Labour Under New Management

Labour Under New Management

The British Labour Party’s hopes rest on the belief that a combination of green industrial policy and supply-side reform can cure British economic malaise. Is this a fairy tale?

Keir Starmer delivers a speech at the Labour Party conference in October 2023. (Ian Forsyth/Getty Images)

In the next British general election, due to happen within the year, the Labour Party is set to sweep into power after fourteen years in opposition. Its two major rivals, the Conservative Party and the Scottish National Party (SNP), have imploded in scandal and division. The financial meltdown unleashed by the forty-nine-day tenure of former Prime Minister Liz Truss propelled Labour to a commanding position in national opinion polls, one that her successor, Rishi Sunak, has been unable to dent at the time of writing. A police investigation into misappropriation of donations and the resignation of First Minister of Scotland Nicola Sturgeon have undermined the SNP at a moment when the pandemic, war, and Conservative vulnerability have made the case for independence seem far less pressing than it did a decade ago. Local council and by-election results from the rural shires of Yorkshire to the satellite towns of Glasgow suggest that Labour is advancing on all fronts. 

After national elections in 2015 and 2019 saw Labour routed in many of its former heartlands in Scotland and northern England, it’s a relief to see that post-Brexit predictions of a permanent, U.S.-style electoral realignment on questions of culture and identity were wide of the mark. Ever since the 2017 general election, when Jeremy Corbyn was carried to the gates of Downing Street by a wave of anti-austerity sentiment, large sections of the British electorate have been loudly demanding an end to the relentless cuts to public services—and the increases in taxation and cost of living—that have defined Conservative rule. Taking advantage of Labour’s Brexit divisions, Boris Johnson sought to occupy this position with his 2019 “leveling up” manifesto, offering vague and ultimately mendacious promises of public investment to the postindustrial regions most supportive of Brexit. The stunting of that agenda by COVID-19, the war in Ukraine, and the sheer incompetence of the Conservative Party has left the electorate exhausted enough to give Labour a try. 

 

Labour After Corbyn

The party’s new direction under Keir Starmer, a former chief prosecutor who has served under governments of both parties, has enabled Labour to profit quickly from its rivals’ difficulties. Labour, Starmer proclaimed shortly after his election as party leader in 2020, was “under new management.” Having tried and failed to storm Westminster as a left-populist party in the 2017 and 2019 general elections, the party has now recast itself as a force for stability, seeking permission to govern from the security, media, and business interests that Starmer’s predecessor, Jeremy Corbyn, tried to challenge. The insufferably twee, commodified version of national identity that has become hegemonic in Britain over the past decade is now central to Labour’s self-image: at its annual conference last October, a union jack was made the centerpiece of the party’s membership card. Corporate sponsors were present in full force, drawn not just by Labour’s increased receptiveness to business lobbying but also its perceived proximity to power. In what was deemed the best speech of his leadership by a newly deferential press corps, Starmer brushed off the glitter showered over him by a stray protester and issued a cautiously optimistic call to “get Britain’s future back.” The message seems to have resonated. Buffeted by falling living standards and collapsing state services, many British voters have tired of political tumult. The fierce emotions of the Brexit years have given way to a vacant and pervasive sense of shock, as the full extent of the social and economic decay wrought by Conservative rule has become finally, undeniably clear. Disillusionment with populist experiments has given rise, in turn, to a demand for reassurance—something Labour is now providing in spades.

Starmer’s ruthless style of party management has been central to his success in smoothing the path to a Labour government. If the Labour left was marginalized in the Blair years, it has now been all but eliminated. Once Corbyn resigned, those left MPs who survived 2019’s electoral bloodbath proved themselves incapable of retaining control of the party’s machinery. Ahead of the coming national elections, Labour headquarters has been assiduously working to prevent the selection of parliamentary candidates who might refresh the left’s dwindling band of aging representatives. Corbyn himself has been barred from standing for reelection on the party ticket by Labour’s ruling body, the National Executive Committee (NEC)—a decision ultimately justified in terms of Labour’s overriding “electoral prospects” rather than the toxic controversy about anti-Semitism within the party under his leadership. MPs who put their names to a statement accusing Britain of playing a “provocative role” in the Russian invasion of Ukraine were warned that they should withdraw their signatures or face expulsion. Where Joe Biden saw fit to stand on a picket line with striking workers, Starmer threatened to dismiss Labour MPs who did the same from his leadership team. The Corbynite mayor of the North of Tyne region, Jamie Driscoll, was barred from standing for the party on the flimsy pretext of having made a public appearance in a Newcastle theater alongside the film director Ken Loach, an obsessive and sometimes offensive critic of Israel who had been expelled from Labour in 2021. On those grounds, as the Guardian’s Aditya Chakrabortty has noted, Starmer himself—having shared a public platform with Loach on episodes of the BBC’s Question Time program—should also be removed. 

 

Strength and Brittleness

Because decisions like the deselection of Driscoll are processed by a party machinery firmly controlled by leadership, left opponents of Starmer have little to no recourse. Divisions over policy, however, are a different matter. In a parliamentary system, they can be fatal to a party’s claim to rule if they extend to enough MPs. Starmer’s unfathomable decision, over a month into the war in Gaza, to require his MPs to vote against a motion calling for a ceasefire led nearly a third of the Parliamentary Labour Party—including prominent figures on the party’s center and right—to rebel. It’s not only Corbynite diehards, it turns out, who are moved by Palestinian casualties, concerned about electoral blowback from Labour’s many Muslim voters, or skeptical that a war waged on these terms and by this Israeli government is likely to be in the state’s best interests. Here, as in the case of Jamie Driscoll, the impression given is of a calcified and paranoid operation: one that has not just thrown out the left-wing policy platform but also the inclusive political style that Starmer initially ran on as a candidate for the party leadership. Its ruthless discipline and rigidity is also a form of brittleness, liable to shatter on contact with challenges more complex and intractable than the expulsion of Labour’s discredited, demoralized Corbynites.

So far, however, there is no sign that inchoate discontents over this single (if vast) issue will morph into organized opposition to the leadership. The trade union movement, still the indispensable centerpiece of the party’s coalition, has remained largely friendly to Labour in part because of the impressive series of employment law reforms promised by Labour’s charismatic deputy leader, Angela Rayner. Its money has continued to flow into the party’s coffers even as big private and corporate donors from the New Labour era return to the fold. At the last official count, membership numbers were significantly down from their Corbyn-era peak, but still relatively healthy at nearly 400,000. (This, for context, is more than double what they were a decade ago.) Given the now-overwhelming strength of the party’s right in vital elections to control the NEC, it seems likely that the membership’s ideological composition has reverted to something close to the pre-Corbyn mean: spasmodically open to appeals from the party’s left, but ultimately motivated by the hope of victory over the hated Tories. Anecdotally, some erstwhile Corbyn supporters have left and gone into extra-parliamentary activism on issues of climate or racial justice. Others have disengaged from politics completely. Party leaders are pleased to see them go. According to Labour’s finance spokesperson, Rachel Reeves, many “should never have joined” in the first place. 

 

Bidenomics and British Malaise

All this might lead us to conclude that the “Starmer project”—as the socialist writer Oliver Eagleton has styled it—consists of little more than a “journey to the right.” This, however, is to forget that politics can have more than two dimensions. The productivist, corporatist brand of social democracy articulated by Starmer and Reeves differs almost as much from the messianic liberalism of Tony Blair as it does from the left populism of Corbyn. Labour’s leaders are enthusiastic about industrial policy, hawkish on China, and in thrall to the U.S. progressive narrative that the Biden administration’s policies represent a major break with the economic orthodoxies of the past forty years. Far more so than the Conservatives, who are hopelessly divided between nationalist and libertarian views of political economy, the party feels comfortable talking the language of the “new Washington consensus.” Its emergent policy platform represents a British attempt to adapt to a series of new paradigms emerging in the governance of capitalism in the United States and the European Union: the “de-risking” of private sector investments in infrastructure and decarbonization projects, the “onshoring” of productive capacity, and the “rebalancing” of economies toward lower-earning workers and postindustrial regions. 

Over a carefully choreographed set of policy announcements styled as “national missions,” Labour has pledged a “Green Prosperity Plan,” including $34 billion of annual public investments—a sum significantly larger, in terms of Britain’s GDP, than the $37 billion annual spending anticipated under the U.S. Inflation Reduction Act. The money is to be targeted outside London and its wealthy environs, and funneled through a public electricity generation company (“Great British Energy”), a new “National Wealth Fund,” and a series of as-yet-unspecified tax credits to encourage the creation of domestic supply chains in the manufacture of wind turbines, “green steel,” and electric vehicle batteries. As in the European Union and United States, the purpose of these investments is to “de-risk” the energy transition and attract private capital: Reeves recently announced a target that for every pound of public investment made by the National Wealth Fund, three pounds will need to come from the private sector. Labour is also keen, however, to tie promises of new investment to an improvement in the bargaining power of labor. The party is committed to the repeal of Conservative anti-strike laws and the strengthening of protections for gig workers and new employees. It wants to make it easier for unions to organize new workplaces and run strike ballots, and aims to place higher floors under wages (beyond Britain’s existing, comparatively robust minimum wage) via sectoral collective bargaining agreements. Beyond this, it has ambitious, though less defined, plans to revive local government and strengthen regional economic planning, making the local as well as the national state a “partner” in attracting new investment to those parts of the country that are cut off from the UK’s London-centric growth model. 

This package of policies is designed to simultaneously decarbonize British electricity generation by 2030, turn around depressed postindustrial regions, and generate “the highest sustained growth in the G7.” This latter ambition is telling because it is suggestive of Labour’s anxiety about the problem that has been stalking British political and economic commentary for the past two years: the evaporation of significant growth in real incomes, investment, and labor productivity since the 2008 financial crisis. The extent of Britain’s economic malaise, apparent before the Brexit vote but deepened by it, places it in a class of its own among large, developed economies. Only Italy, hamstrung by its torturous relationship to the eurozone, has fared worse over the past decade. Labour’s hopes for what Starmer—anticipating not one, but two election victories—has styled a “decade of national renewal” rest on the belief that a combination of green industrial policy and supply-side reform can quickly turn this situation around. That makes for a convincing political narrative, allowing Starmer to place himself in a line of Labour leaders, stretching back to Clement Attlee, who promised to modernize the British economy on an equitable basis. It also, however, seems like a massive hostage to fortune. 

 

Painting Austerity Red

Labour’s growth challenge would be easier to meet if it hadn’t preemptively set aside the most obvious tools it has for generating short-run increases in GDP: taxing and spending. The party has committed itself to “fiscal rules” modeled on those adopted by Gordon Brown in the sunny 1990s: falling public debt as a percentage of GDP, balanced “current” spending (that is, on the provision of public services and benefits), and borrowing only to invest in capital projects. The hard line that party leadership has held against Britain’s ongoing wave of public-sector strikes was motivated by a stern refusal to be drawn on pay settlements for doctors, nurses, or teachers, which come from the bucket of funds that the Treasury labels “current.” The same ostensible rigor has prevented the party from committing to reform a Dickensian welfare system that punishes Britain’s poorest families for having too many children or keeping a spare bedroom. Its apparent openness to capital spending—potentially limitless, depending on how exactly investment is defined—is interpreted by way of self-denying ordinances about iron fiscal discipline. Even the generous public investment totals initially pledged under the Green Prosperity Plan are shrinking by the month.

Labour’s ever-increasing fiscal caution, including in areas supposedly central to its program for government, is explained by its lopsided interpretation of the Truss administration’s catastrophic failures. Britain’s shortest-serving prime minister created panic in currency and gilt markets by simultaneously announcing a massive program of subsidies for household energy costs alongside significant cuts to corporate and high-income taxation. The secondary effects of the crisis were precision-targeted to destroy core Conservative support among pensioners and older, working-age homeowners. They pushed up borrowing costs on mortgages, which are tied to the Bank of England’s base interest rate, and put several major pension funds at risk of failure. While Labour has wasted no time seizing the electoral opportunities created by this extraordinary series of unforced errors, it seems intent on learning the wrong economic lessons. Truss and her finance minister, Kwasi Kwarteng, based their policies on a series of wildly implausible claims about the business investment their tax cuts would unleash. The Bank of England, for its part, failed to anticipate the knock-on effects of its own rate rises. Neither of these conditions need apply to a more careful program of fiscal expansion geared toward social repair and strategic investment—especially if this were to be funded, either entirely or in part, by taxes on pollution, high incomes, and unearned wealth. 

Making the case for this kind of spending, however, is close to impossible within the stifling confines of Britain’s political culture. In every recent campaign Labour has lost, the Conservatives have succeeded in tagging them with unpopular tax rises linked to the neuralgic point of British politics: housing wealth. In 2010 and 2015, Labour was accused of planning a “death tax” and a “mansion tax” when it sought to raise revenue from British house price inflation. Similarly, when the Conservatives proposed a levy on the homes of elderly care recipients during their ill-fated 2017 campaign, Corbyn’s Labour Party leaped at the chance to brand their plans a “dementia tax.” The rentier bias in Britain, recently mapped in an incisive book by the political economist Brett Christophers, rests on the popular consent of an aging cohort of homeowners as much it does on the artful machinations of a London elite of lawyers and accountants. It’s the biggest obstacle to a more dynamic and equitable British economy, and the one that’s electorally hardest to tackle. Labour’s best effort, to date, involves labeling itself a “YIMBY party” and promising to “bulldoze” obstacles to new housebuilding (something that already has environmental groups worried). Small wonder, perhaps, that its current tax policies are almost entirely symbolic in nature, raising little money but demonstrating the party’s moral disapproval of private schools, private equity, and “non-domiciled” taxpayers.

 

De-Risking Britain

When pushed on how Labour hopes to repair the creaking public realm without seeking an electoral mandate for fresh taxes or borrowing, Starmer replies that “growth is the answer” to Britain’s problems. The mere election of a Labour government, the argument audaciously runs, will unleash the animal spirits of innovation and entrepreneurship, spurring sufficient growth to fill the public coffers. The business leaders Starmer meets are just waiting for a strong Labour government to emerge so they can commit to spending untold billions on projects that just happen to align with the party’s agendas for low-carbon, regionally balanced investment while also generating lots of taxable profits. The reason they haven’t done so in the past isn’t because of anything difficult, like material interests, historical path dependencies, or power relations. It is simply, Starmer claims, because the incompetent Conservatives have been in charge. 

Is this a fairy tale for public consumption or an honest account of how Labour thinks things will play out once it takes power? It’s certainly true that the political space to the left of today’s Conservative Party is close to infinite and encompasses many of the owners of British capital. At the same time, it’s vital to understand the extent to which Britain, unlike the United States, lacks a nationally rooted capitalist class in any meaningful sense. The people wining and dining Labour’s leaders are likely, by and large, front men for vast multinational corporations and asset management companies with only a marginal interest in the UK. Rejoining the European single market—the biggest incentive Labour could offer for investing in Britain—is off the table politically, given the outsize representation of erstwhile Leave voters in swing constituencies. The result is a dangerously lopsided dependency. Because Labour has accepted Brexit and austerity as immovable fixtures of British life, it needs implausible amounts of good will from private investors to secure its objectives not only directly, on green industrial policy, but indirectly, on growth and thus revenue for public services. What, we might well ask, will those investors want in return? How many fewer social homes in new-build estates? What alterations to Labour’s policies on union rights? What share in the revenues of publicly backed energy or infrastructure projects? 

This is the point at which we can start to understand how Labour’s political and economic strategies work in tandem. With ruthless discipline, Starmer’s team has established tight control over the Labour Party and refused to offer the Conservatives any opening for prosecuting its usual campaign against left-wing “tax and spend.” They hope thereby to get a Commons majority large and pliant enough to do whatever it takes to boost investment in Britain’s economy, restore its society to some sort of health, and win reelection. Labour, in other words, has diagnosed British malaise as a crisis of investability caused by escalating political risk, and has positioned itself as the most effective agent to remove that risk. In so doing, it has confused self-imposed political dicta with objective economic constraints, with consequences that will be difficult to escape once the party has to stop campaigning and start governing. The danger of this approach is that it sets Labour up to fail. Britain’s political tumult is self-evidently a consequence, as well as a cause, of its decade-long economic stagnation. The dire state of the country might make the next election an easy win, but if Labour takes power, the country’s problems will become their responsibility more or less overnight. If the party can’t point to rapid, tangible improvements in living standards and public services, then it will just become the latest object of voter derision. Amid its gleeful anticipations of victory, Labour would do well to remember that old British saying: “What’s sauce for the goose is sauce for the gander.” 


James Stafford is a historian of modern Europe and an assistant professor at Columbia University. He edited Renewal: A Journal of Social Democracy from 2015 to 2020. 

Correction: Due to an editorial error, the print version of this essay included a reference to the “British state’s best interests.” The author was referring to the Israeli state, and that inaccuracy has been corrected here.