How to build a one nation state

The idea of ‘stewardship’ is a Fabian riposte to the recent (mis)characterization of its rich tradition of democratic collectivism as the embodiment of the evils of ‘big state’.

State collectivism, with its national purview, long-termism and sense of agency, must have an enduring role if we are to create a better society than the one we inherit. Even the Left’s communitarians and localists would accept we need political stewardship and the tools of the state to set in train the changes which might promote their objectives of responsibility, shared lives, loyalty, co-operation, autonomy and vocation.

Advancing seemingly ‘anti-statist’ ends purposefully with the tools of government may seem paradoxical, but the alternative of mere exhortation will always founder, as David Cameron has discovered with his Big Society project.

Consider Maurice Glasman’s proposal to revive the vocational polytechnic or Jon Wilson’s vision of democratic, autonomous public service institutions. How are either to be achieved without ‘top-down reorganization’ and central agency on a grand scale?

In any case, the communitarian, decentralist version of social democracy only takes us so far. In truth many of the challenges Britain faces require solutions grounded in strong central leadership, not just the flowering of local institutions and solutions.

I have already talked about the reordering of the economy and about environmental sustainability, where purposeful, expert, long-termist regulation and intervention is essential. But there are other good examples.

New Labour’s pension reforms should be held up as a paradigmatic example of One Nation social democracy in the Fabian mould. They embody the spirit of One Nation both in their aims, to simultaneously reduce poverty in old age and to help people in all income brackets save for retirement; and in their means, combining private and public sector responsibility.

In setting out to achieve significant planned change over a 50-year timeframe, through small incremental steps, they are quintessentially Fabian. I would argue we now need a similarly grand approach when it comes to housebuilding and infrastructure investment, two areas where a failure to take a long-term national perspective has led to gridlock.

There is, however, a stronger case for state collectivists to cede ground to the decentralizers with respect to local public services, where values and relationships are all important. For there is a growing recognition on the centre left that there was a hollow core to the new Labour public services agenda. It was based on the twin pillars of central command and marketization, which both forced change from without, based on instrumental sticks and carrots.

At the time, this may have been necessary to resuscitate services after decades of decay, but it left little space for autonomy, vocation, relationships and ethos. We now need public institutions where value and innovation comes from within, and from relationships with citizens, in place of machines buffeted by market forces and central dictat.

The challenge is how to avoid throwing the baby out with the bathwater. With less of the market will public bodies remain responsive and efficient? Without central control will politicians be able to define national priorities, tackle failure and achieve a degree of uniformity?

Somewhere there is a balance to be struck. These dilemmas about the organization of public services throw up plenty of robust disagreements within the Left. But they are an order of magnitude below the more fundamental question of the scope and scale of the state. Today the Left is being forced to address this issue in a way that was simply unnecessary ten years ago. There is little dissent from the proposition that public expenditure should remain somewhere around the postwar norm of 40 to 45% of GDP. But public spending restraint is unavoidable in the medium term, because the economy is far smaller than anticipated.

This is not to endorse the current government’s fiscal plans: there is a strong case for slowing the pace of deficit reduction and doing more through tax rises rather than spending cuts. But bringing the public deficit under control is essential, for there is nothing social democratic about passing on rising debt to future generations.

So for the foreseeable future, the prospects for advancing social democratic ends through new spending will be very limited. The Left therefore needs to consider the purpose of spending from first principles and weigh up whether One Nation social democracy implies we should allocate public finance differently. To do this we must assess the various overlapping roles of public spending and consider the extent to which they build a more united society.

For egalitarians, the state is of course a vehicle for redistribution via taxes, social security and services-in-kind. But redistribution as an end in itself is always likely to be a minority taste, with the potential to divide not unite. Moreover, if we aim merely for redistribution, the logic takes us towards safety-net entitlements which will over time degrade public solidarity and support.

Indeed, over the last 40 years our gradual shift to ostensibly pro-poor social security has paradoxically resulted in less generous welfare provision for low income groups and a decline in overall redistribution. So the character of spending matters as much as its distributive effects at a given point in time. A One Nation state should aim to minimize the amount of redistribution which is merely a transfer, especially where it is paying for the costs of economic failure, and maximize the share which also plays the role of ‘investment’ or ‘insurance’.

Spending on economic failure includes welfare provision linked to unaffordable housing, preventable worklessness and poverty pay. When in office Labour did better than is usually recognized to rein in spending of this sort, especially by introducing the minimum wage and successfully helping so many lone parents, disabled people and older workers into jobs.

But huge problems still remain. The ultimate prize for the Left would be One Nation economic reforms which could suppress rising demand for public spending. The challenge is to design realistic policies which will achieve this. This might well be possible with the introduction of Living Wages or job creation schemes, but action to reduce rents, for example, could take far longer to feed into public savings.

The next major category of spending is investment in the future. This ranges from capital spending on infrastructure, housing or green technology to expenditure on children, education and science. In principle much of this spending should pay for itself by boosting long-term growth, but the returns usually stretch beyond a spending cycle. This may explain why the UK remains so bad at prioritizing future-facing spending in the face of competing pressures, as exemplified by the halving of public capital investment after the financial crisis.

With many other competing priorities, a One Nation state must ensure future-orientated spending is not crowded out. The final and largest slice of spending constitutes publicly organized insurance. We contribute in the shape of taxes and then receive public provision when our needs are greater or our income reduced. This can either entail the staging of costs over time, as in the case of the state pension and the NHS, or joining a risk-pool against contingencies such as disability.

This conception of spending as lifecycle insurance, of horizontal distribution ‘from us to us’, was a core component of the Beveridge settlement and has remained at the heart of British social democracy ever since. But the Left has lost the habit of talking about the state in this way. It is the most compelling One Nation argument for public spending, in the face of attempts by the small-state Right to push for a narrow safety net.

One Nation social democracy therefore needs to be sceptical about the extension of means-testing. The tussle between targeting and universalism is of course a lively controversy within social democrat debate, with many complexities. People like Polly Toynbee and Peter Kellner want fringe programmes to be means-tested but fight passionately for universalism elsewhere, particularly when it comes to public services rather than cash payments.

And often it is not a simple choice between pure universalism and tight means-testing. There is the ‘progressive universalism’ of tax credits; the option of tighter or looser ‘needs-testing’; and the possibility of ‘backloading’ a universal entitlement, as with the coalition’s plans for social care.

Finally there is the perennial question of whether entitlements should be earned by contribution or at least notionally earmarked to parallel revenue streams, to sustain public solidarity, consent and responsibility. In tough times, people place understandable priority on protecting the short-term interests of the poor; and perhaps restricting the odd universal entitlement might do little harm at the margin.

But any manifesto which makes serious inroads into the principle of universalism risks undermining the One Nation state. In particular, universalism within the ‘investment’ and ‘insurance’ functions of the state should lie at the heart of any notion of One Nation Labour. The debate within the Left on targeting and universalism is really only half a debate, for we obsess about spending but do not focus on tax. A completely flat system of entitlement can be highly redistributive after all, if it is funded by progressive taxation.

With very little headroom for achieving egalitarian outcomes through spending, tax reform suddenly takes on great urgency. There are even a range of tax changes which would be both progressive and pro-growth. It sounds like a no-brainer for One Nation politics, especially better wealth taxation and reform of pension tax relief. But the public case needs to be made. With ‘no money left’ Labour must start to set out One Nation principles for how tax is to be raised as well as spent.

One Nation Politics

So One Nation means radical politics. It means a political programme that encompasses progressive tax reform, economic iconoclasm, a gradual reordering of spending allocations, public service reforms that are rooted in values not just results, and identity politics based on liberalism as well as community.

None of this is compatible with mushy trimming towards the cautious views of an imagined swing voter. Rather One Nation Labour needs to be a politics of conviction. The Labour Party has to set out why a radical but uniting version of social democracy is the only way to bring together the vast majority and reflect the perspective of every corner of Britain. With such conviction, leadership and purpose the party will win round many who are ambivalent about Labour today.

The point of One Nation Labour is not to dilute social democracy by stretching to the Right. For in our low-turnout, first-past-the-post democracy, it is possible to govern with the support of less than 30 per cent of adults. The votes Labour needs come from people on the Left of the political spectrum.

But a sectional victory will not buy the legitimacy and permission needed to implement radical change. People who will never vote Labour must still give their tacit consent so Labour can become a party of national leadership in the fashion of 1945 and 1997. Social democrats will only prevail over the status quo and the vested interests if the vast majority believe we reflect their interests too. One Nation is the route to a majoritarian politics of the Left.