While Labour was busy debating who should lead the party over the next parliament, George Osborne and David Cameron moved swiftly to close down political dividing lines and broaden electoral appeal.
Thus the first Conservative budget in almost two decades was billed as ‘a budget for working people’. The chancellor even included tweaked versions of Labour’s manifesto pledges on skills and low pay, with the introduction of an apprenticeship levy and a ‘national living wage’ for over 25 year olds. Commitments to slow the pace of spending cuts, increase childcare provision, crack down on non-payment of the minimum wage and build a new ‘northern powerhouse’ are further examples of political cross-dressing.
With only a fragile majority, the revival of compassionate conservatism represents an ambitious bid to reach into traditional Labour heartlands and respond to the rise of nationalist parties in England and Scotland. These measures also seek to address the biggest policy failures of the last parliament. In five years the coalition did little to address the unbalanced nature of the UK economy. Productivity is still below its pre-crisis peak, in part because growth has been concentrated in low paid sectors. As a result families were on average worse off on the eve of the election campaign than they were in 2010, and levels of low pay and insecurity remain unacceptably high.
Labour has a key role to play in holding the government to account on this agenda. The focus on working people is a significant shift for the Conservative party, which has long argued that growth is best driven by providing incentives and rewards for a few firms and people at the top, whose wealth will eventually ‘trickle down’ to everyone else. Deregulation is seen as the key to productivity, and the party struggles to embrace progressive market intervention, even when there are clear concentrations of power that are bad for business and consumers.
Look a little closer and the contradictions are easy to spot. The budget prioritised tax give-aways to large corporations and the wealthy over frontline services and support for small businesses. The enhanced minimum wage rate for over 25 year olds provided cover for large cuts to tax credits that will leave many working families worse off. Measures to tackle the cost pressures and unfair practices people face in the markets they rely on for their everyday needs, such as energy, transport and housing, are notably lacking.
The Tory shift to the centreground is also an opportunity for the Labour party to re-examine its own historic mantle as representatives of the interests of working people in government – and what that means in an era of fiscal austerity.
The last Labour government improved living standards by investing heavily in public services and support for working families. But the same levers are not available today. The intellectual task in the post-crash world is how to build a fairer and more prosperous society without spending more money.
In the last parliament, Labour argued that this required more active intervention to build an economy that supports rising living standards, and a willingness to take on powerful interests where they are an obstacle to this. They called for sensible market reforms – rather than new spending commitments – to underpin affordable energy, transport and housing supply and drive a higher skill, higher wage growth model.
A core challenge for the next five years is to apply the same rigour to the state – reforming public services to meet the needs of a more diverse and ageing population within current spending constraints. Attempts to reduce waste or spend money differently are politically difficult, as they usually involve shifting existing entitlements from one set of people and priorities to another. These necessary but painful trade-offs require a new approach to public service reform – one that does more to involve people in the decisions that affect their lives and communities, and puts in place structures that seek to balance the interests of different stakeholders in a given area. Higher performance standards, better training and more democratic governance structures would also enable frontline staff to respond better to the needs of the communities they serve.
Whether Labour is able to convince a deeply sceptical public that they can deliver more with less will be crucial to addressing its own electoral weaknesses in the years to come. But the need to reform is not just about value for money. The failure of the European left to respond effectively to austerity politics has left a vacuum that is increasingly being filled by the return of destructive nationalism to the continent. Democratic renewal of the institutions that govern social, economic and political life could provide a route to addressing this disillusionment with mainstream politics.
For Labour in opposition, this means understanding how to combine efforts to build a majoritarian coalition for change at national level with a deeper connection to the communities it represents. Efforts to strengthen local leadership could also inform a distinct, centre-left approach to the issues of most concern to disenfranchised communities, such as patriotism, identity and immigration. In other words, like the Tories, today’s political fault lines may require Labour to move out of its comfort zone.