Gerry Hassan: What Labour in power will mean for the United Kingdom

The scale of their unpopularity means that it is increasingly likely that next year will see the election of a Labour government led by Keir Starmer.

Labour have a consistent 15-20% lead in the polls, sustaining the pole position for more than two years since the first allegations about Boris Johnson and “partygate” emerged in late 2021. Through all the change and churn of the past two years – the end of ­Johnson, Liz Truss and Trussonomics, the ill-fated fag end ­premiership of Rishi Sunak – the Tory vote has broadly flatlined and as the election gets closer shows no sign yet of recovery.

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The prospect of Labour and Starmer taking ­office is not only probable but may well happen in ­inauspicious circumstances. The state of the UK economy and society has been fractured by failures of thirteen years of Tory governments – and longer-term failures of British capitalism such as the ­dominance of the City of London and finance capitalism.

The UK economy is now locked into a low wage, growth, investment and productivity death loop which is fuelling decline and stagnation. UK ­incomes are £10,700 per year less than if growth had ­continued at levels of the previous Labour ­government. ­Inequality is now greater than any other developed country – the USA notwithstanding – and generational and ­regional divisions are increasingly seismic.

Despite Tory failure and the abject crisis of the ­British economic model, what is the alternative ­offered by Labour? Under Starmer and Rachel Reeves, Labour offer reassurance of “business as ­usual” and no change from existing Tory tax and spending plans, which came as no surprise, as Chancellor ­Jeremy Hunt deliberately created impossibly tight ­spending projections to entrap Labour in future.

Labour have no coherent critique of what has gone wrong with the UK economy and long-term prospects. Instead, they pose superficial answers about more growth, ­efficiency and public service modernisation. This week Reeves confirmed a new City panel of ­experts to advise the party, confirming that Labour has been voluntarily captured by the City of London and ­finance capitalism. Shadow city minister Tulip ­Siddiq at the same time boasted that “City firms want stability from Labour, not a whole new set of rules”.

Missing is any analysis that the City of London ­increasingly holds the UK back by “overcrowding” the real economy via speculation, short-termism and offshoring – none of which are about long-term ­investment and support for businesses and growth. Related to this, previous Labour governments until Tony Blair and Gordon Brown recognised that this was reinforced by the concentration of power in the Treasury with its fixation on controlling public spending and by the lack of a government department devoted to growth and economic prosperity.

Add to this, recent comments by Starmer and Reeves on public spending, public services and ­immigration policy, and the gap between Labour and Conservatives is being reduced every day – and in places becoming minuscule to non-existent.

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“The policies of government and opposition are largely attempts to recalibrate the status quo, to patch and mend the existing system,” notes ­broadcaster Robert Peston.

What is tragic is that Labour have been here ­before, clinging to so-called “classical economics” ­orthodoxies under the first two Labour ­governments of Ramsay MacDonald and Philip Snowden in the 1920s and 1930s. This saw the party fixated on balancing the books and unable to cope with the ­Depression and unemployment, ­eventually forcing the party from office, with MacDonald leaving to join the Tories.

Despite this, there is a concerted push for a minimalist agenda from Labour to not over-promise. John McTernan, ­formerly Tony Blair’s chief of staff, last week posed that the outcome of the next election was decided and that because of this Labour should campaign on the ­simple message: “Get them out. We will fix it.”

Numerous former New Labour ­grandees are swirling around, advising Starmer and the leadership with Blair, ­Peter Mandelson and Alastair Campbell the most notable. Just as damaging there are (unlike previous Labour ­governments-in-waiting after long periods of Tory ­dominance, such as 1945, 1964 and 1997) no major intellectual currents and strands that inform a centre-left critique of the status quo.

For example, in 1945 Labour had the two Beveridge Reports on the ­welfare state and full employment; in 1964 ­numerous critiques of “the stagnant ­society” and outdated practices; and in 1997 the ideas of “stakeholder ­capitalism”.

Despite their poll leads and Tory turmoil, Labour still faces numerous challenges to form a majority government. Labour face an electoral mountain to win – even by the thinnest margins. They need to win a minimum of 123 seats to gain a majority of one according to John Curtice. This is something they have only done post-war in 1945 and 1997; Labour needs a swing of over 13% from the Conservatives, something never previously been achieved – and without its previous banker of safe Scottish seats.

The multiple crises that the UK faces – economic, social, democratic – raise profound questions about the ­efficacy of government, public bodies and ­public institutions. An incoming Labour ­government will face tough choices from day one that will disappoint some of their supporters. They will have little wriggle room for manoeuvre in terms of public spending and services – or for ­redistribution. All while respect and trust in the institutions of government and ­politics to advance the common good have fallen and are nowhere at the level they were when Labour previously ­entered office.

In an ideal world, the election of a ­Labour government in the above ­circumstances could be a catalyst for ­radicalism. Yet looking at examples of history it is more likely to be a ­factor in reinforcing Labour caution and ­conservatism.

Every post-war Labour ­government has been elected after a period of ­crisis – 1945, 1964, 1974 and 1997. 1945 is an ­exceptional case that many in ­Labour cite as a blueprint, forgetting that it ­followed five years of the party in ­wartime ­coalition; in effect running the domestic “people’s war” and building up an ­expertise in how Whitehall worked.

Wins in 1964 and 1997 both came ­after long periods of Tory rule which saw ­Labour posing as the party of ­democratic renewal. The only near comparison for 2024 is February 1974 when the UK ­economy and society were engulfed in crisis, division and disputation, combined with the questioning of the legitimacy of ­government and public institutions.

Then Labour came to office as a ­minority government under Harold ­Wilson which became a narrow majority of three seats when he went to the polls again in October 1974. Labour governed in a climate of tempestuous domestic and international conditions. Any radicalism the government initially had was thrown overboard as it managed stormy ­economic waters.

As Labour tried to govern during 1974-79 an increasingly emboldened right-wing critique of what was wrong with Britain gained steam which ­eventually crystalised into Thatcherism. It put forward a prognosis of “the British disease” and a cure to heal it – tearing up the pillars of the managed society which characterised post-war Britain.

Pre-1979, and prior to the election of Thatcher (above) as PM, this critique had already established its intellectual and political dominance. One example of many was Labour PM Jim Callaghan embracing the merits of monetarism, stating that the days of UK full employment were over.

History rarely repeats itself in a ­completely tidy way, but 1974-79 is a warning for a Labour government ­elected in 2024 that may well have a slender to no majority in the Commons. ­Numerous challenges – economic, fiscal, social, ­domestic and international – will ­constrain it and are even more severe than 1974 without mentioning the ­damage done by Brexit.

A new Labour government will also face opposition from a virulent, ­xenophobic and illiberal politics of the right, even more legislation motivated by ­performative cruelty (increasingly ­influential in the Tory Party), right-wing think tanks and media.

It is not unimaginable that if a Labour government is broken by the challenges and storms that it faces then an even more “nasty party” Conservatism and right-wing ideological politics will return with a vengeance to complete what they see as “unfinished business” of Thatcherism in tearing down the last remaining vestiges of the post-war social contract.

Labour’s emerging programme as it stands is limited, timid and falls well short of what is needed in the circumstances, designed as it is partly to placate right-wing vested interests. Gone is the confidence of previous Labour eras – 1945, 1964, even 1997 to an extent – that Labour can be the party of the future and remake Britain in a progressive direction.

Labour’s economic programme may be draw from economist ­Mariana ­Mazzucato and the notion of an ­“entrepreneurial state” actively ­intervening in markets, supporting collaboration and ­partnership to aid a more dynamic and more ­socially and environmentally conscious ­capitalism, but it lacks any real teeth in terms of institution building – or concrete ideas to change business and a systemic critique of British capitalism.

Labour radicals once had an ­explicit idea of a different kind of British state. This was the thinking behind Labour’s National Plan in 1964, the ­Department of Economic Affairs to challenge ­Treasury orthodoxy and the Industrial ­Reorganisation Corporation, and in 1974, Tony Benn’s vision of a ­National ­Enterprise Board and industrial ­strategy which was emasculated by Wilson’s ­centrism. Labour’s aspirations to change the nature of the state, business and ­capitalism went with the grain of the times, with Harold Macmillan after 1959 and Ted Heath after 1970 trying and ­failing with Tory policies along somewhat similar, if less interventionist, lines. All this was brought to an end by the ­ascendancy of Thatcherism.

Labour currently have no interest in ­aspiring to a different kind of state. ­Besides this, they seem to accept that their highest goal is to put back together a ­competent neoliberal state and ­settlement at the core of British government, albeit one with a small amount of mood music social democracy.

On top of this, the UK that the Labour Party seek to govern is not only bitterly divided economically and socially, but deeply divided between the nations and regions that make up the UK. There is now no such thing as a homogeneous ­British politics, and the Union Labour seek to keep together is creaking, ­cracking and increasingly fragmented.

A future Labour government not only needs to remake the undemocratic British state, but address the democratic deficit at the heart of English governance, and how Scottish, Welsh and Northern Irish self-government could work better. This terrain will provide an opportunity for the forces of Scottish and Welsh self-determination and Irish reunification. Amongst many differences, all three need to speak to those yet unconvinced, understand and respect pro-Union sentiment, develop detailed plans on democracy, the economy and social justice, as well as addressing the politics of transition and risk.

Labour used to stand in their 1945-75 heyday for the idea of the Union of the UK as a means to an end – that end ­being a more social just, fair and open ­society. But in the 2014 referendum, Scottish ­Labour backed themselves into the corner of defending the Union as an end in itself – in effect, parroting the Tory unconditional pro-Union line and having to live with the consequences in 2015 of their near total wideout north of the Border.

Despite everything – the history of ­episodic Labour governments; ­dominance of the Tories across the arc of the 20th century onward; the ­reality that the current dispensation of the ­British ­political system, state and electoral ­system works in the Tory self-interest – Labour can still not stop believing in the current system of government and ­politics.

LABOUR still cling to the wreckage of the British state, to first-past-the-post, ­parliamentary sovereignty and ­Westminster absolutism as much as the Tories do (for whom it works). Such a ­political opinion unites the ­Labour ­leadership and Tory ­Brexiteers – though the ­former believes that a majority ­Labour ­government can hold monopoly ­political power on a minority of the vote. The ­Gordon Brown Constitutional ­Commission, rather than being a vehicle for democratisation, decentralism and pluralism, holds on to traditional Labour totems of believing in the Westminster ancien regime.

Labour faces a narrow window to achieve government with a convincing majority and, once there, to ­successfully transform the UK. They also face a Tory Party which despite all their ­fissures and ­infighting never fully give up and ­voluntarily relinquish power (in the way Labour have done ­several times in ­office – 1951 and 1979 being examples).

As academic Tim Bale observes in his study The Conservative Party After ­Brexit, the Tories in the post-war era faced three previous points – the 1940s, 1960s and 2000s – when it looked like they were heading for electoral oblivion and exclusion from office for a significant period, only to regroup and come back.

The Tory Party can never be underestimated, and a party defeated in 2024 could be back sooner than many think; more ­vicious, nasty and punitive and prepared to run a horse and cart through checks and balances and international law.

Labour need a more ambitious ­economic, social and democratic offer. One which champions a more equal, dynamic economy with a vibrant ­social contract which underpins solidarity and redistribution. Yet on issue after ­issue, Labour are wary of taking on “the right-wing blocking machine” of the ­media, think tanks and dark money in the City.

Without reform and ­democratisation, Labour in office can expect – in journalist Will ­Hutton’s words – to face “new heights of feral bestiality inhibiting their every act in government”.

This is a politics which ill-serves the party, consigning it to operating in the right-wing paradigm of recent decades just as it has become discredited. It will be more than ironic if Labour in office cling to the zombie capitalism, economics and politics which have done such damage to the UK, as its threadbare, unjust and unsustainable nature is becoming increasingly obvious.

The Tory Party era of dominance may be coming to an end, but Tory ideas live in on Labour who may end up ­trying to hold together a broken political and ­economic order, while the Tories in ­opposition paint themselves as the new insurgents prepared to take on elites and vested ­interests, taking Britain and ­British ­politics even further to the ­extremes of the right.