This article traces the history of ‘crowding out’, and its use as a justification for austerity and state deflation from its origins in the 1920s to its latest post-2010 incarnation. It examines why governments have kept turning to austerity and continue to justify it on the grounds that public sector activity crowds out more productive private activity, despite the accumulated evidence that this traditional pro-market formulation has failed to deliver its stated goals. It examines three other embedded forms of crowding out that have been highly damaging—leading to weakened social resilience and more fragile economies—but which have been ignored by both governments and mainstream political economists.

THE IDEA OF ‘crowding out’ has long been one of the central canons of pro-market economic theory. The concept was first promoted at an international conference of officials in Brussels in 1920 to discuss ‘sound economic policy’ in the postwar years. Given limited capital, asked the British delegation, will ‘Governments or private industry’ use it more productively? ‘The answer is … private industry’.¹ This argument was then placed at the heart of a strategy of state-imposed austerity through cuts in public spending and wages applied in Britain and other nations in the early 1920s.

Following the short-lived boom at the end of the 1914–18 war, Britain, along with much of Europe, faced growing economic turbulence and surging dole queues, along with high levels of public debt from funding the war. With heightened public expectations of social reform, the coalition government Prime Minister, David Lloyd George, initially promised social reconstruction through higher state spending, especially on homes and schooling. Simultaneously, the Prime Minister faced demands from the owners of capital for a return to the pre-war status quo.

During the war, large chunks of the economy had been taken under state control, with the subordination of private profit to steer resources to the war effort. While the public was calling for a better society in return for the sacrifices of war, business leaders were demanding the dismantling of the heightened state intervention of the war years, lower rather than higher public spending, and the reversal of the strengthened bargaining power labour had enjoyed during the war years. Political and industrial clashes were the inevitable outcome.

Deepening recession and the fear of mounting unrest, fuelled by the shadow of Bolshevism, induced panic among the ruling political and corporate classes. In response, the government dropped its commitment to social renewal in favour of a programme of austerity, or state induced deflation. This involved severe cuts in public spending, including reductions in pay for police, teachers and other public servants—cuts dubbed the ‘Geddes axe’ on the advice of a committee chaired by Sir Eric Geddes, the Minister of Transport.

Economic revival, it was argued, depended on lower spending by the state, lower wages and a return to a balanced budget, with state spending matched by tax revenue. If the state had borrowed more to meet its high-profile postwar pledges on housing and education, it was argued, more efficient and more pro-value private activity would have been ‘crowded out’. The measures, based on the idea of an automatic trade-off between state and private activity, were, it was asserted, simply sound economics based on fundamental laws—and not to be tinkered with—of how the economy worked. These ‘laws’ drew on the doctrines of the early classical economists that free markets and minimal state intervention would bring equilibrium, stability, and optimal growth.

Austerity Britain

Since the 1920s, governments have repeated this strategy of austerity—based on the doctrine of crowding out—on several occasions. These include the early 1930s, the 1970s, the 1980s and the post-2010 decade. Despite the time gaps, these episodes have been marked by almost identical justifications and remarkably similar impacts.

One of the constant themes has been a replay of the balanced budget theory of the 1920s and 1930s. Another has been that public spending cuts and lower wages would release scarce resources for the private sector. In 1975, two Oxford economists, Roger Bacon and Walter Eltis, argued in Britain’s Economic Problem: Too Few Producers that Britain’s economic plight stemmed from too many social workers, teachers and civil servants and not enough workers in industry and commerce. Buying into this argument, the new Chancellor of the Exchequer, Geoffrey Howe, told the House of Commons in 1979, ‘[we need to] roll back the boundaries of the public sector’ in order ‘to leave room for commerce and industry to prosper’.2 In June 2010, launching another rolling programme of spending cuts in his first budget, the Chancellor, George Osborne, repeated this claim that public spending ‘crowds out’ private endeavour.

Again, the presumption was that a more robust economy requires more private and less state activity, along with the counter-intuitive idea that austerity was the route to growth and enterprise. The somewhat crude ‘private sector good, public sector bad’ mantra was widely echoed. ‘The next government is going to have many challenges’, wrote the Times in 2010, ‘but tackling a public sector that has become obese … is going to have to be a priority’.³ Channel 4 went a step further with a programme describing state spending as a ‘Trillion pound horror story’, while The Spectator magazine called it ‘the most important programme to appear on British television this year’.⁴

So, does the austerity/crowding out theory stand up? And if not, why has it been so widely applied? The accumulated evidence shows that it is at best a significant oversimplification of the way economies work. Crowding out of private by too much public sector activity might apply when an economy is operating at full capacity and employment, but the doctrine has only been applied in situations of economic crisis, high unemployment and inadequate demand. Even at full capacity, there is still a choice to be made about the appropriate balance between public and private activity.

Heterodox economists, such as John Hobson in the early twentieth century, had offered an alternative route to growth and out of crisis. His work, which had an important influence on J. M. Keynes, showed that recessions were the product of a shortfall of demand stemming from ‘under-consumption’ and ‘over-production’ triggered in large part by a lack of purchasing power among low- and middle-income households arising from extreme levels of wealth and income inequality.⁵

In the 1920s and early 1930s, slamming on the public spending brakes proved counter-productive. It cut demand and slowed recovery, with private as well as public activity ‘crowded out’. The strategy had minimal effect on improving the state of the public finances, but led to a retreat on social programmes, while unemployment never fell below one million in the inter-war years.

A hundred years on, the Osborne cuts have had a very similar, and predictable impact. They also came with a new label: ‘expansionary austerity’, but an identical message—that a smaller state would generate greater stability via lower interest rates, greater confidence and faster growth. In the event, the strategy turned out to be an additional assault on an already weakened economy, with the cuts in public spending having little or no impact on expanding private activity, while damaging the quality of Britain’s social infrastructure and weakening its system of social support.⁶ One critic, David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee, concluded that, by destroying productive capacity and making households worse off, the austerity programme simply ‘crushed the fragile recovery’.⁷ In one estimate, rolling cuts in public spending were said to have shrunk the economy by £100 billion by the end of the decade.⁸ Another study showed that if real-terms growth in public spending at the 3 per cent level inherited in 2010 from the previous Labour government had been maintained and paid for by matching tax rises, Britain’s government debt burden would still have been lowered by 2019.⁹

None of this means that crowding out never occurs. It just takes very different forms from the process advanced in neoliberal thinking. There are three alternative and distinct types of crowding out at work that have consistently had a malign effect on both the economy and wider society, yet have not been systematically addressed in the mainstream economic literature or by relevant government departments.¹⁰ First, the idea that markets know best in nearly all circumstances has shifted the balance between private and public activity too far in favour of the former, thus crowding out the latter. Second, an increasing share of private activity has been geared less to its primary function—to building economic strength and creating new wealth—than to boosting personal corporate rewards in a way which fuels inequality, weakens economies and crowds out economic and social progress. Third, there is the way the return of the ‘luxury capitalism’ of the nineteenth century (triggered by the application of pro-inequality neoliberal policies) has come at the expense of the meeting of essential material and social needs.

The balance between private and public activity

The simple notion—private good, public bad—has long been overplayed by neoliberal theorists. Both have a role to play and the real issue is getting the right balance between the two. State spending plays a crucial role not just in meeting wider social goals, but in supporting economic dynamism and stability. Private corporations do not operate in a vacuum. The profits they make, the dividends they pay and the rewards received by executives stem from a too-often unacknowledged interdependence with wider society, including the state. Business provides jobs and livelihoods, while responding to consumer demand. Society provides the workforce, education, transport, multiple forms of inherited infrastructure and often substantial state subsidies.

History shows that while bad decisions are too common, carefully constructed and evidence-based state intervention can have a highly positive impact. Government responsibility lies in helping to shape markets, prevent market abuse, support innovation, share the burden of risk-taking in the development of new technologies, promote public and private wealth creation and protect citizens. It is now time to ask if these functions—from market regulation to citizen protection—have been underplayed.

Britain is a heavily privatised and weakly regulated economy. Among affluent nations, it has a comparatively low level of public spending, including social spending and public investment in infrastructure, relative to the size of the economy.¹¹ A relatively low portion of the economy is publicly owned.¹² With the cut-price sell-off of state assets, from land to state-owned enterprises, the share of the national wealth pool held in common has fallen sharply from a third in the 1970s to less than a tenth today. This ongoing privatisation process has also greatly weakened the public finances. Britain is one of only a handful of rich nations with a deficit on their public finance balance sheet, with net public wealth—public assets minus debt—now at minus 20 per cent of the economy. The balance stood at plus 40 per cent in 1970. This shift has greatly weakened the state’s capacity to handle issues like inequality, social reconstruction and the climate crisis.¹³

The emphasis on private capital as the primary engine of the economy has failed to deliver the gains promised by its advocates. Since the counter-revolution against postwar social democracy from the early 1980s, and especially since 2010, levels of private investment, research and development, and productivity—key determinants of economic strength—have been low both historically and compared with other rich countries. Several factors account for Britain’s relative private ‘investment deficit’. They include Britain’s low wage history, with abundant cheap labour dulling the incentive to invest, and the perverse system of financial incentives that makes it more attractive for executives to line their pockets than build for the future. There is also the preference given to capital owners—an increasingly narrow group—in the distribution of the gains from corporate activity. In the four years from 2014, FTSE 100 companies generated net profits of £551 billion and returned £442 billion of this to shareholders in share buy-backs and dividends, leaving only a small portion of these gains to be used for private investment and improved wages that support economic strength.¹⁴ With UK corporations increasingly owned by overseas institutional investors, such as US asset management firms, little of this profit flow has ended up in UK pension and insurance funds and back into the domestic economy.

Some forms of financial and business activity have played a destructive role. In a remarkable parallel with the 1929 stock market crash and the Great Depression, the 2008 financial crash and the financial crisis that followed were classic examples of the impact of uncontrolled market failure. They were the product of tepid regulation of the financial system that turned a blind eye to a lethal cocktail of excessive profiteering and reckless gambling by global finance. It was only public intervention on a mass scale to bail out the banks—and many of the architects of the crash—that prevented an even greater crisis.

Claims about the overriding benefits of the outsourcing of public services to private companies have been exposed by a succession of scandals involving large British companies like G4S and Serco and by damning reports of the consequences of outsourcing in the NHS, the probation service and army recruitment.¹⁵ Such claims were also undermined by the collapse of two giant multi-billion-pound behemoths—the UK construction company Carillion and the public service supplier Interserve (which employed 45,000 people in areas from hospital cleaning to school meals). In the ten years to 2016, Carillion, sunk by self-serving executive behaviour and mismanagement, liked to boast about another malign form of crowding out—of how it raised dividend payments to shareholders every year, with such payments absorbing most of the annual cash generation, rather than building resilience.

Extraction

A second form of crowding out stems from the return of a range of extractive business mechanisms aimed at capturing a disproportionate share of the gains from economic activity. While some of today’s towering personal fortunes are a reward for value-creating activity that brings wider benefits for society as a whole, many are the product of a carefully manipulated, and largely covert, transfer of existing (and some new) wealth upwards. Early economists, such as the influential Italian economist Vilfredo Pareto, warned—in 1896—of the distinction between ‘the production or transformation of economic goods’ and ‘the appropriation of goods produced by others.’¹⁶ Such ‘appropriation’ or ‘extraction’ benefits capital owners and managers—those who ‘have’ rather than ‘do’—and crowds out activity that could yield more productive and social value. It delivers excessive rewards to owners and executives at the expense of others, from ordinary workers and local communities to small businesses and taxpayers.¹⁷

Extraction has been a key driver of Britain’s low wage, low productivity and growth sapping economy. Many large companies have been turned into cash cows for executives and shareholders. A key source of this process has been the return of anti-competitive devices described as ‘market sabotage’ by the American heterodox economist Thorstein Veblen over a century ago’.¹⁸ In contrast to the claims of pro-market thinkers, corporate attempts to undermine competitive forces have been an enduring feature in capitalism’s history, contributing to erratic business performance and economic turbulence.

Far from the competitive market models of economic textbooks, the British—and global—economy is dominated by giant, supranational companies. Key markets—from supermarkets, energy supply and housebuilding, to banking, accountancy and pharmaceuticals—are controlled by a handful of ‘too big to fail’ firms. The oligopolistic economies created in recent decades are, despite the claims of neoliberal theorists, a certain route, as predicted by many distinguished economists, from the Polish economist Michal Kalecki, to the Cambridge theorist, Joan Robinson, to weakened competition, extraction and abnormally high profit. This new monopoly power, according to one study of the US economy, has been a key determinant of ‘the declining labor share; rising profit share; rising income and wealth inequalities; and rising household sector leverage, and associated financial instability.’¹⁹

Although they helped pioneer popular and important innovations, the founders of today’s monolithic technology companies have turned themselves from original ‘makers’ into ‘takers’ and ‘predators’. Companies like Google and Amazon have entrenched their market power by destroying rivals and hoovering up smaller competitors, a form of private-on-private crowding out of small by more powerful firms. Multi-billionaires in large part because of immense global monopoly power, the Google, Amazon and Facebook founders can be seen as the modern day equivalents of the American monopolies created by the ‘robber barons’ such as J. D. Rockefeller, Andrew Carnegie and Jay Gould through the crushing of competitors at the end of the nineteenth century.

The House of Have and the House of Want

The third type of crowding out follows from the way the growth of extreme opulence for the few has too often been bought, in effect, at the expense of wider wellbeing and access to basic essentials for the many. Today’s tearaway fortunes are less the product of an historic leap in entrepreneurialism and new wealth creation than of the accretion of economic power and elite control over scarce resources. It is a paradox of contemporary capitalism that as societies get more prosperous, many fail to ensure the most basic of needs are fully met.

In Britain, elements of the social progress of the past are, for a growing proportion of society, being reversed. Compared with the 1970s, a decade when inequality and poverty levels were at an historic low, poverty rates have more or less doubled, while both income and wealth have become increasingly concentrated at the top. Housing opportunities for many have shrunk and life expectancy rates have been falling for those in the most deprived areas. Mass, but hit and miss, charitable help has stepped in to help fill a small part of the growing gaps in the state’s social responsibilities. While Britain’s poorest families have faced static or sinking living standards, the limits to the lifestyle choices of the rich are constantly being raised. The private jet, the luxury yacht, the staff, even the private island, are today the norm for the modern tycoon.

In heavily marketised economies with high levels of income and wealth concentration, the demands of the wealthy will outbid the needs of those on lower incomes. More than one hundred years ago, the Italian-born radical journalist and future British MP, Leo Chiozza Money, had warned, in his influential book, Riches and Poverty, that ‘ill-distribution’ encourages ‘non-productive occupations and trades of luxury, with a marked effect upon national productive powers.’²⁰ The ‘great widening’ of the last four decades has, as in the nineteenth century, turned Britain (and other high inequality nations such as the US) into a nation of ‘luxury capitalism’. The pattern of economic activity has been skewed by a super-rich class with resources deflected to meeting their heightened demands.

While Britain’s poorest families lack the income necessary to pay for the most basic of living standards, demand for superyachts continues to rise. The UK is one of the highest users of private jets, contributing a fifth of related emissions across Europe. The French luxury goods conglomerate, LVMH—Louis Vuitton Moët Hennessy—is the first European mega-company to be worth more than $500 billion. Resources are also increasingly directed into often highly lucrative economic activity that protects and secures the assets of the mega-rich. Examples include the hiring of ‘reputation professionals’ paid to protect the errant rich and famous, the use of over-restrictive copyright laws, new ways of overseeing and micromanaging workers, as well as a massive corporate lobbying machine.

The distributional consequences of an over-emphasis on market transactions is starkly illustrated in the case of the market for housing. Here, a toxic mix of extreme wealth and an overwhelmingly private market has brought outsized profits for developers and housebuilders at the cost of a decline in the level of home ownership, a lack of social housing and unaffordable private rents. The pattern of housebuilding is now determined by the power of the industry and the preferences of the most affluent and rich. Following the steady withdrawal of state intervention in housing from the 1980s—with local councils instructed by ministers to stop building homes—housebuilders and developers have sat on landbanks and consistently failed to meet the social housing targets laid down in planning permission. Instead of boosting the supply of affordable social housing, scarce land and building resources have been steered to multi-million-pound super-luxury flats, town houses and mansions. In London, Manchester and Birmingham, giant cranes deliver top end sky-high residential blocks, mostly bought by speculative overseas buyers and left empty. The richest crowd out the poorest, or as Leonard Cohen put it, ‘The poor stay poor, the rich get rich. That’s how it goes, everybody knows.’

There has been no lack of warnings of the negative economic and social impact of economies heavily geared to luxury consumption, most of them ignored. Examples include the risk of the coexistence of stark poverty and extreme wealth: of what the radical Liberal MP, Charles Masterman, called, in 1913 ‘public penury and private ostentation’, and what the American radical political economist Henry George had earlier called ‘The House of Have and the House of Want’.²¹ Then there was the influential 1950s’ warning from the American economist, J. K. Galbraith, of ‘private affluence and public squalor’.²² ‘So long as material privation is widespread’, wrote the economist, Fred Hirsch, in the 1970s, ‘the conquest of material scarcity is the dominant concern.’²³

For much of the last century, policy makers have seen wealth and poverty as separate, independent conditions. But that view has always been a convenient political mistruth. If poverty has nothing to do with what is happening at the top, the issue of inequality can be quietly ignored. Yet, the scale of the social divide and the life chances of large sections of society are ultimately the outcome of the conflict over the spoils of economic activity and of the interplay between governments, societal pressure and how rich elites—from land, property and private equity tycoons to city financiers, oil barons and monopolists—exercise their power. In recent decades, the outcome of these forces has favoured the already wealthy, with the shrinking of the economic pie secured by the poorest. As the eminent historian and Christian Socialist, R. H. Tawney, declared in 1913, ‘What thoughtful people call the problem of poverty, thoughtful poor people call with equal justice, a problem of riches.²⁴

Conclusion

These three alternative forms of crowding out have imposed sustained harm on social and economic resilience. Despite this, governments have continued to apply a long-discredited austerity-based theory of crowding out, while ignoring other, arguably more damaging forms of the phenomena. The latest application of the original theory since 2010 has inflicted ‘vast damage on public services and the public sector workforce’, without delivering the declared goal of ‘crowding in’ through faster recovery and growth, or improved public finances.²⁵

Britain is currently being subjected to yet another wave of austerity, with the 2022 Autumn Statement announcing a new package of projected public spending plans, higher taxes and lower public sector real wages, again in the name of fixing the public finances and boosting growth.²⁶ It’s the same short-term, narrowly focussed strategy that, by digging the economy into a deeper hole and cutting public investment, has failed time and again over the last 100 years.

Meanwhile, other damaging forms of the crowding out of key public services, value-adding economic activity and the meeting of vital needs, driven by over-reliance on markets, excess inequality and dubious private-on-private activity, are simply ignored or dismissed.

Notes

¹ C. E. Mattei, The Capital Order, Chicago IL, University of Chicago Press, 2022, p. 156. ² House of Commons, Hansard, 12 June 1979, col 246. ³ J. Tomlinson, ‘Crowding out’, History and Policy, 5 December, 2010; https://www.historyandpolicy.org/opinion-articles/articles/crowding-out⁴ J. Delingploe, ‘Britain’s trillion pound horror story’, The Spectator, 13 November, 2010. ⁵ J. A. Hobson, The Industrial System, London, Longmans, Green & Co., 1909. ⁶ C. Breuer, ‘Expansionary austerity and reverse causality: a critique of the conventional approach’, New York, Institute for New Economic Thinking, Working Paper no. 98, July 2019. ⁷ D. Blanchflower, Not Working, Princeton NJ, Princeton University Press, 2019, p. 172. ⁸ A. Stirling, ‘Austerity is subduing UK economy by more than £3,600 per household this year’, New Economics Foundation, 2019; https://neweconomics.org/2019/02/austerity-is-subduing-uk-economy-by-more-than-3-600-per-household-this-year⁹ R. C. Jump, J. Michell, J. Meadway and N. Nascimento, The Macroeconomics of Austerity, Progressive Economy Forum, March 2023; https://progressiveeconomyforum.com/wp-content/uploads/2023/03/pef_23_macroeconomics_of_austerity.pdf¹⁰ See S. Lansley, The Richer, The Poorer, How Britain Enriched the Few and Failed the Poor, Bristol, Policy Press, 2022. ¹¹ K. Buchholtz, Where Social Spending is Highest and Lowest, Statistica, 28 January, 2021; https://www.statista.com/chart/24050/social-spending-by-country/¹² OECD, The Covid-19 Crisis and State Ownership in the Economy, Paris, OECD, 2021; https://www.oecd.org/coronavirus/policy-responses/the-covid-19-crisis-and-state-ownership-in-the-economy-issues-and-policy-considerations-ce417c46/¹³ L. Chancel, World Inequality Report, World Inequality Database, 2021. ¹⁴ High Pay Centre/TUC, How the Shareholder-first Model Contributes to Poverty, Inequality and Climate Change, TUC, 2019. ¹⁵ National Audit Office, ‘Transforming Rehabilitation: Progress Review’, National Audit Office, 1 March 2019; https://www.nao.org.uk/reports/transforming-rehabilitation-progress-review/¹⁶ V. Pareto, Manual of Political Economy, New York, Augustus M. Kelley, 1896. ¹⁷ Lansley, The Richer, The Poorer. ¹⁸ T. Veblen, The Theory of the Leisured Classes, New York, The Modern Library, 1899; T. Veblen, The Engineers and the Price System, New York, B. W. Huebsch, 1921. ¹⁹ I. Cairo and J. Sim, Market Power, Inequality and Financial Instability, Washington DC, Federal Reserve, 2020. ²⁰ L. Chiozza Money, Riches and Poverty, London, Methuen, 1905, pp. 41–3. ²¹ C. Masterman, The Condition of England, Madrid, Hardpress Publishing, 2013; H. George, Progress and Poverty, New York, Cosimo Inc., 2006, p. 12. ²² J. K. Galbraith, The Affluent Society, Boston, Houghton Mifflin, 1958, ch. 23. ²³ F. Hirsch, The Social Limits to Growth, Abingdon, Routledge & Kegan Paul, 1977, p. 190. ²⁴ R. H. Tawney, ‘Poverty as an industrial problem’, inaugural lecture at the LSE, reproduced in Memoranda on the Problems of Poverty, London, William Morris Press, 1913. ²⁵ V. Chick, A. Pettifor and G. Tily, The Economic Consequences of Mr Osborne: Fiscal Consolidation: Lessons from a Century of UK Macroeconomic Statistics, London, Prime, 2016; G. Tily, ‘From the doom loop to an economy for work not wealth’, TUC, February, 2023; https://www.tuc.org.uk/research-analysis/reports/doom-loop-economy-work-not-wealth²⁶ Chancellor of the Exchequer, Autumn Statement, 2022, Gov.uk, 17 November, 2022; https://www.gov.uk/government/topical-events/autumn-statement-2022

This article was first published in The Political Quarterly 

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Biography

• Stewart Lansley is the author of The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor, a 200-year History, 2021. He is a visiting fellow at the University of Bristol and an Elected Fellow of the Academy of Social Sciences.

picture credit flickr

The post Rethinking ‘Crowding Out’ and the Return of ‘Private Affluence and Public Squalor’ appeared first on The Progressive Economy Forum.

By Josh Ryan-Collins

After a decade of austerity and the trauma of a two-year long pandemic, the UK’s public sector workers deserved some respite come 2022. Instead, they are now enduring the largest real wage cuts in recent history.

Average settlements on offer to public sector workers are currently around 3% with inflation at 10%. This 7% cut in real wages amounts to almost a month’s salary not being paid. Furthermore, the private sector is enjoying wage deals more than twice as high at around 7% as shown in Figure 1.

Under such conditions, the withdrawing of labour is an entirely rational response. It is even more understandable when you consider the wider macroeconomic policy regime that appears rigged against the public sector.

The argument being repeatedly made by both the government and the independent Bank of England is that paying public sector workers close to or above the current rate of inflation would be self-defeating because it would lead to higher prices. This is due to the so called ‘wage-price spiral’ where higher prices lead to calls for higher wages which then feed through to higher prices and so on.

There are four reasons this argument is flawed.

Firstly, in capitalist market economies the public sector does not set prices, firms do. So the wage-price spiral can only apply to the private sector in as far as it is a direct relationship between wages and consumer prices.

The only way the government could finance additional wages for the public sector would be raise taxes or borrow more. Taxing directly removes money from the economy so it is difficult to see how this could be inflationary.

Borrowing involves investors spending money buying government debt instead of other assets. Bank of England governor Andrew Bailey has stated this would affect “overall demand in the economy” and force the Bank to raise interest rates, further adding to the cost-of-living crisis facing low paid workers.

There is evidence that bond financed fiscal deficits are associated with higher inflation. But this relationship is almost exclusively found in developing countries with weaker institutions and tax raising powers, not in high income economies like Britain.

Second, current inflation in the UK is mainly driven by supply-side factors, in particular rising energy prices caused by the Ukraine war feeding through to other sectors. There is evidence that rising energy costs have led firms to raise their prices and evidence that other firms have exploited the situation of rising prices to use their market power to raise prices above inflation, generating excess profits. If anything, there is more evidence of a ‘profit-price spiral’. None of this has anything to do with what public sector workers are paid.

Thirdly, public sector workers make up only around 17% of the workforce. Thus inflation-linked wages to help public sector workers catch up with years of real wage cuts would have much less impact on total demand in the economy than they would in the private sector.

Finally, the public sector is suffering from a serious shortage of labour caused by the COVID pandemic and difficulty recruiting workers from the EU post-Brexit. In particular the healthcare sector is in crisis, making up 13% of all jobs advertised in the UK last month.

Keeping wages well below those available in the private sector — which they have been over most of the past eight years (Figure 1) — will make the situation worse as employees are more tempted to leave. In turn, this will require even larger pay increases down the line to bring workers back.

Given flatlining growth, fears about excess demand and entrenched inflation have to be tempered with the risk of rising unemployment and even more individuals leaving the workforce, worsening an already extremely weak macroeconomic environment.

Striking public sector workers have the support of the majority of the public. They seem to recognise, better than the politicians and policy makers in charge of our economy, that a strong public sector is the building block for sustainable economic growth. Let us hope that those taking industrial action succeed in pushing through higher wages for all our sakes.

This blog was first published on 14th February 2023 on the official blog of the UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM | https://www.ucl.ac.uk/bartlett/public-purpose/

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• Hegel, 1820

The education system in Britain is in the mud. That is scarcely news. But would Labour have the courage and values needed to revive it? The trouble they would have if they win the next General Election is due partly to their Party’s legacy and partly to a personal problem.

Education is, or should be, a commons. It belongs to all of us equally, in the sense that whatever counts as knowledge and learning cannot morally be made the property of anybody or any interest. It is a natural public good. If preserved as a commons, education is a superior public good, in that if everybody has good education, we all gain. A public good is one that is non-competitive, in that if one person has it, that does not or should not deprive others of it. So, denying it to some people, as when the price mechanism is used, is a denial of common rights.     

In the past 50 years, the educational commons has been shredded. Instead of education as liberating, as a public good and as a means of developing cultured citizens, it has been commodified to the point where higher education is the largest ‘industry’ in the economy, after finance. A progressive government will have to confront a systemic collapse that is far more than a matter of more public funding or one capable of being rescued by the sensible fiscal measures so far announced by the Labour leadership.

To appreciate the scale of the challenge, and its economic aspects, we must recall what education is all about. In ancient Greece, education was depicted as a means by which people became civilised. But a struggle evolved between the ‘authoritarian’ approach, in which wise elites conveyed truth to the masses, and the ‘liberal’ Socratic approach, in which teachers and students learned from each other, in common pursuit of truth.

The latter was the model for university education from the 12^th century onwards, crystallising in the views expressed by Hegel, Cardinal John Newman and J.S.Mill in the 19^th century. As Newman famously stated in 1875, ‘A university training is the great ordinary means to a great but ordinary end; it aims at raising the intellectual tone of society.’

In the UK, this liberal view was extended to workers in the early 20^th century with the formation in 1903 of what became the Workers’ Educational Association, set up by moderate reformists to broaden knowledge of society and politics. Seen as diverting energies from revolutionary Marxism, the WEA received the approval of the Conservative Balfour government and the likes of Winston Churchill.

Nevertheless, it advanced the liberating effects of education, conveyed in lectures and classes on the arts, social sciences, reading groups and nature study rambles. In 2003, in a book celebrating its centenary, Tony Blair wrote a Foreword. One abiding aspect of the WEA is a vision of education as a two-way process between lecturer and student. Among its formative lecturers were R.H.Tawney and Karl Polanyi.

However, it was the two World Wars that advanced the liberal model most emphatically. In 1919, a monumental statement was the Report of the Adult Education Committee of the Ministry of Reconstruction, known ever since simply as the 1919 Report. In his covering letter to the Prime Minister, the chair wrote that the ‘goal of all education’ should be citizenship, ‘that is, the rights and duties of each individual as a member of the community; and the whole process must be the development of the individual in relation to the community’. It stated that the objective of adult education should be the strengthening of democratic society, geared towards shared civic, social and economic values. Put bluntly, adult education should not be about just preparing workers for jobs.

As the Second World War approached its end, as politicians considered a new post-war social compact, the liberal Conservative ‘Rab’ Butler steered through the 1944 Education Act, which shaped state schooling for the next 44 years. Albeit in a segregated way, and with a foolish streaming through the 11+ exam, it established free secondary schooling for all. In doing so, it reiterated education as a commons, as a public good.

The zenith of the liberal perspective came in 1963 with the Robbins Report on higher education. It was chaired by Lionel Robbins, a right-wing economist at the LSE and a founding member of the Mont Pelerin Society in 1947, a society that was to produce all the economists who forged the neo-liberal economics revolution in the 1970s and 1980s. The irony lay in the fact that the Robbins Report was an eloquent restatement of the classical view. It depicted the university as a public good that should be accessible to everybody able to qualify to enter it. It was firmly in the tradition of Cardinal Newman and John Stuart Mill. This is captured in three statements in the Report:

‘Excellence is not something that can be bought any day in the market’

‘The essential aim of a first degree should be to teach the student how to think.’

‘We should deplore any artificial stimulus to research’.

The Report stated that universities had four tasks, ‘the promotion of the general process of the mind so as to produce not mere specialists but rather cultivated men and women’, ‘the search for truth’, ‘instruction in skills’, and the transmission of culture and common standards of citizenship.   

The liberal tradition was extended in the Open University set up by Harold Wilson in 1969, overcoming scepticism from Anthony Crosland among other Labour politicians. To this day, the Open University remains the largest university in terms of student enrolments, despite going through a difficult period after the sharp rise in student fees in 2012. A benign offshoot has been the U3A, the University of the Third Age. 

However, the establishment of the Open University marked the zenith of the liberal tradition. The erosion began with the arrival of Margaret Thatcher on the scene, as Secretary of State for Education, known as ‘the milk snatcher’ for ending free school milk for 7-11 year olds. Her lasting legacy came during her Prime Ministership. It began with her vandalism in selling off state school playing fields, clearly an illegitimate theft from the educational commons. But the attack on higher education was more strategically ideological.

In 1985, in the height of the neoliberal economics revolution, a new report was published, the brainchild of Keith Joseph, Thatcher’s political mentor. Known as the Jarratt Report, after its chair Alex Jarratt, it was drawn up by a committee biased towards financial interests, with the directors of finance of Ford and of an arms company among its members. The report recommended that universities be run like businesses, stating that ‘universities are first and foremost corporate enterprises’, to which academic departments owed their allegiance. Vice-chancellors, rather than being ‘scholars first’, should act like chief executives, with management, finance and business skills taking primacy.

The government’s adoption of the Report’s recommendations effectively ended the academic independence of British universities. Among the reforms were abolition of academic tenure, beginning the commodification of academics, the introduction of managerialism, with a dictate to earn from university assets, and an emphasis on ‘competitiveness’ as the guide to ‘the education industry’.

The Jarratt Report was followed by the 1988 Education Reform Act, a remarkably ‘regulatory’ measure for a government claiming to favour ‘de-regulation’. Its main features were, first, introduction of a national school curriculum combined with more use of exams to make sure more children left school with qualifications for the labour market, second, removal of control over schooling by local authorities, allowing individual schools to opt out and receive funding from central government instead, and third, a declared attempt to raise standards by giving parents more choice over where to send their children to school.

The 1988 Act was an act of enclosure, centralising control over content and choice, and preparing the ground for privatisation and commodification. For state schools, Thatcher herself wanted a national curriculum that was very narrow, leaving out all artistic and creative subjects as not functionally useful.

Since then, commodification, privatisation and financialisation have detonated what was left of the educational commons and the liberal tradition. Higher education became a zone of rentier capitalism. Students and degrees became commodities. Maintenance grants were replaced by student loans in 1990 and New Labour introduced fees in 1998. Government grants were formally ended in 2015. These measures turned students into instruments of the new debt-driven economy. Students were required to take loans to pay ‘tuition fees’, which rose from £1,000 in 1998 to £9,250 in 2018 (still that in 2023). On a per capita basis, student debt in the UK is easily the highest in the world. 

Universities have been turned into corporate entities plunged into market competition, with each other, with foreign universities and with other emerging purveyors of adult education. The government has steadily cut funding for universities, meaning that they must mobilise more money themselves, primarily by expanding the number of students, a tendency unleashed by the removal of the cap on numbers after 2012. The fetish of promoting economic growth was extended to universities, frontline of the ‘education industry’.

Universities began to sell themselves as ‘brands’, and accordingly devote more of the financial resources they could mobilise to selling themselves. Four developments stand out. First, they devoted more resources to making their ‘product’ an attractive package, with more lavish amenities and entertainment facilities. Second, they sought to sell their packaged product abroad by expensive sales campaigns and recruitment drives. Third, some opened up foreign campuses.

As a result of the second and third activities, today over three-quarters of a million students of British universities are studying outside Britain, and the total number of foreign students has grown to about 40% of the total. But it is the fourth outcome that implies fraud. As a result of devoting more financial resources to selling activities, much less than half the income from tuition fees is actually spent on tuition. Students are being cheated.

Meanwhile, a new trend is taking shape, which is predictable when a public good is commodified. Substitute competitors emerge to take, share and expand the market. In the UK, these are mainly MOOCs and educational brokers, both thriving with the aid of electronic technology and predatory financial capital.

MOOCs

MOOCs are Massive Online Open Courses. Politically, they have been given an easy ride so far. Increasingly, courses and bits of schooling are being packaged and sold to universities and schools instead of, or in addition to, teacher training in classes. There are now degrees based entirely on MOOCs.

Unsurprisingly, they tend to be cheaper than teacher-taught degrees. But to any progressive they should be concerning. They risk minimising the essence of liberal, dialogical education; they risk standardising learning and becoming instruments for indoctrinating millions in a hegemonic way of thinking. And they tend to be acquired by Big Tech and Big Finance, dominated by a few corporate giants able to extract rental profits.

MOOCs were expected to be disruptive of university education, but have proved to be mainly complementary, because as The Economist noted, students ‘are not buying education for its own sake, but rather a certificate from a respected institution.’ What has boomed most is a broker system, through ‘Online Programme Managers’, led by the firm 2U. They have gained from an increase in online second  degrees. Around one third of graduate education in the USA is online, reflecting the high wage premium associated with such degrees. One can predict that MOOCs will burrow away at taking profits from universities in Britain, further eroding the liberal tradition.

Education Brokers

However, it is another commodifying trend that should be given priority by an incoming progressive government. Generically, it may be called the ‘education disruptor’. If politicians forge an education ‘industry’ geared to preparing children and adults for jobs and for earning more, then it is likely that companies will emerge promising to do that more efficiently than universities. This is made more likely if the commodities produced by universities become ‘credentials’ rather than signals of occupational prowess. That makes it easier for competitors to offer near substitutes.                   

Enter the self-styled ‘education provider’. In April 2017, the government introduced the Apprenticeship Levy to boost apprenticeships. For large firms, this involves a 0.5% levy on the annual wage bill if it is over £3 million, with smaller firms paying just 5% of the cost of any apprenticeships, the government paying the remainder.

Just beforehand, a young employee in J.P.Morgan teamed up with a colleague to set up a company that has been able to take advantage of the scheme. It became Multiverse, in effect a labour broker. It places young jobseekers in firms as apprentices. The jobseekers do not pay anything directly, while the firms pay Multiverse for finding trainees. The business model is simple and risk-free. The firms that would have to pay the Apprenticeship Levy anyway can divert that to paying Multiverse, which undertook to provide nominally apprenticeship training, all online, for about 12 to 15 months.

Over six years, Multiverse has placed about 8,000 ‘apprentices’, bringing in a remarkable amount of revenue, declared to be £27 million for 2021-22 alone. Somehow, it has managed to declare a loss every year, leading to the firm receiving from the government millions of pounds of tax credits (£2.7 million in 2022). The head of Multiverse is Euan Blair, eldest son of Tony Blair. At the age of 38, he was awarded an MBE for ‘Services to Education’, although it is unclear what services he has provided.

Despite his company apparently making consistently large losses, Blair flaunted his plutocrat status when he splashed out over £22 million on a luxurious five-storey west London town house, with seven bedrooms, a two-storey ‘iceberg’ basement with an indoor pool, gym and multi-car garage. In 2022 as well, financial capital poured money into his company, turning it into a unicorn, valued at £1.7 billion; Blair apparently has a 50% stake.

There is an irony in that while universities have become more like job preparation factories, the son of the Prime Minister who promoted ‘Education, education, education’ as Labour’s mantra dismisses the relevance of university education for job markets. Blair told the digital media platform UNLEASH that ‘a university degree has become a stamp in the passport for young people seeking access to the best careers. But, more often than not, the education they’re getting at university isn’t relevant to the jobs they’re going for’.    

Blair was quoted in the Financial Times as saying: ‘One of the things that’s so broken about the current system is it tries to pretend a three- or four-year undergraduate degree is enough to see you through a multi-decade career. We won’t make the same mistake with apprenticeships. Our vision is for a system in which people can return to apprenticeships whenever they need to, to level-up their career.’ There is no evidence that anybody does ‘pretend’ any such thing. But this disparaging of university education comes from a neoliberal perspective that sees universities as simply preparing people for careers.

Then came the potential bombshell. In September 2022, Blair’s firm was granted a licence to award degrees without the need for a university or college, a huge break with historical tradition, marking a new phase in commodification and privatisation, the apprenticeship degree or ‘degree apprenticeship’. It is moot whether a 12-15 month on-the-job training course, done entirely virtually, would have passed muster as an apprenticeship at any previous time in history. It is even more dubious to call what Multiverse is offering a ‘degree’, entitling successful apprentices to the degree of B.Sc.

Although its growth has been rapid and its completion rate has been remarkably high, the scale of this education disruption is still modest. But financial capital and the Office for Students, the government regulator that approved Blair’s ‘degree’, have clearly decided that it is a model for the future on a grand scale. But it raises many ethical and economic issues. The most obvious is that it is an abuse of the idea of a degree as the embodiment of the liberal view of education. It is also a further move towards a ‘modular’ approach to skill and training undermining the apprenticeship traditions. It is also further shredding the idea of adult education as a commons, a public good.

Euan Blair’s disruption model (as he describes it) will pose a delicate challenge for Labour if elected as the next government. Labour’s Deputy Leader, Angela Rayner, has said, ‘Education is a public good and should be treated as such.’ Blair’s model is the opposite, as is the licence to issue degrees given by the Office for Students to James Dyson, the billionaire Brexit backer who promptly moved his headquarters to Singapore after the Brexit vote. They epitomise today’s rentier capitalism.

They also raise numerous questions. Should a commercial company be raking in millions of pounds by dispensing ‘degrees’? Should firms be able to divert the Apprenticeship Levy to pay a private corporation to recruit workers for apprenticeships paid for by the tax? Should Blair’s lightly regulated company, valued at nearly £2 billion, be receiving millions of pounds each year in tax credits, paid by the taxpaying public? Should Blair’s ‘degree’ be half the duration of a normal university degree? If Blair’s firm is allowed to issue degrees, should all its competitor online platforms be allowed to do so? The awkward questions can be multiplied. 

However, there are crucial societal questions that Labour should pose. First, should the education system be an ‘industry’ driven by the perceived demands of the labour market? The current commodifying trends are destroying a broad-based liberal education. Second, how can a progressive government restore the foundational principle of education, that of developing critical minds and citizens driven by values of empathy, altruism, ethics, creativity and social solidarity, rather than by competitiveness, narcissism and personal aggrandisement? Third: Given the trends towards superficiality and commodification, at what point will a degree from a British university not be recognised as a credible degree abroad because it has been so devalued? Alarm bells should be ringing. Following previous traumatic transformational national events, such as the two World Wars, there were radical reappraisals of the role of education. Whatever the political hue of the next government, it should set up a high-powered Commission to map out how to recover the soul of the educational commons.                  

The author acknowledges the helpful comments from Will Hutton and Danny Dorling on a earlier draft of this blog

photo credit: Flickr    

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“… weapons producers want governments to underwrite the profitability of their investments. This is precisely the alliance between industry and the state that formed the basis of the military Keynesianism that Michal Kalecki criticized during the 1950s. He showed how, at the height of the Cold War, Western governments subsidized private capital with arms contracts paid for by taxpayers.”

photo flickr

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As we reach the year’s end, we wanted to look back on a dramatic year that has seen economic turmoil here and across the globe, and the dramatic return of inflation to levels unknown for decades.

Through it all, the Progressive Economy Forum has argued for evidence-based, progressive economic policy that can cut against the crumbling neoliberal and austerity consensus and make the case for a fairer, more sustainable economy. Below, we pick out some of the year’s highlights, including a major conference on progressive economics and a decisive pre-Autumn Statement intervention that helped shape the public narrative.

Progressive Economics 2022

Hosted with the University of Greenwich, PEF’s first Progressive Economics conference saw 500 attendees at a packed day at Greenwich’s historic main campus with debates and discussion on the cost of living crisis, the future of work, responding to the climate disaster and the political economy of Russia’s war, amongst others. With speakers including Michael Marmot, Caroline Lucas and Ed Miliband, the whole day is available as separate recordings from here. Nadia Whittome MP, who spoke on the caring economy panel, wrote an account of the day over here.

Progressive Economics 2023 has been provisionally booked for June 11, University of Greenwich.

Online discussions

Alongside our big in-person events, PEF has hosted regular webinars with expert speakers, this year including Jason Hickel and Ann Pettifor on degrowth, Robert Skidelsky and Guy Standing debating Basic Income versus a Job Guarantee, and Jill Rutter, Peter Holmes and Christopher Grey on the economic impact of Brexit, amongst others. Recordings are available on our YouTube channel.

Our blog has carried regular discussions and analysis throughout the year, from PEF Council members and beyond – you can read it here.

Brexit: Reviewing the Trade and Cooperation Agreement

Written by trade expert Peter Holmes of the Sussex Trade Policy Observatory, this timely publication argued that the existing Trade and Cooperation Agreement between the EU and the UK is not only flawed, but open to renegotiation in 2025, providing an ideal opportunity to correct some of the increasingly obvious problems with the current deal.

You can read Reviewing the TCA: how to salvage something from the wreckage of Brexit here.

The Case for a £15/hour Minimum Wage

With the cost of living crisis eating up wages and salaries, after a decade of flat or falling real wages for most, the need for a significant increase in pay has become clearer. This paper, written by James Meadway and Howard Reed, argues that the £15/hour minimum wage called for by trade unions is not only affordable, but a necessary compensation for real income losses since 2010. Forming PEF’s submission to the Low Pay Commission, it will be cited in this year’s LPC report.

The Case for a £15/hour Minimum Wage can be downloaded here.

The distributional impact of energy price rises

With domestic energy bills skyrocketing through the year, PEF’s work on the distributional impacts of domestic energy price increases, undertaken by Gissell Huaccha of Leeds University, was used as the basis for a Guardian report on the shocking impacts of energy price hikes on the poorest – even with government support, here. The original modelling results are here.

Funded by the Andrew Wainwright Reform Trust, a full report will be published in early 2023.

Killing the “fiscal black hole”

After September’s disastrous “mini-Budget”, which saw a sudden spike in government borrowing costs and a falling value of the pound, a new Prime Minister and Chancellor started insisting that a “fiscal hole” in the government finances now had to be filled by cutting spending.

Timely work by Rob Calvert Jump and Jo Michell exposed the “dangerous fiction” of the claims made by the government and others of a “fiscal black hole”, with the size of the supposed hole completely dependent on uncertain forecasts and the government’s own rules. You can read their report here.

PEF’s work attracted coverage on the BBC, including the Today programme; the Times, the Daily Mail, the Telegraph and across the broadcast and online media, helping set the domestic economic discussion in the run-up to a crucial Autumn Statement . Questions were put to Jeremy Hunt about the supposed “fiscal hole” and by the time of the Autumn Statement, the rhetoric was dropped entirely. Opposition to austerity is central to PEF’s aims and challenging the poor framing used to support arguments for it is crucial in improving the quality of public economic debate in Britain.

As our multiple economic crises worsen, the need for clear, evidence-based economic alternatives to the failed policies of austerity and neoliberalism is becoming more pressing. PEF will continue to publish and argue for an economics and economic policy that can support a fairer, more sustainable country and planet.

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Guy Standing

If there is one area where the Labour Party should come together it is in the strategy to revive the economy of the sea. Under common law, going way back, the sea, the seashore, the seabed and all in the sea belonging to the country are part of the commons, that is, the property that belongs to everybody, equally. Yet the sea has been subject to a greater ‘enclosure’ than land, and has been subject to a process of privatisation and financialisation that nobody who calls themselves a progressive should accept. This will become even more important since the sea is projected to double its contribution to global GDP to over 10%.

Consider a few facts. Since 1982, the UK owns four million square miles of sea under what is called its Exclusive Economic Zone. That part adjoining Britain is three times its total land area. But successive governments have overseen the privatisation of the blue economy and given vast subsidies to corporations, costing taxpayers billions of pounds and enhancing the profits of foreign capital and financial firms.

Take the seabed. It has always been accepted as a commons, with the government and monarchy required to act as the Steward, expected to respect what is known as the Public Trust Doctrine, that is, to act in such ways as to ensure the commons is kept intact and in good condition. So, why has the left kept quiet while the Crown Estate has been auctioning off thousands of square miles of our seabed, earning an income flow estimated to be £9 billion, while selling rights to multinational capital? More auctions are planned. Details are given in my book, The Blue Commons: Rescuing the Economy of the Sea. Labour should make it clear that it will block further privatisation of our seabed.

Then there is fishing. Starting in 1967, the government operates a complex system by which it hands over what are private property rights as ‘fish quota’ to selected fishing companies. A trick played was that the amount of quota given to companies was based on recorded past catches. Until quite recently, small-scale fishers were not required to keep records of how much they caught.

So, when the current system came into effect, they were excluded from the main ‘pool’ of quota. A result is that today just 25 firms own over two-thirds of all the quota, and five families, all on the Sunday Times Rich List, own 29%. They are given virtual ownership of the fish, denying all small-scale fishermen the right to catch much at all. This was not the fault of the EU’s Common Fisheries Policy; the Leave Campaign lied that it was.

Making the situation worse, the government hands out £120 million a year in subsidies, most going to the corporates. And they have treated the law with contempt. Thirteen of the top 25 firms were caught clandestinely breaking the quota rules, catching 170,000 tonnes of illegal excess fish worth £63 million. They received fines but nobody was imprisoned because under British law it is merely a civil offence, not criminal. And they were allowed to keep their quota. The book gives later cases.

The government slashed the budget of the Marine Management Organisation, the body responsible for policing what happens at sea. And there are just 12 coastguard vessels to monitor 773,000 square kilometres – one for every 64,000. This is de facto deregulation. It should be seen in the context of one fact. Because economic growth has been given precedence over preservation of the commons, subsidies have helped fisheries become more ‘efficient’, meaning more fish are taken than is sustainable. As a result, the hourly catch today is just 6% of what it was a century ago. At current rates, our children will have no British sea fish to eat.             

Then there is aquaculture. Over half the seafood we eat today comes from onshore and offshore fish farming. This is another sphere where foreign capital has come to dominate. It is a form of enclosure. Giant fish farms are doing ecological damage, and big companies, most notably the Norwegian Mowi, only bear half the production costs. In Norway, the government is imposing a 40% levy on the cash-flow of such firms. Labour should match that.  

Then there are our ports and harbours. Thatcher privatised all ports, and most have fallen into the hands of foreign capital, much of it Chinese and much controlled by private equity, a form of finance notorious for seeking short-term profit maximisation, asset stripping and ecological disdain. At the time of writing, there is a scandal in the Teeside, where local fishermen have had their livelihoods destroyed by the port owners dredging and dumping 250,000 tonnes of sediment in the sea, killing off crabs, lobsters and other crustaceans. The port and the river authority are run by the subsidiary of a Canadian private equity company. All ports should be nationalised or at least mutualised.   

Then there are the giant cruise ships and container ships. They use the most polluting ‘bunker diesel’ and keep their engines going all the time they are in port. They cause more pollution than all the cars on our roads. Yet they are allowed to do it. A study showed that throat cancer and other ailments linked to their pollution mean that around Europe these boats are responsible for 50,000 premature deaths each year.

Then there are what will be two big ‘blue growth’ areas. Mining in the sea is very profitable and deep sea mining for minerals needed for electric batteries and much more is about to take off on a major scale in 2023, for reasons outlined in the book. Marine scientists are acutely concerned. But mining companies and big finance investing in them are lobbying effectively.

Here is a predicament Labour must address. Under the United Nations’ Convention on the Law of the Sea, adopted in 1982, the International Seabed Authority was to draw up a Mining Code and regulate what happens in the Deep Sea. The ISA was set up in 1994, but after 28 years it still has not drawn up the Code. This is significant, because the Code is meant to ensure that income from the deep sea is shared by all humanity, so that capital is not the sole beneficiary. Powerful interests have ensured the Code does not exist. Labour should demand it be drawn up without further delay.

Perhaps above all, the development of intellectual property rights in the sea should cause all of us alarm, as it relates to what will become a huge part of the global economy. There are already 13,000 patents in ‘marine genetic resources’, vital for future medicines among others, guaranteeing their owners monopoly profits for 20 years. Over 47% of the patents are possessed by one corporation, the German chemical giant BASF; 76% are possessed by three countries, Germany, the USA and Japan. Britain is nowhere. Labour must have a policy to redress that.

Finally, Labour should develop a strategy that combines revival of the blue commons with a shift to what could be called eco-fiscal policy, by raising revenue from levies on profits from activities that use and deplete common resources. The proceeds should be channelled into a Blue Commons Capital Fund, along lines of what has been done in Norway. From the Fund, Common Dividends could be paid out, as a form of common property right, a basic income by another name. It can be done.      

picture credit : Ed Dunens flickr      

Guy Standing is Professorial Research Fellow, SOAS University of London and a Council member of the Progressive Economy Forum. He is author of various books, including The Precariat: The New Dangerous Class and The Corruption of Capitalism: Why Rentiers thrive and Work does not pay.

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Using official forecasts from the Office for Budget Responsibility, economists Dr Jo Michell and Dr Rob Calvert Jump show that small changes in forecasts for future interest rates and growth, and what is counted as government debt, dramatically alter the size of the apparent “hole” in the public finances.

These changes to forecasts and accountancy rules produce hugely bigger effects than the £50bn or more changes in spending and taxes the government is reported to be considering for the Autumn Statement.

Most dramatically, reversing a decision to exclude the Bank of England’s debt from the government’s own debt figure, made in January 2022, completely wipes out the projected “fiscal hole” and, on the official forecasts, leaves the government with an additional £14bn to spend against its own debt targets by 2027.

Examples of minor changes, relative to the government’s current forecasts, are shown in the modelling results below.

1. A small increase in the government’s forecast borrowing costs makes the path of future debt unsustainable, making the target useless.

2. Slight changes in the forecast rate of growth, including a possible recession, mean the government also miss its target, also making the target useless.

3. Changing the accountancy rule used to measure the government debt back to what it was before Autumn Statement 2021 completely removes the “black hole”, putting government debt back on a sustainable footing with £64bn headroom to spare.

Download pdf here

Phoot credit flickr

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Ten Years and Counting…

In 2009, we wrote The Spirit Level, based on our work as epidemiologists researching the social determinants of health and wellbeing. We showed, emphatically, that greater equality – a smaller gap between rich and poor – is the fundamental basis of a better society. The more equal of the rich, developed countries have resoundingly better physical and mental health, which is part of the reason why they weathered the storm of Covid-19 better than more unequal countries.

But economic inequality, and its intersection with inequalities related to ethnicity, gender, disability, language, religion and more, is not just a health issue. In The Spirit Level we showed that all the problems that are more common at the bottom of society, that have a social gradient, get worse with greater inequality. And that body of evidence has continued to grow in the years since, based on our own research and the work of many others across the world. In addition to shorter life expectancy, higher death rates and levels of chronic disease, increased obesity, mental illness and poor child wellbeing, more unequal societies suffer from more violence, including homicides, domestic violence, child maltreatment and bullying. Children and young people do less well in school and have lower chances of social mobility and higher rates of dropping out and teenage births. Drug and alcohol abuse, problem gambling, status consumption and consumerism also rise with inequality, while levels of trust and solidarity, and civic and cultural participation decline.

Countries that tend to do well on any one of these measures tend to do well on all of them, and the ones that perform badly do badly on most or all of them. And not only is the impact of inequality wide-ranging, differences between countries are large; and although the poor are worst affected, inequality affects almost everybody.

And that means that the UK is trailing behind the countries to which we usually compare ourselves, on that long list of problems, and that all of us – young or old, male or female, in the North or the South, rich or poor – ALL OF US, are damaged. We are each at higher individual risk, and our whole society is ground down and trapped by inequality: we, and it, fail to thrive.

We’ve used a robust framework analysis to show that this is a causal problem and we’ve done a lot of work to understand the pathways through which inequality does the damage.³ We know that tackling inequality is the central task in responding to the multiple crises we face: the climate crisis, the cost of living crisis, the North-South divide, food insecurity, the gig economy, threats to our democracy.  Inequality is at the heart of it all.

The lost decade

When The Spirit Level was published we were at first heartened by the political response to the research. Politicians across the political spectrum seemed to understand the evidence and inequality seemed to take its rightful place on the political agenda.

But what has happened in the UK since then – a decade of austerity, followed by a global pandemic, and now a cost of living crisis, means we’re just as unequal now as we were then. And every crisis that comes along seems to be another engine of increasing inequality. 

Who suffered from the Global Financial Crisis? Average real incomes declined, and that was particularly true for the youngest and lowest paid workers.  Who were most likely to be exposed to Covid, to be infected, to be really sick, to die? Death rates were twice as high in the most deprived areas of the UK as in the most affluent. And we know who is already suffering most from rising prices, rising interest rates in the cost of living crisis – those on low incomes, on benefits, families with children, especially lone parents and everyone living outside of London and the south east.

And in all three of these crises, it hasn’t simply been a matter of the poor getting poorer.  In these big existential crises, the rich have got richer, a lot richer.  In the years following the Global Financial Crisis, the world’s richest 1% increased their wealth until they owned more than the bottom half of the world’s entire population. Top investors made billions by buying up shares in failing banks, betting against housing markets that were foreclosing on the mortgages of the poor, basically “buying when there’s blood in the streets” to realize massive gains during recovery. The pay of the FTSE 100 chief executives has sky rocketed, unlike that of their workers. During the pandemic, the rich accumulated wealth, including from government procurement under emergency regulations with lowered scrutiny for corruption. Oil and gas companies have made huge profits since the energy crisis began, and their chief executives continue to be paid millions, some of them many millions.- Huge pay and benefits packages and dividends have enriched the chief executives and shareholders of the UK’s water companies despite their abysmal record on tackling leaks, pollution and investment in new reservoirs.

We need the right (left) kind of active government

The Coalition and Conservative governments have certainly been active since 2010. They have actively failed to tackle inequality; they have acted to benefit the rich and harm the rest of us. Their actions speak much louder than their hollow words on levelling up.

An Active Labour Government could do so much to transform our society from the failing, unproductive, harmful state it is in, to one that promotes and, crucially, achieves the welfare and wellbeing of all its citizens. An active government that puts wellbeing first through tackling inequality would see spin-off benefits and savings across health, education, social care, law enforcement and more.

The courage to change

Labour should take heart from the progressive preferences of British citizens. When polled, the large majority of the public are in favour of progressive policies that are too often dismissed as radical, utopian, or unfeasible by the press or the Westminster bubble.

Close to 80% of the British public believe that the gap between those on high and low incomes is “too large” and this has been a consistent trend (varying between 72-85%) over the four decades that the British Social Attitudes (BSA) survey has been running. In 2018, the BSA concluded that “the public are likely to have more of an appetite for policies aimed at addressing poverty and inequality than they did a decade ago.”

The majority of the British public want water, energy, rail, buses, Royal Mail and the NHS to be run in the public sector, and that includes the majority of Conservatives.

Recent academic research on public opinion research in “red wall” constituencies found consistently high levels of support for Universal Basic Income, even when the policy was presented to voters in terms used by its opponents. There is little evidence that voters with conservative social values – those in left behind communities in Labour’s former heartlands – won’t actually support radical social policy.

The vast majority of the public support action on climate change and they are much more worried about the costs of doing nothing than they are about the cost of tackling the problem.

The triple-win manifesto

So what should the Labour Party do?  We are not politicians, or even political scientists or policy experts.  But we do know that Labour needs a bold and compelling vision that brings people onside by painting a picture of a society that can respond to the climate emergency while at the same time transforming people’s lives for the better and creating sustainable  growth.

What follows is by no means an exhaustive list, but six triple-win active policy options include:

• Joining WEGo, the Wellbeing Economy Governments (currently Canada, Scotland, Iceland, New Zealand, Wales and Finland), a collaboration of national and regional governments promoting sharing of expertise and transferrable policy practices for building wellbeing economies.  It is growth in wellbeing that we need, not growth in GDP.
• Committing to actually tackling inequality by taxing wealth, top incomes and financial transactions
• Giving people resilience and stability through a universal basic income and a proper living wage.
• Enacting the Socioeconomic Duty of the 2010 Equality Act
• Promoting fair work and economic democracy within a Green New Deal
• Putting children and young people at the centre of policy: recommit the country to ending child poverty; end selective education and remove charitable status from private schools; properly fund the comprehensive education system; enshrine in law universal free school meals and free holiday meals for families on benefits; and close the digital divide

Labour needs to act fast and boldly, with energising urgency, to make sure that the policies needed to tackle the climate emergency are politically acceptable to the public because they can see that they are part of a transformation to a fairer, better society in which they and their children and grandchildren can flourish.

What inspired progressive political change in the past was a vision of socialism, embodying the belief that a better society is possible for all of us.  The loss of that ideal has meant political hope has dwindled for so many.  Labour must build a new vision, firmly built on the foundations of an egalitarian and sustainable society.

Kate Pickett is a social epidemiologist, co-author of ‘The Spirit Level’ and ‘The Inner Level’ and co-founder of The Equality Trust.

Richard Wilkinson is Professor Emeritus of Social Epidemiology at the University of Nottingham Medical School, Honorary Professor at University College London and Visiting Professor at the University of York.

This article is published with permission from Labour Tribune MPs. It first appeared in a collection of essays published by Labour Tribune MPs in 2022 entitled “THE CHANGE WE NEED : How a Starmer Government can Transform Britain”

Further Reading

Wilkinson RG, Pickett K. The Spirit Level: Why Equality is Better for Everyone. London: Penguin; 2010.

Pickett KE, Wilkinson RG. Income inequality and health: a causal review. Social Science & Medicine 2015;128:316-26

Wilkinson R, Pickett K. The Inner Level: How more equal societies reduce stress, restore sanity and improve everybody’s wellbeing. London: Allen Lane; 2018.

Greater Manchester Independent Inequalities Commission. The Next Level: Good Lives for All in Greater Manchester, 2020: https://www.greatermanchester-ca.gov.uk/media/4337/gmca_independent-inequalities-commission_v15.pdf

Pickett K, Wilkinson R. Post-pandemic health and wellbeing: putting equality at the heart of recovery. In: Allen P, Konzelmann SJ, Toporowski J. The Return of the State: Restructuring Britain for the Common Good. London: Agenda Publishing, 2021.

Wilkinson R. If it doesn’t work for people, it won’t work for the planet. Club of Rome, 2021: https://www.clubofrome.org/blog-post/wilkinson-inequality-sustainability/

Reed H, Lansley S, Johnson M, Johnson E & Pickett KE. Tackling Poverty: the power of a universal basic income, London: Compass, 2022. Available at: https://www.compassonline.org.uk/publications/tackling-poverty-the-power-of-a-universal-basic-income/

Johnson M, Nettle D, Johnson E, Reed H & Pickett KE. Winning the vote with a universal basic income: Evidence from the ‘red wall’. London, Compass, 2022.

Picture credit: flickr

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The omni-shambles of Liz Truss was more than an ideological experiment backfiring. It was the culmination of 12 years of ineptitude, marked by the weakly opposed fleecing of the social fabric through austerity, and forty years during which rentier capitalism has become entrenched. While Rishi Sunak will delight his friends in the financial markets, the reactions to the crazy mini-budget demonstrated two realities: first, Britain lacks economic and social resilience, and second, fiscal policy is in disarray.  

For the past century, social democrats have supported a model of society in which high and progressive taxes on income and consumption have been justified as the means of reducing inequality and poverty while paying for a growing array of state benefits and public services. For many decades, that prescription served them well, assuring regular electoral victories.    

Since the 1990s, that has ceased to be the case. The political right may not have won the intellectual or moral argument, but their prescription of low income and consumption taxes has had increasing popular appeal, draining support for the left from those gaining from tax cuts, even if they still support public services and benefits.

It is no use the left lamenting the passing of that era. It must reinvent fiscal policy. To do so, it must recognise once and for all that the income distribution system of the social democratic decades of the 20^th century has broken down irretrievably. Whether there is high or low GDP growth, most of the extra income flows to the owners of property, financial, physical and intellectual, while less and less goes to those who rely on labour. That applies in countries where unions are strong as well as where they are crippled. This is an era of rentier capitalism.

Moreover, in the globalised economy dominated by finance, it is easy for high-income recipients to avoid income taxes. They just use tax havens, as has been happening to a growing extent, as the Panama Papers and other evidence shows.  Across Europe, offshore wealth is about 10% of GDP nowadays; in the UK about 20%. The wealthy hardly pay income tax whatever the rate.

Labour and the left are too defensive

However, in response to cuts in income, consumption and corporation tax, the left has been defensive. This was symbolically demonstrated by Labour’s reaction to the regressive ‘mini-budget’ the new Truss government introduced on September 23. The budget lowered the basic rate of income tax to just 19%, starting after a tax-free allowance of £12,570. Immediately, Labour said it would not reverse the cut. It accepted a tax rate so low that financing public services would become even more problematical. There was not even evidence that the public wanted such a low rate. On the contrary, a survey found that 52% of the electorate favoured tax increases. Nor is there any evidence that cutting income or corporation taxes increase economic growth; they merely increase inequality.  

The questions one felt inclined to ask Labour were: How low a tax rate would you be prepared to tolerate before you squealed stop? And how are you going to pay for good public services and decent state benefits if you do not tax incomes to pay for them?

The more general question for the left across Europe is how to make taxation popular, progressive and functional. The answer should be based on overcoming the right’s populist trick, that taxing income is ‘disincentivising’ and a reflection of ‘envy’ by the losers in society against supposedly dynamic entrepreneurs and energetic ‘workers’.

Facing this predicament, progressives should opt for an eco-fiscal policy, one designed to dismantle rentier capitalism. Accept that high progressive income tax is out of date. Make it clear that income and consumption taxes are mainly for public services and infrastructure, including transport, defence, housing, schools and other social needs. Beyond that, restructure fiscal policy so as to make it a means of common justice.

Fiscal policy for the commons

It may seem esoteric, but we should start by reviving the idea of the commons, that is, resources and assets that belong to all of us, as commoners. Ever since the Justinian Codex of AD534, common property has been the base of common law. The commons include land, air, water, minerals, the sea, seabed and seashore, as well as commons bequeathed to us by previous generations. Yet all forms of commons have been taken or eroded illegitimately, through enclosure, spoilage, privatisation and financialisation. The left should demand that commoners be compensated for that plunder.

Words and how the narrative is presented matter. The term “levy” should be used rather than “tax”, to indicate three distinctive features – that it is not a tax on labour, work or consumption, that it is designed to indicate it is a cost imposed on those taking from our commons, which belongs to everybody equally, and that the revenue from it will be recycled as Common Dividends on common wealth.

So, what should be covered by eco-fiscal policy? Start with a progressive Land Value Levy (LVL), which should start on landholdings of above the typical garden size, to avoid it being dubbed ‘a garden tax’, and thus politically difficult. A progressive LVL is further justified by the fact that the value of land has jumped as a share of non-financial assets, partly due to globalisation and speculation by global finance. Across the OECD, land now accounts for over a third of non-financial wealth, and in the UK has risen from 39% in 1995 to 56% today.  

Then introduce a Wealth Levy, probably instead of inheritance tax, excluding land if there is an LVL. In European countries, wealth is taxed much less than income, wealth inequality has risen relatively to income inequality, and a majority of wealth is inherited, definitionally unearned. Even a 1% wealth tax would raise huge revenue, and be harder to avoid than income.

Next, following Sweden’s lead, there should be a high Carbon Levy, a tax on carbon emissions that are causing climate change and acidifying the oceans. According to the IMF, only a fifth of global emissions are covered by proper pricing. A carbon levy would transform the atmosphere into a regulated commons. And we know that the rich cause most of the pollution, while low-income groups mainly bear the costs, including in ill-health. 

By itself, a Carbon Levy is potentially regressive, in that paying for emissions would be a higher share of a low-income person’s income. It would only become progressive if all the revenue were recycled to all commoners equally. The way to ensure that is to channel the revenue into what could be called a Commons Capital Fund, from which all usual residents would be entitled to equal Common Dividends. Here is not the place to go into details, to ensure independent governance and so on. The point is that progressive should shift to eco-fiscal policy and build mechanisms to ensure outcomes are progressive.

Next, eco-fiscal policy should target rental income gained by exploiting the commons. Here we should salute Norway, which has just announced a ground rent on industrial aquaculture, (salmon farming), as well as on hydropower. Given that major aquaculture firms only pay about 50% of production costs, the rest being borne by local communities and surrounding ecosystems, the proposed 40% levy could be copied in other European countries where fish farming is booming. As proposed in my new book, the principle could be extended to sea fishing, seabed mining and offshore windfarms.  

Among other levies should be a Digital Data Levy. The Big Tech corporations make billions of dollars from our work, in us providing them with information all the time we use electronic equipment. They are taking rental income from the information commons. That should be shared, justifying a Levy on their advertising revenue, put into the Common Fund, as it would only be fair if everybody received an equal share of the revenue.

The left should play on the right’s ideological contradictions. They justify shareholder capitalism by claiming that shareholders (principals) pressurise managements (agents) to pursue long-term growth. That had some veracity decades ago when the average time a share was held was seven years; today it is under six months and falling. So, a Financial Transactions Levy would incentivise what the right claim to want, and it would be progressive.

Similarly, a Market Concentration Levy would be a form of anti-trust measure. The right say they are opposed to monopolisation as contrary to a ‘free market’. But conglomeration has resulted in a sixfold increase in the average mark-up of prices over production costs. So, to combat conglomeration, a levy should be imposed on profits of corporations that take more than 20% of their market. This would be better than a ‘windfall tax’, since it would address a structural fault.                    

Regressive subsidies

There is also the other side of fiscal policy that receives remarkably little attention in progressive economic thinking, that is, government subsidies. These are really a ‘negative tax’, and are mostly regressive. A progressive fiscal policy would take an axe to thousands of selective subsidies that governments give to special interests. I have identified 1,190 in the UK. If the right claim to believe in ‘free markets’, then giving distortionary subsidies is hypocritical.

One sphere where subsidies are particularly damaging and regressive is fishing subsidies, mainly for fuel to enable industrial fisheries to carry out ‘long distance fishing’. The World Trade Organisation trumpeted an agreement reached in mid-2022, but all it did was ban some subsidies for ‘illegal’ fishing, which is an oxymoron. The WTO even removed reference to ‘harmful subsidies’ from the agreement’s final text. Globally, $35 billion is spent on such subsidies. They are causing fish population collapses. In Britain, the government spends £120 million a year on them, to no good effect.

The resort to subsidies during Covid was an opportunity for the left to be consistent, by applying a ‘progressive stress test’, that a fiscal policy should only be supported if it does not increase inequality. The job furlough schemes failed that test miserably. But most leftish parties vociferously supported them, as did unions. It was predictable from the outset that they would intensify inequality – giving far more to the salariat than to the precariat – and be subject to massive fraud. They also propped up numerous ‘zombie firms’.

More generally, progressive politicians have gone along with bail outs of companies deemed ‘too big to fail’.[i] In effect, commoners pay for the socialisation of investor losses. Worse, the left has not opposed the globalisation of the US intellectual property rights regime, which enables corporations to make monopoly profits for 20 years through patents and for much longer in the case of copyright and industrial designs, even when patents are the result of publicly funded R&D, which means the public bears the risk. This was brought out shamefully by the vast profits earned on Covid vaccines. At the very least, the public should have an equity stake in any patented product if public money is used to subsidise the R&D.          

Progressives should also oppose implicit subsidies to capital. Under the Investor State Dispute Settlement process, multinationals can sue governments if in their view reforms threaten their future profitability. So, as has happened, if a government introduces anti-pollution measures it can be sued for hundreds of millions of dollars. This should be scrapped, saving revenue that would increase the fiscal space.      

Similarly, the Energy Charter Treaty (ECT) should be scrapped. It dates to the 1990s and ironically was drawn up to help ex-Soviet countries by protecting investors in their oil, gas and coal industries, by obliging governments to compensate companies if reforms hit their potential profits. Today, five energy companies are suing European governments for almost E4 billion over restrictions being placed on coal, oil and gas projects. If they win, Europeans will see their taxes diverted to paying them, while further disincentivising energy firms from efforts to decarbonise. Progressives should be demanding a reform of the ECT.

In sum, in this potentially transformative moment, progressives in Britain and across Europe should reposition fiscal policy to dismantle rentier capitalism, contribute to ecological revival and reduce inequalities.

 Guy Standing is Professorial Research Fellow, SOAS University of London and a Council member of the Progressive Economy Forum. He is author of various books, including The Precariat: The New Dangerous Class and The Corruption of Capitalism: Why Rentiers thrive and Work does not pay.

[i] Consider British Steel, owned by Chinese capital. After receiving £780 million in subsidies, it is in negotiations with the new ‘free market’ Business Secretary, Jacob Rees-Mogg, over a new subsidy of £500 million, supposedly so that it can keep afloat. As an act of political expediency, one understands. But it shows the hypocrisy behind the ideology. Also, it is hardly pro-growth to prop up loss-making capital.     

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A detailed report in the Financial Times this morning lays out the options being considered by new Prime Minister Rishi Sunak and his likely Chancellor, Jeremy Hunt, ahead of the fiscal statement on October 31.

Aside from a hint that Sunak may want to move the date – unlikely, given the close match between PM, Chancellor, and Treasury on the core issue of austerity – there are some further details on the likely headline messages. Intriguingly, this includes:

His plan is likely to appeal to Sunak because much of the fiscal pain will not be felt until after the next general election: it will set out a fiscal consolidation that will aim to have debt falling as a share of gross domestic product in the fifth year.

Parking cuts until after the next general election is what Labour’s then-Chancellor Alastair Darling attempted in 2009 and his final Budget of 2010, after Gordon Brown had been brow-beaten by the Treasury into accepting strict austerity measures. (These were then worsened by Chancellor George Osborne, after the Coalition government was formed in May 2010.)

But the detail on the debt target is interesting. I’d earlier suggested – because it’s an obvious wheeze – that shifting the government’s “fiscal mandate” from having debt falling relative to GDP after three years, to debt falling relative to GDP after  five or seven would significantly reduce the so-called “black hole”. (The “black hole” is entirely the product of the forecasts, and the government’s own fiscal rules: change the forecast, or the rules, or both, and the so-called “black hole” shrinks or even disappears.) It’s difficult, without the official Office for Budget Responsibility forecasts, to know precisely how much more room: but even with higher interest payments on debt, past experience suggests it could be substantial.

It looks like this is what the Treasury is going to go for. The outcome would be to reduce the immediate pressure on the government to cut, and so allow it to palm off any spending cuts until after the election. Combined with “delaying” capital spending, freezing the tax thresholds so that they don’t move with increasing pay, and perhaps even extending a windfall tax – and suddenly the “eye-watering” cuts Hunt threatened last week look less difficult. Cue media plaudits for Sunak’s sound economic management, and a fighting chance for the Tories at the next election.

Trapped

But this also creates a thorny issue for Labour as it draws up its next manifesto. There are already voices from the party’s right urging at least temporary support for austerity, seemingly in the belief that this will make the party look “responsible” in the eyes of some ill-defined group of swing voters, or perhaps just to the Tory press.

The model here is Gordon Brown, who (in)famously stuck to Tory spending plans for the first two years of the Labour government after 1997 – increasing spending fairly sharply thereafter. The belief on the party right is that a period of some pain could be tolerated if it then allowed a Labour government the space to increase spending afterwards.

But this isn’t 1997. Back then, with the economy growing, wages rising, unemployment falling, a comparative squeeze on public spending – miserable though it was – could be masked by rising prosperity more generally. That doesn’t apply this time round. No credible forecast would suggest anything other than a worsening of economic conditions – here and across the world – over the next two years. And of course things could get radically worse: gas supplies in Europe could be seriously curtailed by Russia, a Chinese recession would drag the world economy backwards, the global financial system is creaking and of course the cost of living crisis is unlikely to get significantly better.

It is not even remotely plausible for Labour to think about its next period in office as if the 1990s had never ended. Instead, the party needs an immediate plan for the recovery: delivering serious increases in real living standards – meaning money in people’s pockets – as rapidly as possible: minimum wage increases (I favour £15/hour, in line with party policy); benefits uprated; public sector pay improved. After that, think about what the big investment plans look like. And to make sure the whole thing hangs together, go for serious tax increases on the rich, and hammer out a fiscal framework that gives enough space for a government to borrow, whilst keeping the costs of doing so as low as possible. (A rolling deficit target, over five years, would be preferable to any debt to GDP target.)

It’s not easy. The Tories are likely to recover under Sunak from their current debacle – they would be unlikely to do much worse than present. The British economy is weak, amongst the weakest in the developed world, and the signs from the global economy are worsening. Expectations of change from a new government will be high. Labour’s room for manoeuvre, unlike the 1990s, will be tiny.

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