Labour and the death of consensus

Britain is desperate for a new politics. Is Labour prepared to seize that chance?

When Keir Starmer appeared at the Future of Britain Conference with Tony Blair this July, he delivered an irresistible twist in a long-running soap opera: New Labour is back! Less attention was paid to what Blair actually said. Britain’s economic prospects today are “very different” from 1997, he lamented; today, “It’s grim, right?”

Does that mean that Labour must be even more politically cautious than Blair was back then? Or does it demand a much more radical rethink? Original Blairites such as Peter Mandelson and Charlie Falconer argue that unlike 1997, today’s crises make this a transformative moment. To understand what’s going on now, we need to go back beyond the 1990s and look to the two great turning points in postwar British politics: 1945, and 1979.

The victories of Clement Attlee and Margaret Thatcher each inaugurated a new political consensus, after agonising years of flux and crisis. Since the 2008 financial crash we have been trapped in a similar predicament. Can Starmer’s operation hope to match those earlier projects?

The elections of 1945 and 1979 were each part of a much longer story: the waning of a long-dominant fear, and the acceptance that a new nightmare must now take precedence. In the 1930s, Labour and the Conservatives agreed that it was vital to balance the Treasury’s books and avoid ruinous inflation. This nightmare limited what was politically “possible”: unemployment rose to three million, but radical state intervention was seen as unthinkable. But by May 1940, an ill-prepared government found itself with a million men out of work, even as Britain faced invasion. Expanding the state and borrowing money now seemed unavoidable.

That July, the young left-wing journalist Michael Foot co-wrote a book that entrenched a radical new narrative of the decade before. Guilty Men condemned the old guard, led by Neville Chamberlain, for having let outdated nightmares stop them from helping the unemployed, and preparing the country to fight. In 1945, Labour invited the British people to take back control from those guilty men, and won. The nightmare of mass unemployment shaped what was politically possible for decades.

By 1968, even as inflation rose and ever-more strikes broke out, radical intervention was seen as unthinkable. The taboo on mass unemployment underpinned the power of the unions. Both parties tried to restrain strikes by law, but the unions defeated Tory and Labour governments alike, even as inflation climbed. Finally, in late 1978, the James Callaghan government found itself convulsed by the winter of discontent. Weakening the unions and letting unemployment soar now seemed unavoidable.

Thatcher entrenched a new narrative of the decade before. Her iconoclastic front-bench ally Keith Joseph condemned the old guard for letting the ghosts of 1930s dole queues scare them off tackling inflation. Thatcher condemned union “wreckers” for abusing their power to demand inflation-busting pay hikes. In 1979, the Conservatives invited the British people to take back control from these guilty men, and won. The nightmares of high inflation and endless strikes shaped what was politically possible for decades.

In the years since the financial crash of 2008, life has become so desperate for so many people that political consensus has broken once again. As in the 1930s and the 1970s, there have been repeated attempts to reorient politics around new nightmares – stagnation and snobbish liberal neglect. Red Toryism, Blue Labour, Theresa May’s promises to those “just about managing”, levelling up. But none succeeded in overcoming the old nightmare – reinvigorated by George Osborne – that, unless the profligate state was hacked back, Britain would go the way of Greece.

Can Labour finally entrench a radical new narrative of what has gone wrong over the past 15 years, identifying who – and what ideas – are to blame, and what has to change? Labour advisers, all too young to remember the 1970s, have been studying how the Thatcherites pulled that off. Today, however, the process is likely to be messier. Not just because Starmer is no charismatic ideologue, but because of the voters.

As one shadow cabinet minister put it to me, the failure of previous grand projects has left the public disillusioned: “Labour isn’t putting forward big visionary ideas for how the country can be radically transformed,” they said, because “focus group work shows that nobody would believe it if we did.” Many voters fear spending hikes will cost them dear. As one source close to Starmer explained to me: “The borrowing nightmare is still strong.”

Yet others report focus groups’ desperation for change. People get so upset about their economic troubles that it can be “hard to watch”, said Josh Williams of the think tank Labour Together. This suggests that there is a battle of nightmares afoot within the electorate, perhaps within individuals: the status quo is unbearable, but what if change makes things worse?

This is why Labour needs a compelling story of outdated fears giving way to urgent new ones. Starmer’s recent speeches, alongside Rachel Reeves’ “securonomics” speech in May, suggest Labour has now identified the new nightmare on which it thinks it can found a new consensus. If, after 1945, it was accepted that “we must never go back to the mass unemployment of the 1930s” and, after 1979, that “we must never go back to the inflation and strikes of the 1970s”, Labour’s mantra is now: “We must never go back to the insecurity of the 2010s (and early 2020s).”

“Insecurity” is not as vivid as hunger marches or mass pickets; one reason, perhaps, why it has taken multiple crises to push it to the front of our politics. While admitting their party is still feeling its way towards a clear narrative, that same shadow cabinet minister also complained that for “a lot of more intellectual left commentators”, insecurity “isn’t exciting enough, because their lives perhaps feel less insecure to start with”. They insisted that this theme defines the moment, “whether it’s insecurity at work, insecurity of income, insecurity in the world, insecurity with the climate, insecurity with our international relations, even insecurity on the streets”, such that for working people, making this theme central is “a very significant offer”.

Throughout the 2010s, Labour struggled to bring these anxieties together around a single core idea. It was always happy to talk about economic insecurity but was much less comfortable addressing other forms of insecurity – around the way some voters felt immigration was changing their communities, for instance. For many in the party, this conjured fears of populist nationalism. Now that economic woes are the most pressing, Labour seems to have got past this. It is now promising to put working people at the centre of the government’s concerns, in a way it has not been for a very long time.

[See also: Syriza and the death of Eurocommunism]

But who made life for working people so miserable for so long, and why? To be transformative, a retelling of the recent past must expose the thinking behind the neglect of people’s needs. Last year’s Truss-Kwarteng mini-Budget helps here. The turmoil that followed its sudden, unfunded scrapping of the top rate of income tax revived the same basic story as partygate and the crash: an elite recklessly pursuing its own interests, and expecting everyone else to clean up their mess. But outrage alone doesn’t skewer the underlying beliefs.

The closest the Labour leaders have come to calling out the origins of our present discontents is Reeves’s attack on the economic logic of the post-1979 consensus: the false promise of “trickle-down” economics, as government withdrew from the economy, wealth gushed upwards and “whole communities were thrown on the scrap heap”, even before austerity “sucked [demand] out of the economy”. But Mandelson told me that Labour has never managed to shatter George Osborne’s “propaganda” about the Brown government’s post-crash deficit spending. “Austerity,” he argued, “was designed to attack a nightmare of over-spending and over-borrowing that only existed in the minds of those who never supported a ‘responsibility state’ in the first place and were never included amongst those who most needed its protection and security.” Labour must “address the nightmare of insecurity that has befallen the country, reverse the argument of austerity and commit to the public and private investments needed on a sufficient scale to get our future back” – in particular, that of younger generations.

Mandelson was unconvinced, however, by Reeves’s case that “globalisation as we know it is dead”, and said fiscal restraint remains vital. Of what has happened in the British economy since 2008, his Blair-era cabinet colleague Charlie Falconer is even more forthright: “Do not underestimate,” he said, “the extent to which the bankers are guilty men in this story.”

Around the Labour leadership, attitudes to calling out guilty men are ambivalent. After years of strife, there is talk of the need to bring people together. But when I suggested to key members of Starmer’s team that Thatcher unified the country against the “wreckers” from whom she wanted to take back control, there is some openness to this. As another source close to the Labour leader admitted, “We do need to do more of that,” adding it’s “not as much about labelling people – more about pinpointing the behaviours and philosophies… like our attacks on trickle-down economics”.

The wreckage of previous bids to challenge the status quo has made this more hazardous. Labour is acutely aware of the reaction to its grand spending promises in 2019, and to Truss’s borrowing bonanza. But who is afraid of what, exactly? Some Labour figures think higher tax is the main taboo; others, higher borrowing. Some seem more exercised about the public’s worries; others about investors’. There is a desire to move away from top-down redistribution as it is often ineffective; better to nurture prosperity across the country. But while we’re waiting, public services and infrastructure need expensive emergency repair, not least to help revive productivity.

Even those adamant that Labour needs to convince voters it won’t raise taxes admit that it’s wise to leave some room for fiscal manoeuvre – not as a dastardly conspiracy to dupe the voters, but because the scale of national decay may mean it’s the worst option, except for all the others. The need to shift the burden from earned to unearned income has been mooted by such voices as Michael Gove, the Conservative Reader newsletter, and the Financial Times, which recently argued that “an entire consensus around taxing and spending could start to crumble”.

On borrowing, there is confidence that investors will be able to distinguish between Truss’s madcap dash for growth and Starmer’s careful plans to build the green “infrastructure of tomorrow”, to bring “new jobs… cheaper bills and national security”. In a speech in Leith, Scotland in June, the Labour leader invoked the Office for Budget Responsibility to argue that borrowing within Labour’s fiscal rules would “save our public finances money in the long run”. It may be that, if Labour wins and the markets don’t panic, things will loosen up.

The years 1945 and 1979 were transformative because they brought the redistribution not just of money, but economic power: taking back control once again from the guilty men. Claire Ainsley, Starmer’s ex-director of policy, thinks Labour leaders “realise there is not an endless public appetite for big state spend. People want action on the causes and the root problems with markets, not just subsidies for their worst effects.” She sees a turn to thinking about “how we start to put citizens at the front of this, rather than the extortionate profits, putting the shareholder at the centre – wherever they may reside”. Why, she asked, are these people “more important in the British economy than your average working person?”

But are Labour’s plans sufficient? Angela Rayner promises a New Deal for Working People, including “fair pay agreements”, starting in social care, and bans on zero-hour contracts and fire-and-rehire. There is some willingness within the party leadership to enforce regulation of the privatised utilities more firmly. Labour has sworn to dismantle planning barriers to housebuilding. At the summer conference of Blair’s Institute for Global Change, speakers suggested cajoling pension funds to invest in UK infrastructure, and compelling the food industry to stop feeding people junk, which stores up vast costs for the NHS. But since then there have been Labour’s pledge-softenings and row-backs.

The transformations needed to address Britain’s everyday nightmares also involve getting the state to work better – and another often-made promise: “Our view is you’ve got to do something to change where power lies, open it up,” said the shadow cabinet minister, “so the regions of England where a lot of the poverty is, can start to get back control” – of infrastructure, transport, economic development.

But Labour’s biggest move to intervene in the economy is also its most prominent borrowing pledge: the Green Prosperity Plan. This chimes with a consensus that had begun to emerge under Johnson, that the big threats we face all demand a more active state: that we have to adjust to a hotter, more hostile world by “rebuilding the industrial foundations that we have lost and which has left us exposed to global shocks”, as Reeves put it, fostering “carbon capture and storage technologies… in the manufacturing landscape of Teesside”.

In the early 1980s, at the start of the last period of consensus, Thatcher’s narrative of liberating individuals from the dead weight of the state was crystallised in one policy: the chance to buy your council house. When I asked whether Labour has anything to match that, several party advisers suggested “Great British Energy”, the “national champion” at the heart of the Green Prosperity Plan. If pitched to voters in terms of solid jobs, cheaper bills and protection from Vladimir Putin, this could show how Labour would stave off the nightmare of insecurity on several fronts at once.

None of this may be enough. The residual Osborne nightmare of Britain-as-Greece may stop Labour doing what it needs to tackle the real and present nightmares of insecurity. But perhaps a longer process is at work. Today, Attlee and Thatcher look like leaders of destiny, but while both told stories of transformation, they too moved cautiously on policy. In May 1945, Attlee refused to believe Labour could win an election, and had to be prised out of coalition with Churchill by a furious party conference. In 1978, Thatcher did not yet dare to reject secondary picketing.

In both cases, the case for a break with the past was galvanised by another nightmare, born of frustration. In the 1940s, the prospect that promises of a welfare state would be broken stoked fears of vengeful squaddies coming home and turning fascist. In the 1970s, the prospect that no government would dare confront the unions drove a desperate middle class to mutter about coups. It can be dangerous to do too little as well as too much. Reeves seems alert to this, warning that “no democratic government can be content with a lack of decent work, falling wages and the dimming of people’s hope for a better life” – a betrayal that “risks fanning the flames of populism”.

Labour’s “caution” may prove to be part of a slow, years-long process of building a new consensus by regaining trust and finally overriding Osborne’s old nightmare. It may gradually build a consensus that says, come what may, there must be no return to the insecurity of the 2010s. But if, after trusting the Conservatives to level up, disappointed voters return to Labour only to be let down once more, who will they turn to next?