Labour looks more likely to form a government than any time since leaving office in 2010. If there was an election tomorrow, depending on the poll, the Party could come to power with as much an 150 seat majority.
This is exciting news for not only those of us who want to see a Labour government in power, but for anyone who wants a more just and prosperous Britain. A Britain where the obscene poverty that has been allowed to build up in the last decade is finally tackled, and a dynamic and high-tech economy that benefits everyone is achieved.
But then supporters of any government want it to be successful and popular. Every Prime Minister wants to do their best for the country. Liz Truss wanted good things to come of her mini-budget. They did not and it has started to dawn on Labour thinkers that the shellacking she has received since this fiscal event has implications for our party’s agenda down the line.
Some variation of, “Truss is ghastly but global capital shouldn’t be able to undermine any PM in this way” is being discussed. Truss’s travails remind us of John McDonnell’s planning for a market revolt in the face of Corbyn’s agenda. While I agree there is an issue for a future Labour government to manage around the global financial system – I do not agree that the solution is total repudiation of that system.
I do not believe it is possible, but even if it was – such a move is not desirable. If you thought Brexit was bad, deliberately becoming a pariah state on the global stage will be worse. It is not a move that will promote prosperity, equity or opportunity for the people of this country. It should be immediately discounted.
How then can a radical reforming Labour government coexist with the bogeyman of global financial markets?
Step one will be to avoid doing anything staggeringly stupid. Perhaps it was well intentioned but a two year fix on energy prices, for everyone in the country including the richest, during a war, paid for by government no matter how high prices get, was always a bad policy.
Labour proposed a more modest six-month guarantee with potential to extend after review, which Jeremy Hunt has today essentially adopted. While I believe the original policy was badly designed, its issues might not have been fatal if it weren’t for the massive tax cuts offered in the same budget.
Much has been made of the ideological nature of the mini-budget and the spectacle of supposed free-marketers hung by their free market petard. It is quite important to see that this is not the case, and does not represent some new phase of global capitalism.
Markets are asking the same question most of us ask of spending. Will it work, and can we afford it? If the Tories had kept the tax cuts but ditched the billions of pounds of energy support – they would probably have been fine. It would have been a moral outrage but they would have ‘balanced the books’.
Instead the government, confused as to whether it was populist or libertarian, proposed a massive whack of spending and basically shrugged its shoulders as to how it was going to pay for it, or what it would do to inflation. We might mistrust global finance, but in this context it’s a pretty rational reaction for people, businesses, and other nations lose confidence in you.
And so a ball starts rolling which, to be honest, is hard to understand. The Bank of England is trying to keep inflation down, the government is driving it up. People are losing faith in the UK so selling our bonds but no one wants to buy them so the price is tanking. Tanking prices mean pension funds have to sell what they are holding, exacerbating the price crash and meaning the bank of England has to step in and buy this debt. Falling prices of government debt, for reasons I will not pretend to understand, drives up interest rates. Higher interest rates threaten to undermine the original intention of the mini-budget, to tackle the cost of living.
It’s all a bit chaos theory, reminiscent of Jeff Goldblum’s rantings in the movie Jurassic Park. But, as we have seen so brutally in the last few days, this stuff has material, painful consequences. Consequences that undermine an agenda be it Truss’s or Labour’s, before it even starts.
It is also, contrary to the tone of some coverage, all explicable, and to some extent predictable, by people and institutions rationally reacting to events. A conspiracy of international capital doesn’t raise its head at any step in the chain. That should give us confidence.
So if step one is to not do anything stupid, step two will be to communicate why a Labour government is doing what it is doing, well and early.
Radical plans should not be unveiled like a rabbit out of a hat. Major items of Labour’s agenda and how they will be financed need to be trailed before the election – not least because they will help us win it – but because they can be priced in by the markets and the electorate. If we will borrow more to invest in growth – say so. If we will raise taxes to fund universal child care – make a virtue of it.
This incoming Labour government, should we get it, will have to navigate between the bottled up expectation of a nation and a fiscal situation that could wreck it at any moment. Communicating, early, often and clearly to both parties is essential to avoid being wrecked on either bank.
Signalling to people is just as important as to markets here. It is a great progressive virtue to want all of the change and to want it all now. Inevitably it is Labour supporters who are most dissatisfied with any Labour government. Our hopes are sky high and if we are frank our grasp of the fiscal constraints is paper thin.
Internal conflict is as much a threat as external shocks so, activists and voters along with markets need to be told that Labour will be a reforming government but one that can only move at the pace it can move. Party members and activists in particular need to understand this not as a lack of bravery, but as a genuinely effective way of shielding the agenda from the travails that have brought down Truss.
Has this all been an apologia for boring centrism? The perspective above allows for centrism but actually enables much more, especially in conjunction with step three, which is to take a long view and prioritise.
What needs to be done to fix Britain cannot all be achieved in one parliament. Some of it will be radical and transformative. With humility and pragmatism (to be seen to think it is ‘in the bag’ would be disastrous with the public) Labour needs to be setting out an agenda to turn the country around over multiple parliaments.
At the very least it needs to set out the rationale for what it would prioritise in its first and perhaps only term. It needs to clearly pinpoint the burning issues to be addressed, providing justification for focusing on one issue to the exclusion of another, given that after a decade of misrule there are so many problems to tackle.
There is so much to do, but the most important thing is to let the country know that Labour will govern with responsibility, humility and common sense. If the message is clear that the Party has a plan, and that it will methodically sort the country out at a realistic pace, it will unite both voters and markets behind us and ensure that we not only govern, but change Britain for the better.
For more on the contrast between Labour and the Conservatives see The Tories Live in the Past, Labour’s Time is Now by Alison McGovern MP
