It has been said of Boris Johnson that he is now “more Castro than Castro” and that the economy is now more “socialist … than at any point in British history”. This is, of course, plainly not true. Socialism is normally understood as common ownership of the means of production, distribution and exchange – with power in the hands of workers and citizens, rather than shareholders – and the fundamental aim of a society of equals. The temporary expansion of state spending during a global pandemic is obviously not the same, and the current government is plainly relaxed about inequality.
Yet it is hard to overstate the scale of that expansion. Between March this year and next, the Office for Budget Responsibility forecasts an increase in government borrowing of £372bn. That’s three times the annual budget for the entire NHS or about 15% of the entire UK pre-pandemic economy. So what are the wider implications of this expansion in state spending?
Unlike the bailout of the banks during the financial crisis, the government has not nationalised large companies nor sectors of the economy: there has been no demand for shares in British Airways or Primark, or any meaningful conditionality imposed on recipients of loans such as the chemicals giant BASF, which received £1bn from the government. Conditionality is perhaps what might have differentiated a putative Labour government’s economic response to the pandemic from that of the Conservatives. Labour would probably have demanded a raft of changes to businesses – from workers on boards, to curbs on executive pay, to profit-sharing schemes – in return for bailouts from taxpayers. This government has simply doled out the cash with little serious consideration of meaningful economic reform. Cash could be found to encourage eating out in restaurants during a global pandemic, but not for providing meals to impoverished children.
In economic terms, the pandemic is best understood as an epic, simultaneous supply-side and demand-side shock. Demand has collapsed as incomes have dropped and workers fear for the future, and at the same time the labour market has ground to a halt as normal working patterns have been disrupted. Structural shifts – such as the move away from high streets and hospitality to home entertainment and online shopping – are set to destroy hundreds of thousands of jobs, probably for ever. This is why the V-shaped recovery predicted by the Bank of England in May is nothing more than a pipe dream. And it’s why a vastly expanded role for the state in the economy is here for the foreseeable future.
There is an argument that the state taking centre-stage in the economy will necessarily help the left rather than the right of politics. But the political consequences are in fact counterintuitive. The expansion in state spending is likely to help the party in government rather than the opposition. Here’s why.
A central Tory strategy since Thatcher has been to use state spending to secure the support of particular parts of the electorate. Privatisation was a political strategy before it crystallised into an economic ideology after-the-fact: public assets were cynically sold off and the receipts were used to fund large tax cuts aimed at Tory voters. Council houses were sold at a discount to buy the support of working-class voters.
In the past decade, successive Tory chancellors have been sure to divert resources to purchase the support of the over-65s through the pensions triple lock, even as budgets elsewhere were slashed. The expansion in state spending now presents new opportunities for the Tories to bribe voters. Witness the far greater support given through the furlough scheme to salaried employees than to those in insecure work who were in much greater need.
What’s more, the expanded role for the state presents a major challenge for the Labour party to differentiate itself from the government. The traditional social democratic method – higher state spending within the same framework – simply won’t cut it when spending is already ballooning. Promising to spend more becomes rather meaningless, even if Labour is able to win day-to-day tactical advantages.
This leaves Labour with two choices. It can either outflank the Tories with an agenda of deep economic reform to overhaul the fundamental basis of the economy, not just the size and scope of the state. Or it can try and position itself, in opposition to the explosion in expenditure, as the new fiscal hawks.
Last week Labour chose the latter, claiming that the government’s missteps would cost £110bn or “£4,000 for every household”, in an increasingly familiar attempt to secure tactical advantage. But attempting to seize the mantle of fiscal responsibility by channelling George Osborne circa 2009 is unlikely to succeed as a political strategy.
When, in the mid-1990s, Gordon Brown promised that an incoming Labour government would stick to the Tories’ spending plans, he was neutralising a perceived weakness in a context where a thriving economy meant Labour could offer to share the proceeds of growth. Today, the economy is in a deep recession and the recovery is likely to be long, slow, uneven and unequal. Fiscal rectitude is an obviously inadequate response that would leave Labour splashing around in the shallow end of politics.
Moreover, if Labour vacates the territory of economic reform, then it narrows the arena of political contest to the so-called “culture war” and managerial competence. The problem for the opposition is that the Tories have the full power of the state to pursue that war – witness the pathetic abuse of power by the Charity Commission that is now investigating the National Trust for examining the colonial history of its buildings, for example. Labour knows it can’t win on cultural issues; at best it remains mute, and at worst it ends up on the wrong side of principled issues, demoralising its own supporters, as when it failed to oppose the “Spycops” bill.
And so, by deduction, Labour has narrowed its politics to a contest over managerial competence. With a prime minister out of his depth and a tired government devoid of talent, it ought to be relatively straightforward to persuade the public that Labour might be more capable. But promising to be a more competent – and even more compassionate – version of the Tories is unlikely to build a broad enough coalition to carry Labour to power. Competence cannot animate a political project.
For all its petty spitefulness and superficiality, politics is an intellectual endeavour at its core. It demands insight into the present condition of the country and deep thinking about how to forge a better future. Those hard yards are the real work of opposition. Labour needs to show that the flame of ideas that illuminates politics has not been extinguished and can shine brightly once more. The alternative is more years of Tory misrule, where the price is paid by those who can afford it least.
• Tom Kibasi is a writer and researcher on politics and economics