• Labour's Covenant with the People


    Labour Together's editorials on the pressing issues of the day are based on the politics of Labour's Covenant. With a change in conservative leader, in this editorial, we look at the next steps for Labour.


    Labour’s conference comes in the wake of the death of Queen Elizabeth. The week that proceeded her death confirmed that we are a country both ancient and modern, with a people deeply attached to an ineradicable sense of our nationhood. The long queue that wound along the Thames was its democratic expression


    Labour is one of the great institutions of our constitution, able to represent both the radical and conservative dispositions of the British people. It has been one of the tragedies of the last decade that it lost this ability to represent both tradition and modernity. It has resided in opposition while whole swathes of the country were desecrated by deindustrialisation, austerity and an unfettered globalisation. As a new Carolingian age begins, the Labour Party too is at a turning point as it once again embraces the whole country, progressive and conservative, in a mission of national renewal.


    A new age of geopolitics has halted the advance of globalisation into national economies. Europe is waking up to find that it has outsourced its security to the United States, its energy to Russia and its manufacturing to China. Where once government were promoting the free movement of goods and services by getting rid of domestic regulations and the transactional costs of national borders, they are now concerned with national economic resilience, strategic assets, redesigning supply chains, and reining in national companies that do business with rival countries.


    Whatever Liz Truss, Kwasi Kwarteng and other believers in liberal economics argue to the contrary, it is no longer possible to conceptually separate the economy from society, national security, nature, energy, local places, or health. Nation states across the West are being forced to intervene to offset market failure, restore a semblance of national security, and take the first pragmatic steps in responding to the breakdown in their domestic social contracts.


    Nowhere is this more necessary than the UK where governments went further than other OECD countries in globalising the economy, selling off strategic national assets, marketising the public sector, and failing to keep control of key industries. Britain’s de-nationalised, consumption led growth model has left the country in a chronic state of disrepair. Over the last forty years half of the UKs population has barely shared in the growth of the economy. This summer, wages that have been stagnant or barely improving fell by 3 per cent.


    The British State is failing. The pillars of social order, an affordable and sufficient supply of food and energy, are under threat. As Helen Thompson argues, the energy crisis is structural, there will be no quick fixes. The sheer scale of the challenges are daunting.


    As the Conservative government attempt to replay the failed past, Labour has begun to address this crisis. Keir Starmer talks of the national economy, a significant shift from Labour’s past rhetoric in which the economy existed beyond control, place and territorial boundary. He acknowledges the importance of the everyday economy that sustains the daily life of every citizen. Shadow Chancellor, Rachel Reeves has reinforced his point: ‘We know that our national economy does well when the everyday economy is thriving’. Labour will help boost the national economy by using government procurement to increase the buying, making and selling of British goods. It believes in spreading economic power and re-engaging communities. Levelling up will be a priority of a Labour Government, backed up by an annual £28bn climate investment pledge over a ten year period.


    Alongside these proposals, Lisa Nandy, Shadow Secretary of State for Levelling Up, Housing and Communities, has been shaping a Labour narrative of national renewal. While its principal focus has been on local community wealth building, devolution of power, and local democracy, she has begun setting out a broader argument around political economy. Building new industries from the ground up, innovating new technologies, and improving public services will require a new approach to government. Nandy calls for a great rebalancing of power between capital and labour to spread wealth, security and opportunity across the whole country.


    Labour is tentatively signalling a new corporatism focusing on growth and productivity. But growth for growth’s sake is not enough. The old approach of growing the economic pie and then redistributing it won’t repair the broken covenant between government and citizens. A new model of economic growth is needed that improves the economic security and wellbeing of households.


    This is pragmatic rather than ideological policy making, a practical response to the crisis facing the country. However does Labour’s pragmatism precede a larger and more enduring paradigmatic change in economic policy making? Dani Rodrik, Professor of International Political Economy at Harvard suggests it might. A new bipartisan consensus is emerguing on both the left and right around what he calls "productivism". US Secretary of the Treasury, Janet Yellen has called this focus on increasing growth and addressing longer term structural problems, ‘modern supply side economics’.


    The emphasis is on production and investment over finance, and revitalizing local communities over globalization’. President Macron who took office as a neo-liberal technocrat exemplifies the new rhetoric: ‘there are goods and services that must be placed outside market laws. To trust our food, our protection, our capacity to cure the sick, essentially our framework of living, to others than us is madness. We must take back control of them.’


    Labour’s own pragmatic response needs joining up into a distinctive politics that can win over the millions of working class voters who either voted Conservative in 2019 or who abstained. This constituency voted for Brexit because they wanted a new model of government and a new model of the economy. The Conservatives have failed them. Labour now has an opportunity to turn its ‘Make Brexit Work’ into an ambitious and compelling story about the reconstruction of the national economy across the UK.


    ‘Starter policies’ can create the institutional framework to mobilise the three principal ingredients of money, people and power in a great national effort of creative energy and imagination. They must lay the foundations for a durable social and economic development continuous over a period of decades. This will include protecting and where necessary regaining control over industries, services and assets essential for the national interest.


    Labour will have to recognise that incumbent elites are entrenched in the institutional arrangements of the neo-liberal economy which provides them with wealth and status. It cannot ignore attempts to hinder or neutralise change. National reconstruction will require state-led action as well as social and economic development from the bottom up. And it must deepen and extend devolution and democracy to break up concentrations of unaccountable power, notably in England.


    Fundamental to national reconstruction will be the idea of covenant which puts the practice of reciprocity at the centre of social and political relationships. A covenant between government and citizen, state and families, and worker and employer is the principle for creating partnerships, sharing power, and ensuring greater fairness, responsibility and accountability. It will ensure that everyone can make a contribution to national prosperity with access to high quality education, health care and child and elder care.

    Here are 7 tasks of national reconstruction that will ‘make Brexit work’. Their aim is to build resilience and fairness into the economy, and so improve people’s lives.


    Rebalance the national economy across the UK


    Labour must be the party of the national economy. The function of the national economy is to supply every citizen with the basic goods and services that sustains daily life - the food we eat, the homes we live in, the energy we use, and the care we receive.


    The most effective way of improving national resilience and economic security is by upgrading and repairing the everyday economy which employs 40 per cent of the workforce of England and Wales and in which the whole population participates as consumers and service users. The everyday economy binds the UK together in the shared necessities of life. Labour can develop strategies to develop its often low skill and low wage sectors, with a focus on ‘liveability’ and the family household.


    Alongside this incremental economic development a new Companies Act would modernise the firm for a new period of economic innovation and social renewal by re-evaluating company stakeholders. It would include elected employee representatives on boards and renumeration committees in companies with more than . Trade unions have a major role to play in improving working life and achieving greater security for workers. Labour needs to work with them to develop a covenantal relationship of mutual obligations that works toward shared goals.


    Put culture and belonging at the heart of a new model of economic growth


    Culture is a principal resource of local social renewal and social order. People’s resilience and their readiness to act comes out of a sense of belonging and pride in their cultural inheritance. Parochialism is the wellspring of solidarity and enduring democratic change. But it requires safe neighbourhoods. Crime and anti-social behaviour shatters the thread of ongoing, normal individual life and destroys the sense of belonging in a community.


    Labour should prioritise crime, take culture seriously and address the widespread dismay at boarded up high streets, unsafe, ugly neighbourhoods, the loss of local shops, festivals, fairs and markets that once gave local places their unique character and history. These are not cosmetic issues. To a great many people they indicate the condition of the country and the regard government hold them in. National reconstruction means local cultural renascence and an expectation of safe neighbourhoods and protection from crime.


    Don’t separate economy from nature and land


    Like culture, nature is ignored or reduced to an externality by the liberal, utilitarian approach to the economy. Pollution continues to damage human and animal health, and ecosystems are collapsing due to deforestation, agribusiness and urbanisation. The rising influence of environmentalism has recovered the idea that human beings are and remain part of nature. An environmental covenant recognises that human beings are both of nature and have responsibility for it.


    The global climate is heading towards irreversible tipping points. Adaptation and lessening the impact of climate change, alongside a revolution in domestic, sustainable energy production are essential steps toward national energy security. A similar systemic approach is required to develop domestic food production through a food strategy and a pro-worker and pro-nature approach to farming.


    Labour needs a new language and politics of nature, land and the environment that has popular appeal and which speaks about access to the natural world and improving the quality of people’s local environment, as well as global change. National energy security, cheap sustainable energy and jobs is a more salient message than ‘Green Industrial Revolution’.


    Invest in vocational education


    The education system, too standardised and class-bound, is failing to develop the kind of post-industrial diversity of talents, skills and capabilities the country needs to build itself. Vocational education has suffered grievously from class bias, business neglect and long term government failure. In recent decades, a ready supply of cheap, EU migrant labour ‘capped wage inflation in some sectors’, and provided a disincentive to firms to innovate, to invest in new technology and to train staff. Mass immigration from the EU contributed to incentivising the low skill, low wage, low productivity economy.


    The end of free movement brings a tighter labour market and an opportunity to develop a national and devolved system of vocational education and training, fit not only for the automation and artificial intelligence of the new digital machine age, but for developing the everyday economy of retail, utilities, care and public services. As technology gets more sophisticated, as robots take on more human functions, so human understanding, skill and ingenuity will become ever more valuable.


    Improve the capitalisation of development banks


    A UK wide ecosystem of venture capital and entrepreneurial activity is a vital component of economic growth and levelling up, but it remains concentrated in the South and areas of existing prosperity. In the following decades the whole country needs irrigating with capital through regional banking to grow local enterprise, connect with innovation, and create wealth.


    The British Business Bank, a successor of the original Industrial and Commercial Finance Corporation is underpowered, undercapitalised and lacks strategic purpose. The UK Infrastructure Bank suffers the same predicament. Both need a review of their charters. An improved system of local wealth strategy boards is needed to bring together business, community associations, local councils, funders, and other interested bodies to develop local economic power.


    Create more effective and responsive government through devolution and reform of the central state.


    The Treasury and Whitehall function as blocks on change. The organisational cultures of the political parties reinforce this status quo. National reconstruction needs new approaches to governance and leadership, brokering and convening bodies and organisations across society and economy in new forms of common good politics and partnerships.


    While the dispersal of power and brilliant local social innovation encourages local people to take local control, they alone cannot redress the structural faults of the economy nor generate a new model of growth. This will require a strong developmental state sovereign over the UK which uses its legislative and executive power to take on vested interests and monopolies and mandate change for the common good. Labour’s political challenge is to create reciprocal relationships between central government, the devolved administrations, regional mayors, local councils and local communities.


    Set up a council for social and economic development


    How does national reconstruction get done? Where does the agency lie within Government to sustain the development of its convening, brokering and covenantal approach to social and economic development?


    These practical questions are about how Labour does national reconstruction and where it puts responsibility for it within the institutional framework of government. There is a role for a new kind of National Economic Development Council that will drive forward national reconstruction from the centre. It would provide continuity across changing administrations, collecting and holding data for public access, and providing expert advice and support on levelling up.


    Successive governments can be structured to work toward social and economic development by requiring the Treasury to have regard to its development missions in the annual budget, or by specifying that the Charter of Budget Responsibility must set out a commitment to delivering these missions.


    Ready or not, change is coming


    After years of political turmoil people want a return to normality. In the following decade, the country needs stability and security to absorb and support radical changes in technology and economic organisation. It will need institutions that can nurture creativity and regrowth in what is a broad based services economy and the largest exporter of services in the world. A new model of economic growth will need a modernising everyday economy, and a rebalancing of the regions and the relationship of labour and capital. The country needs a new national story about its resilience and future opportunities, a mood of hopeful, constructive ambition that rises with the crisis and thinks and acts anew. The scale of national reconstruction is an historical undertaking. To begin this task Labour must build the electoral coalition that will support and sustain it.


    Read the last editorial 'After a decade of defeats, Labour has its path to power' and the complete series here. To read Labour’s Covenant click here.