free higher education or personal care. Every spending promise will need to yield maximum results with respect to both social justice and reconnecting with voters. The first billions the party pledges should go to childcare, parental leave and universal credit for working households, to prove that Labour is the party of family and work.

Keir Starmer’s Labour party also needs to consider how to set the country on a new direction without spending money. It needs to be radical in thinking how to reshape the state in ways that do not need cash. For example, it is time to rethink education to reflect the lives young people will lead over this century: what we teach, when and how we assess, and the pathways students take. And we need fool-proof plans for devolving power and money in ways that push local public services to spend across silos, embrace technology and prioritise prevention.

Beyond the state, there is the question of how Labour thinks about shaping and regulating the market and society. The pandemic has proven that the biggest dividing line between Labour and Conservative is not now on public spending but on the parties’ appetite to intervene.

At least on questions of public health, Labour’s instinct towards activism is closer to the public’s. So the party must up its ambitions for reshaping markets and individual behaviours to make Britain fairer, greener, healthier and more prosperous. It has already made a good start by announcing important new workplace rights.

Labour needs to think more about regulation, but also about new partnerships with businesses, trade unions and non-profits to advance shared goals like sustainability or skills; and about the place of new public institutions that challenge or augment the private sector for things like green infrastructure, housebuilding or finance.

These non-spending ambitions need to be big, with sufficient scale to bring deep change to our lives. In the Corbyn years, small-scale initiatives in municipal socialism and grassroots mutualism were championed, but it was unclear how they could ever be expanded to transform our economy or society at large.

Now, under Keir Starmer, Labour needs a low-cost social democracy, where the rhetoric is less radical and business is treated as a partner, but where the scale of action, ambition and change is greater than ever before.

Andrew Harrop

Andrew Harrop is general secretary of the Fabian Society.


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