The Labour Party is walking a cautious path to victory. Conscious of its economic reputation, mindful of the state of public finances, the party has been eager to emphasise an approach to government that prioritises reform over spend.
Labour’s hesitance to be radical is off-putting for some. Voters are ready for something new. They are tired of stagnant wages, declining living standards, insecure jobs, and insecure housing. Labour, some observers say, could seize the opportunity for renewal, fundamentally rewiring the way the country is governed. The question is: what could that new approach be?
For Richard Layard, the world-renowned economist and Labour life peer, something vaguely radical is bubbling under the surface. We connect via Zoom on a wintery Friday afternoon in December. I apologise for the buzzy café in the background, while he sits in a quiet room with stacks of papers behind him. We’ve barely begun the interview before he thrusts one of these pieces of paper at the camera, tapping a sentence written in large font with his finger: “With every pound spent on your behalf we would expect the Treasury to weigh not just its effect on national income but also its effect on well-being.”
Layard then explains enthusiastically: “The thing that is really exciting me at the moment is this statement by Keir Starmer [ in 2021]. This is saying that his government will insist that policies are looked at in terms of their effect on people’s well-being and not just on income. I would love you to print this sentence because this is the way to hold politicians to their promises, to make sure that everybody knows they’ve made them.”
Layard founded the Centre for Economic Performance (CEP) at the London School of Economics, which studies economic growth and ways to make it fair and sustainable. Over the past 20 years at the LSE, he has researched the link between happiness, well-being, health, development and the economy. For New Labour, he developed policies around welfare-to-work and NHS talking therapies. Does he advise Starmer’s team? “I lobby everyone I can,” he chuckles.
The 89-year-old has long advocated for well-being to be the metric by which government measures societal progress. In July 2022 Layard and his CEP colleagues published a “Well-being Manifesto”, showing how governments could make happiness the root of policymaking. The authors outlined how well-being is linked to many of the things that policymakers care most about, from productivity and talent retention to health. “Happy people work more effectively,” they wrote, “happy people are less likely to change employers….happy people are less likely to get sick and to die.”
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Other countries have already adopted this approach. Wales created the Well-being of Future Generations Act in 2015, with seven well-being goals to improve social, economic and cultural well-being. In 2022 the Welsh government reported that as a result the gender pay gap was at its lowest level, greenhouse gas emissions had improved, and the number of low-weight babies had fallen for the first time since 2014. In 2019 New Zealand embedded well-being into the wider public finance system to ensure progress was no longer measured by GDP alone. Australia followed suit in 2023, launching a “national well-being” dashboard.
Despite this trend – including the action taken close-to-home by Welsh Labour – Starmer has not deviated from the “growth is the panacea” line, much like the Conservatives. Both parties are striving for economic growth, though the first of Labour’s five national missions is, at the very least, aiming for that growth to “fair”. Desire for growth has been seen as antithetical to well-being-driven policy. Some academics have argued that there is no link between economic development and happiness, and those on the left continue to criticise prioritisation of economic growth that doesn’t address inequalities. Some even argue for degrowth as a solution.
Layard tells me the picture is even more complicated. “Growth is good, but not quite as good as people think it is,” he explains. “It’s good for families to have better living standards and for the public finances. Both parties give growth as the main reason: if you want better public services, you have to have growth.”
But, he points out, growth should not be the paradigm through which to view the value of policy – cost savings, not growth, is the better aim. There are lessons from his time with New Labour: “When we started promoting NHS talking therapies, we very much stressed that anxiety and depression often make it difficult for people to work and they end up on benefits. We could show the effects would save enough money through more people being able to work, come off benefits and pay taxes, which would, in terms of savings, more than cover the cost of the original cost of therapy […] I would make the argument mainly not in terms of growth, but in terms of saving the government money.”
So far, Starmer’s Labour has steered clear of spending pledges, prioritising public sector reform. Does Layard think Labour really cares about well-being, when so much of the party’s rhetoric has focused on growth and away from public investment?
“I personally think that the Labour Party and Keir himself are really interested in well-being as well as growth,” he tells me, again with enthusiasm. “This and the language they use in the run up to an election is not necessarily the same thing.”
Well-being features most obviously in Labour’s healthcare agenda. The shadow health secretary, Wes Streeting, is pushing a preventative approach, which would futureproof the NHS by empowering people to look after their own health. Well-being is part of this, but without adequate mental health funding, there are questions around how it would work in practice.
Mental health must become a priority, says Layard, partly because it costs the economy more. “One thing people don’t realise is that mental illness is mainly a disease of working-age people and physical illness is mainly a disease of retired people. The economic cost of mental illness is larger, per person, per patient, then the economic cost of physical illness.”
The government’s failure to treat psychological problems in children is “absolutely inexcusable in a civilised society,” he adds. For Labour, there is a clear opportunity to do better. “That should be pretty central to Keir’s preventive strategy, because most adults who have the mental health problem have already shown it when they were children,” he explains.
Layard is supportive of Labour’s policy to embed mental health counsellors in schools, but with caveats. Schools need an “acceptable level” of mental health support, not “free floating counsellors” that aren’t “embedded in a proper team with supervision and support, proper record keeping, and all the rest of it”.
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One of Labour’s most robust well-being-centred policy proposals is arguably the New Deal for Working People. This package of employment reforms aims to enhance workers’ rights, acknowledging that enhanced job security has the potential to address issues such as low productivity, low wages and inequality, and to foster workplaces where individuals can “enjoy dignity, gain security, receive respect, and are supported to prosper”.
Policies include raising wages and establishing fair pay agreements, strengthening rights and protections for workers, and banning zero-hours contracts, as well as making flexible working a day one right and tackling workplace harassment.
Recent polling by Opinium for the Fairness Foundation revealed that 69 per cent of 18- to 34-year-olds, 64 per cent of working individuals, and 63 per cent of those in households earning over £60,000 identified work as a negative influence on their health. Respondents pointed to working conditions, long hours, stress and workplace injuries as compromising their well-being.
The government’s approach to work, meanwhile, has been less than progressive. According to the ONS, 2.5 million people are currently out of work due to long-term sickness. The Chancellor has focused primarily on the introduction of punitive disability benefits measures and back-to-work schemes to bring this figure down.
Layard is enthused by Labour’s plans to strengthen job security. “[It’s] really, really important. I really liked Keir’s speech [in 2022] where he had the three goods: security, prosperity, and respect, I thought that just about summed it up.”
But our issues with work run deeper. “I think the main problem at work actually is people’s bosses”, he explains: “If you do these timings studies, and ask people what were you doing, who were you with and how did you feel the worst time of the day, for the average person it is when they were with their boss. This is a frightful reflection on what our current theories of management training had brought us to.”
Layard explains that quality of work would be improved if workplaces were built around the “empowerment of workers”. Strict top-down hierarchies breed misery. “Planning the work of the team should be much more based on the views of the team members, both in terms of what suits them and their well-being, but also of course what actually will help to get the job done,” he adds.
Back to Starmer’s 2021 pledge that a Labour government Treasury would consider not just national income, but well-being, Layard says embedding this would require “a radical upheaval” in the way that government decisions are made. A “new well-being unit” in the Treasury could provide information based on “established standards”.
Is this the sort of thing that could excite voters about the prospect of a Labour victory?
“I’m absolutely no expert on how to win an election, so I would totally leave it to them to talk about the strategy,” Layard says, before thrusting another piece of paper in front of the camera. This one shows a study of national elections in European countries from 1974, which found that the best predictor of the government’s vote-share in national elections was the life-satisfaction of voters. Happy people vote for the status quo, he explains. “Politicians had better take well-being seriously if they want to be re-elected.”
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