No repeat of ‘education, education, education’ under a Starmer government

There’ll be no repeat of Tony Blair’s ‘education, education, education’ by a Starmer government. For Blair and Gordon Brown ‘education’ became a key economic policy.  Getting ‘qualified’ would, it was argued, sharpen people’s ability to take advantage of opportunities in the new global economy, whereas those who didn’t would be left behind.  In other words, education was seen as a crucial investment good. Able to enjoy more favourable economic conditions, Blair and Brown spent lavishly on a ‘school improvement’; imposing national targets, establishing specialist schools and academies, creating new applied qualifications, the list could go on.

But if the UK economy continued to grow during the Blair years, it wasn’t the result of these initiatives, seen by many in education as divisive, even destructive if the damage done by Ofsted is factored in. The optimism of the New Labour education agenda certainly did not lead to large increases in employment in high skilled, well-paid jobs. Meanwhile, the reckless expansion of the finance sector (lauded by Blair and Brown) led to the 2008 crash. With the Tories imposing a decade of austerity as their answer to rising debt levels, progressive post-war education policies were reversed.

Shadow Chancellor Rachel Reeves used the recent Mais lecture to set out her version of how Labour will grow the economy, but also to distant herself from the policies of the Blair years.  Reeves calls for a ‘new model of economic management’ to address issues faced by the British economy after 14 years of Tory stagnation with Mais providing more detail about Labour’s ‘interventionist’ policies.

There’s now a growing economic consensus that post financial-crisis and post-covid, if you want economies to grow there must be a more active and new ‘supply-side’ state.   This is the argument of esteemed economist Janet Yellen, now US treasury secretary in the Biden administration. Buying into this analysis, Reeves says Labour will amongst other things, initiate a Norwegian style National Wealth Fund and a state-owned energy company.  There are also promises to renationalise the railways when current franchises expire and a commitment to reduce labour market precarity, inequality and insecurity through a ‘new deal for working people’. In contrast Blair didn’t want anything that resembled Old Labour public sectorism, or interference with market forces. Though not openly attacking Blair, Reeves considers this approach ‘too narrow’. Apart from a brief reference to poor basic skills and gaps in vocational education, ‘human capital’ arguments are largely absent.

For the new supply siders, Bidenomics has pointed the way, with a significant fiscal injection allowing the US economy to expand more quickly than elsewhere, even if many would criticise the way this has been done, particularly the emphasis on subsidies to private corporations rather than more European style public ownership. But in sharp contrast, Labour won’t commit to any major increases in public spending and is already back peddling on its green agenda. For example, the Biden stimulus will result in an extra $375 billion for green industries, compared to Labour’s £24 billion over the full parliament.

Labour justifies its reticence by hiding behind self-imposed ‘fiscal rules’. This demonstrates the extent to which neo-liberal thinking continues to imprison the party and particularly the importance of ‘balancing the books’ and paying off government debt. Reeves and her front bench team argue that unlike the Tories, their rules allow borrowing to invest. Yet this is all rather meaningless when another rule decrees that government borrowing as a proportion of GDP has to reduce over the life time of a parliament.

A little more investment isn’t going to be enough to make major improvements to public services, particularly the NHS over a five-year period; while implementing a proper Green New Deal would be a ten-year project and mean spending billions.  Yet even if it’s own rules put Labour in shackles, it could give itself more fiscal space by increasing taxes on the rich, which as is now well known, it refuses to do. (Indeed, Labour has given commitments not to raise income tax or NI for anybody; so, it will be going into the election continuing Tory spending plans).

Some will argue that Reeves and Starmer’s caution is understandable in the face of right-wing media power, threats from international currency dealers, the debacle around Liz Truss and so on and that once the election is won, rules are made to be broken. (John McDonnell operated with fiscal rules he’d inherited from Ed Miliband and Gordon Brown and once in power, would have found it almost impossible to have implemented his tightly funded programme.)  But if Reeves optimism about the willingness of the private sector to take the pressure off state finances by part funding major projects is misplaced, for UNITE’s Sharon Graham it’s simply ‘for the birds’

Yet predictable responses of the powerful feed off and re-enforce public ignorance about how the national finances can be any different to those of the ordinary household, where too much borrowing can only be rectified by reigning in spending.  Even many left activists, including Labour members have trouble challenging these basic assumptions, let alone confronting some of the deeper issues surrounding the ‘debt fallacy’.

Professional economists, including many ‘progressives’, don’t really try to make their subject more assessable to non specialists, while Reeves continues to use her previous employment at the Bank of England to assure Labour’s potential voters that ‘I know best’ and that the economy will be in secure hands. A new alternative and popular economics is urgently needed.