Patrick DIAMOND

Professor of Public Policy at Queen Mary, University of London and a member of the FEPS Scientific Council

This post originally appeared on the Fabian Society website

The opinion polls currently point towards a general election result for the Labour party so catastrophic it leads to a political earthquake and the long-term realignment of British politics. Theresa May’s Conservatives are significantly ahead on critical indicators of electoral performance: party affiliation; leadership strength; economic competence. The irony, however, is that beyond Brexit this election will be fought on political ground once considered the natural territory of the Labour party. Labour’s tragedy is that it is incapable of capitalising on the shifting ideological temperament of the nation.The election’s defining question is which party can ensure prosperity and security for working people in an era of seismic change following the Brexit referendum? May is executing an audacious strategy designed to appeal to the ‘C2’ working-class voters who once habitually supported Labour. She understands that beyond her call for ‘strong and stable leadership’, the issues that will dominate the campaign are wages and living standards; a modern industrial strategy supporting under-performing regions; and sustainable funding of public services, especially the NHS and schools.On wages and living standards, no party can be a serious contender for power in British politics unless it can show it will support ordinary wage-earners, as incomes are squeezed by technological change and market liberalisation. The Institute for Fiscal Studies (IFS) presently forecast that UK average earnings, ‘will be no higher in 2022 than they were in 2007’. The policy success of the last twenty years had been the virtual abolition of unemployment as an economic concern. Today, the challenge is stagnant wages and rising living costs, driven by inflation which hit 2.3 per cent in the aftermath of the European referendum. The Conservatives have opted for superficial initiatives, notably the cap on energy prices acquired from Ed Miliband’s 2015 manifesto. As economic optimism plummets to its lowest level for five years, Labour’s priority ought to be a long-term plan to tackle the underlying drivers of wage stagnation and cost of living pressures.Labour should outline a £50 billion public investment programme funded by a land value tax designed to tackle systemically weak productivity in formerly industrialised areas centred on strategic infrastructure: physical infrastructure (housing, rail, roads, broadband) alongside social infrastructure (skills, training, labour market activation, affordable childcare, migration impact funding). This is the most effective strategy to create more high-skilled, high-productivity, high wage jobs. In addition, wage agreements in return for productivity improvements in sectors from social care to retail would boost family incomes. The Chancellor, Philip Hammond’s decision to revisit the pension ‘triple lock’, if adopted by Labour, could also provide resources to support families struggling on low incomes, advancing inter-generational fairness.This relates to the second major priority in the new electoral battleground: a modern industrial strategy. The Tories now use the rhetoric of active government intervention in the economy; but their approach lacks conviction. Giving state subsidies to car manufacturers to encourage them to remain in Britain post-Brexit smacks of 1970s-style ‘picking winners’. Labour needs to demonstrate that its public investment strategy would increase the trend rate of growth in the economy, investing in capabilities from science to skills and digital innovation. Infrastructure investment targeted at renewables and home energy efficiency would improve economic performance in disadvantaged regions, while cutting energy bills. The state ought to lead the process of regional re-balancing, insisting that major public facilities from government agencies to the arts are located outside London and the South-East, emulating the BBC’s move to Salford.But nowhere is the reshaping of the political landscape surrounding this election more apparent than on the funding of public services. There is no avoiding the essential truth that if the quality of public services is to be maintained, voters will have to pay more tax. May and Hammond are set to abandon the pledge in the 2015 Conservative manifesto of no increases in income tax or national insurance for the life of a parliament. They are terrified about the state of the NHS, realising that mounting evidence of neglect is politically deadly. Ministers will pledge more resources up to 2022, but health spending is set to grow by only 0.5 per cent in real terms over the next three years. The NHS desperately needs sustainable funding, which should come either from a hypothecated NHS tax, or a dedicated social insurance fund. The most recent British Social Attitudes (BSA) survey demonstrated rising support for increasing taxes and more spending on public services.

But Labour’s argument should be that pouring more money into the NHS won’t be enough to safeguard the system for the 21^st century, given changing demographics and medical technologies. The health service must continue to change: the government has no coherent approach to modernising the NHS that parallels the Darzi Plan in the 2000s, which recommended that, ‘services should offer greater patient control, choice and local accountability’. Darzi advocated greater use of GP-led provision through ‘polyclinics’, alongside specialist centres of excellence for treating chronic conditions. The Conservatives lack an intellectually persuasive reform agenda.

These are the issues that will define political debate. Of course, there are those who argue the election will be determined by Brexit, where the party was on the losing side. Labour’s coalition is irrevocably split between ‘remainers’ and ‘leavers’. It is true that Labour has made its task harder by adopting a tactic of obfuscation on Europe, bizarrely electing to vote in favour of triggering Article 50 with no safeguards in place over how May’s Government would handle the negotiation. Yet the Conservatives are just as divided as Mr Corbyn’s party: a ‘hard’ and chaotic Brexit that removes Britain from the single market will be damaging to electoral constituencies that have traditionally supported the Tories, notably the City of London and the financial services sector. Conservative divisions over Europe might well re-emerge.

More fundamentally, this election will still be fought on the key battleground issues of the economy and public services. In the last decade, public attitudes have moved in favour of fairness and redistribution, a delayed reaction to the 2008 crisis which led to the 2016 referendum result – a revolt of lower and middle income Britain against the inequalities wrought by contemporary capitalism. As the BSA report, ‘the British public has not become less collectivist over time in its support for the government having a redistributive role’. What is tragic is that Theresa May is being allowed to colonise this ground for her own party, when the issues that will shape the campaign are naturally Labour’s.