A Different Economy for Britain

Article excerpt

Across Europe the centre-left has suffered defeat after defeat. Former support has swung to populist parties, nationalist parties or the greens - that may sound familiar.

The old reason for voting social democrat - getting a good deal for workers in a market economy by restraining the private sector - became harder as wealth creation stuttered. The replacement strategies - adopting liberal economic policies, investing in supply-side measures like skills, and redistributing the tax receipts - have run their course of effectiveness.

The result is the three challenges Ed Miliband has set out (Miliband, 2011a):

* the squeezed middle - that large group of people working on low and middle incomes who feel that the rewards of hard work, paying taxes and playing by the rules are too little, in contrast to both those who enjoy stellar salaries not matched by results, and those who claim benefits too easily;

* the British promise - the nagging and deep-seated fear that our children will not enjoy better lives than we have done because we cannot pay our way in the world;

* strong communities - recognising the myriad ways, including changing workplaces and working lives, we sense our communities with strong social institutions and common bonds are being eroded.

Our election demands credible responses to those challenges. And that means an economy that looks and feels very different to today's: stronger in more sectors; globally competitive to pay our way in the world; offering fair rewards and creating shared prosperity; underpinning not undermining a strong society.

Labour's Business and Enterprise Review was launched in March. Months of intensive consultations with businesses, large and small, across the country, have helped shape our understanding of the challenges facing British business in the coming years. There is no doubt our review covers many of the critical economic, social and political issues underlying Ed Miliband's three big challenges.

While we have world class companies and huge potential, too little of our economy is globally competitive, across too few sectors of the economy. As Ed Balls has warned, the years of lost growth which George Osborne's fiscal reduction strategy look set to inflict on the UK may be lost forever as the BRIC countries and others Invest heavily. Our domestic economy has too many low wage, poor productivity jobs. We have an economy that simultaneously experiences both skill shortages and many people working below their capability and potential productivity. In turn this puts pressure on public policy attempts to compensate for a poor labour market.

Our economy must be more broadly based. It has to become more competitive in those key sectors where today and in the future we have the opportunity to be globally competitive in order to pay our way in the world. It needs to be better balanced, not just between the financial and other sectors, but between the regions and nations of the LJK.

Why it matters

At a time when last year's recovery has been choked off - with yet more disappointing GDP Q2 growth figures of just 0.2 per cent - it might seem churlish even to ask these questions. Surely, as the current government has argued in allocating the Regional Growth Fund to immediate job creation rather than any strategic purpose, any job is better than no job?

But while we have to be concerned about people having a job, we must also be concerned about what that job is. In the medium to long term, the nature of the growth and the jobs we create is crucial to the overall success of the economy and to those who work in it. Otherwise both the country and its families face a bleak future. The Resolution Foundation, using projections from the Office for Budget Responsibility, has estimated that median gross real wages adjusted by RPI are set to be lower in 2015 than they were in 2001 (Plunkett, 2011). The Governor of the Bank of England has talked of living standards falling for six years (King, 2011). …