The ‘one nation’ test

Labour is slowly moving from mere response mode to feeling out more concrete terrain on what its next state may look like. Some have argued they have taken too long to make this transition but, the publicity (and departmental research budget) vacuum of opposition aside, there has been much to think through. Though the 1997-2010 period was marked by high achievement in office (most obviously the minimum wage and peace in Northern Ireland), it was built on a general economic model that was simply unsustainable: you can, after all, only tax and redistribute the proceeds of a growing financial sector if it, and the economy it should serve, continue to grow. From 2008 the party was outflanked by the Lib Dems from the left, and allowed the Tories to project an image of competence from the right. Labour fell from office in a manner rather seen as attempting to lock the stable after the horse had bolted.

The party has since taken a number of positive steps towards regaining the public’s trust.  Labour councils have borne the impact of 28 per cent real term cuts with a resolve that bears positive comparison to previous decades. The party has broadly remained united, and the prospects for 2015 look bright. But the patchwork of concrete proposals offered so far need to be understood by the electorate as a coherent approach to government, rather than a series of populist policies designed to attack the Tories.

In many ways Ed Miliband is looking back to the future, and in particular to the 1950s. Harold Macmillan and ‘one nation’ have become the totems upon which the 2015 manifesto will be framed. Macmillan has been subject to much post-facto praise of late, but this should be tempered: he indeed built houses, but largely in the affluent south, he raised the condition of the people, but again with significant regional variation.

For all the “Red Ed” jibes in the right-leaning press, framing the debate in terms of a return to the 1950s shows a present Labour party willing to accept that 1945 cannot be the only point of reference going forward – important as it clearly was. Whilst 1930s Keynesian stimulus constitutes Labour’s strategy for the economic foxhole, there is merit in appropriating the language of the 1950s in terms of the society it wants to build. This need not be the fetishisation of the middle class in the 1990s mould, but a return to small ‘c’ conservative values of community, locality and a fair chance for all. Maurice Glasman may indeed be onto something.

There are three broad paths that, positively intertwined, need to be considered within this new approach: a targeted approach to intervention and regulation, a willingness to let private and third sectors play a greater role where they can efficiently do so, and an openness to co-production at the local level. Stella Creasy has opened up the notion of ‘zero-based budgeting’ to the public debate – a pragmatic approach to what the exchequer does and does not do. The same approach, in short, would be welcome in terms of the lines of demarcation for public, private and third sectors. A zero-based state must be both prepared to clamp down and step back where necessary. This article cannot but lay the groundwork for such an approach, but concrete policies are clearly at hand.

Firstly, there are manifestly areas of the economy that require increased governmental intervention. The leading example is finance. Lord Myners has recently followed Peter Hain in arguing Labour should have pursued a broad-based financial transaction tax (FTT) with greater rigour when in office. No similar policy – the bankers bonus levy, bank levy, increasing stamp duty or tapering capital gains tax on shares – offers the combined triple threat of raising significant revenues, stabilising our financial markets, and precedent of being implemented in over 40 countries. This intervention is not just about extracting money from a sector that contributed so unthinkingly to the crash that has blighted the lives of so many, but would be pure political pragmatism. The banking sector paid just £1.3bn in corporation tax in 2011/12 – less than a third of that paid by manufacturing. Keynes backed the FTT, maybe Ed Balls should too.

Using part of the £20bn annual proceeds from a broad-based FTT across shares, bonds and derivatives to capitalise a British investment bank (BIB) – which would lend to other sectors in our economy – would likely see total corporation tax receipt rise too. Finance then, requires a positive intervention to release the potential of other areas. The BIB – operationally independent of government on a day–to-day basis but with, it must be ensured, the mandate to invest across our regions and sectors – forms a perfect example of harnessing all sectors in the national interest. Local enterprise partnerships – though poorly capitalised, and with as yet vague powers – are not a bad model to build upon either, and could also receive a proportion of FTT revenues. A light-touch intervention in the financial markets to unleash small and medium size business across our country, and indeed use part of the receipt to meet our international commitments on development and climate change, seems a sensible step.

Why has this not happened yet? Firstly, policy makers have taken a while to shift from a tacit belief that the City is basically, per se, a good thing. Similarly, one often sees the claim that the only possible FTT is global or business will just flee London – rather odd given the fact that 13 of the major 15 financial centres have one, that UK corporation tax is the lowest in the G8 (why, therefore, move to avoid a 0.1 per cent tax?), and that London consistently ranks as the most competitive financial centre in the world despite the UK’s 0.5 per cent stamp duty being the highest amongst leading competitors. Perhaps this is one area in which the City should believe its own hype.

The real problem here is that financial markets are changing faster than the political establishments’ ability – or willingness – to keep pace. From a base of almost nothing, credit default swaps grew to a size of around $60tn – equivalent to global GDP – inside a decade. ‘Contracts for difference’ – whereby speculators bet on the underlying price of a given share without actually buying it (thus avoiding paying stamp duty) – have grown about 30 per cent on the London Stock Exchange in recent years. This is difficult stuff to keep pace with – particularly since the very people with the technical knowledge to appreciate the type of chicanery that has gone on, work, unsurprisingly, in the finance industry itself. It’s time to view the FTT not so much as a radical new tax, but simply an updating of Britain’s well-meaning approach to financial sector taxation. As it stands, the markets aren’t serving the wider public good, and the state should step in. One nation Labour needs to take on the one square mile of the City.

But tax can’t be Labour’s only recourse. There are areas where the state may want to go further in giving up power and freedoms to both local communities and private and third sectors. Successive governments have sought to divest responsibility for the delivery of a range of different services, from transport to health to energy to social housing, to private and third sector providers. Whilst there is disagreement about the relative value that these initiatives have delivered, arguably a more fundamental problem has been that no attempts have been made to articulate to the public the relative value or otherwise of each approach.

Local councils across the country have shown that there is no one-size-fits-all to who and how their services are provided. But where local areas are given the freedom to deliver in the public’s interest, such as through the ‘community budget’ pilots (the coalition government’s reincarnation of Labour’s ‘Total Place’), there is a genuine opportunity to deliver not only better and cheaper services, but to do so in a way in which local partners (public, private and third sectors) come together in the interest of local communities using the totality of local resources to best effect.

Acting in the public’s interest seems like something that is implicit in the nature of the state, but the recent Francis review into the care failings in Mid Staffordshire have shown us that even the most treasured of state institutions do not do so automatically. Hugh Gaitskell said in the 1950s that “the traditional means of universal, indiscriminate social services are not always the most appropriate to the more subtle social problems which remain.” Would local communities, private or third sectors necessarily have done better? Perhaps not, but maybe now is the time to think about bringing the notion of zero based budgeting into the debate about the right relationship between the state and society.

Increasing fears about the health of the nation have demonstrated that centrally-driven policies have not been entirely successful in tackling localised public health harms. Alcohol consumption and smoking are largely falling whilst obesity continues to rise, but in all cases worrying regional figures buck improving national trends. If a Labour government is to noticeably change the public health landscape it must look to harness the private sector’s willingness to contribute at a local level and build a broader health programme based on partnership.

Cooperation, not regulation, has been more successful in teasing out the willingness of industry. The Conservative-led ‘public health responsibility deal’ has proven an effective framework for partnership working under which the food and drinks industries have voluntarily pledged to improve health labelling, to reduce alcohol and salt content of well-known brands, and implement a raft of other industry-funded measures designed to increase the nation’s health by stealth. But whilst nudging from the centre may help the already discerning consumer these policies will largely miss the mark when it comes to targeting the minority who are increasingly costly to the NHS.

This is in part attributable to successive governments treating top public health priorities as mutually exclusive. However, the upcoming shift in public health responsibility to local authorities provides Labour with a chance to re-align those top priorities with a wider focus on ‘total health’. Alcohol misuse, smoking and obesity should be placed alongside, for example, sexual and mental health and community wellbeing to understand not only the interconnectedness of these issues but also to enable a better form of total care to those who require it. In schools, the workplace, in pubs and restaurants, parks and other public spaces there is a genuine opportunity for local government, not Whitehall, to significantly improve the health of those local populations inconsistent with the national picture.

Sustainable businesses know how to influence consumers and generating innovative solutions to improve public health sits well within their corporate social responsibility interests. If local authorities work alongside private partners they can harness the power of brands, corporate messaging and industry-funded responsibility programmes and produce localised results. Major local employers can be encouraged to think about health in the work-place; educational programmes can be designed around lifestyle choices; councils can re-allocate budgets and think flexibly about business rates for health-conscious businesses or private fitness centres willing to muck-in; licensing teams can encourage local restaurants, pubs and retailers to stock lower-alcohol alternatives and to work more closely with the police to tackle under-age drinking.

Over-regulation and heavy-handedness by government – as Cameron’s plan for minimum alcohol pricing aptly demonstrated – will only foster ill-feeling amongst potential private sector partners. In a time when all tiers of government must deliver in the face of tightening budgets, industry resources are an opportunity not to be missed.

So what, given all of this, is the ‘one nation’ test? What, in short, will mark the next state? Perhaps inevitably a piece of this brevity has to default to some form of ‘public interest’ test. But the concept of the ‘greater good’ can be somewhat fleshed out – will a given policy create wellbeing, work and prosperity for the many not the few. Does it harness productive capital in the national interest? Does it equitably balance the demands of today with the necessities of tomorrow? Does it make use of those with the greatest incentive, or ability, to deliver a service effectively – and can a synthesis of these impulses be found? Does said policy actually empower equally, or simply unleash the excesses of the market? Generally, a malleable attitude towards intervention, partnership with private and third sectors and local government is both electorally necessary and, in a society that must learn what 1945 did not deliver as much as what 1979 wrought, a sensible way to go. This will involve both regulation and relaxation. The preceding text offers some suggestions as to the form this may take.

All authors write in a personal capacity.