Window of change: what Labour’s next leader must do

If McDonald’s wanted to sell upmarket steak, they’d need to do more than put porterhouse on the menu. Similarly, persuading votes to trust Labour on spending required more than the last minute addition of a fiscal lock at the front of the manifesto. But, while McDonald’s doesn’t need to transform itself into the Hawksmoor to succeed, a Labour party that fails to restore its name for care with public money has no future.

Above all else, this is a brand problem. Ask voters if tax rises or borrowing increases worry them more and they will say tax rises by 16 points. But make the choice about Labour tax rises or Labour borrowing and it is Labour borrowing that causes the greater concern. In Scotland, we saw anti-austerity voters turn away from Labour because they did not trust the party with the money they wanted spent.

Fiscal trust is not just important electorally, it also shapes the kind of policy programme Labour can offer. If you are trusted to spend wisely, you are trusted to spend more. If Labour wants to argue that investment is key to long term productivity growth, it needs to be trusted to make the investment. If you think that investment should be debt-funded, you should be an even fiercer proponent of efficiency and prioritization than someone who holds the more politically palatable view that in periods of growth the state should run an overall surplus.

So far, the focus of the leadership debate has been on solving this problem by acknowledging that Labour should not have been running a structural deficit in the mid-2000s. That is, at best, a baby step forwards. When candidates then go onto argue that that spending did not cause the crash, they are engaging in a largely irrelevant debate. Voters don’t think spending was the main cause of the crash, they blame bankers, and lax regulation. However, they think that, like Old Labour, New Labour’s answer to every problem was spending, and that as a result Labour wasted money.

Talk to swing voters and you’ll find them primed with one example after another of waste in public spending. Sometimes it is simple inefficiency: failed IT projects that cost billions, stories of public servants taking taxis rather than trains, contracts that let companies charge large amounts to change a lightbulb in a hospital. At other times it is about Labour’s priorities: welfare payments for recent immigrants who haven’t worked, executive pay in local government, the Iraq war. Sometimes concerns are media confections, but you will be hard pressed to find a nurse or council worker who doesn’t think their employer could be more efficient.

The worst response to this kind of critique is to argue that it is not actually that much money in the grand scheme of things. If you want to persuade people to support aid spending, for example, you need to show it is effective, not that the amounts are paltry. It is no use arguing that migrants overall pay more in tax than they claim in benefits. Treating migrants as a group who are in some way mutually responsible for each other does nothing to legitimate the individual claiming without contributing. Instead, Labour needs to be authentically angry about every pound that is wasted and have a plan to deal with it. To that end, public service reform arguments are now more relevant than they were in the days when advocates of choice faced off against those who said people just want a decent service.

If Labour is arguing for prudent public spending, it needs a different story for how to improve the country. Ed Miliband’s idea of predistribution is right here in terms of policy development, if not rhetoric. The party needs to show it can make things better without spending, reforming the market at the same time as it reforms the state.

Just as the party needs to show change on spending, so it needs to show change on immigration and national identity. Labour’s failure to pick up marginal seats is partly explained by the success of UKIP – as Stephen Fisher has pointed out, the more successful UKIP were in a marginal seat, the less likely it was that Labour would win it. Englishness and immigration are no less important to winning the Tory voters Labour needs to win to have a chance of a majority. Rebuilding the Scottish party involves finding a new way to be a party of Scotland not Westminster.

The political challenge in England is to find a concept of Englishness that does not hark back to the 1950s, but embraces a form of multiculturalism. For all their insularity, deceit and intimidation, on this specific issue Labour can learn lessons from the SNP. Unlike many European populist parties, it is comfortable with Scots of any colour or creed (though they unreasonably try to the line at contrary constitutional views). Labour needs an account of English identity in particular that is inclusive but fundamentally breaks from the uber- internationalist yearning for the nation state to become a redundant entity. By 48 to 20 voters think ‘Labour should be more patriotic and do more to promote British identity’, rather than ‘more internationalist and keep the flag waving out of politics’.

The key window for these brand changes will be the first few weeks of the new leader’s tenure. That is the point when they are undefined and able to signal real shifts. Once that window closes, attempts to change become increasingly harder to believe.

In Ed Miliband’s first speech as leader he said Labour was wrong to have spent as if it had abolished boom and bust, and acknowledged that concern about immigration was not prejudiced. Those messages thinned out over the subsequent years, making it hard to claw back competence in the short campaign.

At the next election, being a fiscally responsible party that is proud of the country it seeks to represent is table stakes. Unless the Tories screw up completely, it will not be enough to persuade people to vote Labour. To do that, Labour needs to have done all its defensive rebuilding, and be on the offensive. It will need to define the challenge of the age, and propose a credible solution to it that shows people how the country would be better under Labour.

David Cameron’s first take on this was ‘broken Britain’, which he shifted into a focus on the deficit when the financial crisis hit. Labour should be equally nimble, but it needs to begin laying the ground now for a critique of Britain after ten years of Tory government.

The debate so far has thrown up a range of options: the centralisation of power, inequality, a failure to reward responsibility, austerity. There may be merit in all of these, but candidates shouldn’t run away from Ed Miliband’s idea that Britain succeeds when working people succeed. Though it never cut through, it was a uniting and overarching narrative that spoke to both growth and distribution. Given the need to show distance from the recent past, candidates are welcome to claim their inspiration was Hillary not Ed, who is running for president on a very similar ticket.

Labour should present itself as practical and sensible, not radical and revolutionary. By 71 to 24, even Green voters prefer sensible changes to radical ones and concrete plans to big visions. This rhetorical imperative shouldn’t be confused with the idea that Labour lost because voters were scared off by its radicalism. In fact only 19 per cent of voters thought Labour radical, four points below the share who thought the Tories ‘radical’. Voters who considered Labour but then voted Conservative were more likely to think the Tories ‘radical’ by a margin of 7 points.

Whatever route they take, rebuilding trust in Labour spending means recognising that part of their job is to rebuild the Labour brand. Voters will filter what they say through their preconceptions of the party. Arguments that would be triumphant in Tory or SNP mouths can be disastrous from the Labour party. The party, needs to give the leader room to lead, but also see their role as holding them to account for brand progress, not just ideological purity. It is only by making a deep change in the way Labour is seen that Labour can be trusted to take Britain forward again.

This article appears in the Summer 2015 Fabian Review, available from our bookshop for £4.95

Image: © Kenn Goodall / bykenn.com