Category Archives: Labour’s policy review
‘Ending the gap between classroom and career: Labour’s next steps in skills and higher education reform’ – my speech at the City of Westminster College – 7 July 2014
This morning I gave a speech to the City of Westminster College entitled; ‘Ending the gap between classroom and career: Labour’s next steps in skills and higher education reform’.
See the full text below:
Ending the gap between classroom and career: Labour’s next steps in skills and higher education reform
Speech by Liam Byrne MP, Labour’s Shadow Minister for Universities, Science and Skills
Monday 7 July 2014, City of Westminster College
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It’s a huge privilege to be here at the City of Westminster College’s Paddington Green campus.
As the grandson of a college principal I feel very much at home.
It’s a privilege to be with those who share my grandfather’s passion for learning that changes lives.
And it’s a privilege to tell the story of someone who shows us just what that change can mean.
Catherine was homeless when she enrolled here.
She’d leave a nearby shelter each and every morning, making the daily trip to and from this very campus.
By night, she’d study under torchlight, dreaming of a way out, dreaming of a way in which she could make her life better.
And she did just that.
Ladies and gentlemen, Catherine graduated in 2011.
She’s can now pay rent, support a family and live the sort of comfortable life that so many of us take for granted.
Her energy, her commitment, her belief were the driving forces behind her remarkable achievement… but without the values and virtues of this College, the City of
Westminster College, there would have been no ladder to climb.
So Catherine has a lesson for us:
We have to ensure that everyone, regardless of their circumstances, has a real choice to change their lives with education.
Without that real choice, we’ll hear less stories of lives changed – less stories like Catherine’s.
And that’s what I want to talk about today.
With under a year to go until the next election, the battle of ideas is taking shape.
The Tory-led government’s script is already clear.
And so are its flaws.
As I said last week they might boast of a recovery – but it’s not a recovery for the many.
Families will be £974 a year worse off in 2015 than they were back in 2010
What does that mean in practice?
It means we have to work harder – it’s an extra fortnight every year at the moment – just to stand still.
Why? Because that old curse, the ‘British Disease’ is back.
That crisis of low productivity that haunts industry and makes it ever harder to give your staff a pay rise.
Since the last election, output for every hour worked hasn’t gone up.
It’s gone down.
Output per worker?
Not up, but down.
Did you know that today’s crisis in productivity is actually far worse than it was the end of the 1970s?
The damage to our global position is huge.
We’re now 21% less productive than the G7 average.
What countries in the G7 finish making on a Thursday, takes us till the end of Friday to complete.
If there is a global race, we are well and truly losing.
We can’t go on like this;
Thankfully, over the last fortnight you heard the voices now calling for a change of course.
The IPPR’s ground-breaking condition of Britain report sets out a path back to full employment, especially for our young people and our parents.
Mike Wright’s review of manufacturing and the supply chain is making clear the role of government in bringing together sectors to plan long term to boost skills and lower our cost base
Lord Adonis’ breakthrough report arguing for a radical devolution of powers and resources to our city regions.
John Armitt’s call for a new approach to infrastructure.
Our own launch of a review into science and innovation policy.
And tomorrow Ed Miliband is speaking at the Sutton Trust’s conference on the importance of high quality vocational education
When you boil it down, our argument is simple:
Big reform, not big spending
An inclusive prosperity for this century
As Ed Balls puts it: “more good jobs, boosting skills and long-term investment as we restore the broken link between the wealth of the nation and family finances.”
Now the sharp-eyed amongst you will have noticed that running through every single report, every single major statement of the last month, running like a golden thread is the challenge of skills.
And that is why you are so important.
Your country needs you like never before.
The years ahead should become a golden age for educators.
When your passion for learning and your mission of service put our country on a new and better path.
It’s now very clear that skills are the key to a Britain that grows more, firms that employ more, and workers who earn more,
How much evidence do we need?
The inextricable trends in trade and technology, discussed so eloquently in books like the ‘Second Machine Age’, sound the death-knell of ‘routine’ jobs
The Migration Advisory Committee has added 117 high-skilled roles to the shortage occupation list.
British business has had to sponsor over 282,000 skilled people into Britain – that’s the same size of Newcastle – because they couldn’t find the skills here.
But look at the future and the skills crisis looms larger still.
In the UK, between 2012 and 2022, it is projected that we’ll need:
Over a million more people in professional occupations
Nearly 600,000 new managers, directors & senior officials
The Royal Society of Engineering tells us that we’re delivering 36,000 too few engineering graduates every year.
Mike Wright says that the country’s automotive and aerospace industries will suffer if there isn’t a greater focus on improving the level of domestic engineering skills in the
Andrew Adonis describes the skills shortage as the “single most important impediment” to British businesses
How many more times do we need to hear it?
The tragedy is that great firms want to bring back work to Britain.
I can understand why.
When I left Business School in America, there was only one place I’d consider to build any business.
Here is Britain.
It’s one of the best places in the world to build a business.
And lots of people want to do more.
In fact, PWC says that ‘re-shoring’ could create 100-200,000 extra jobs over the next decade, adding £6-12billion onto GDP.
What’s standing in the way?
A lack of skills.
This is what KPMG said is stopping too many jobs coming here.
And here’s the tragedy for workers.
Extra skill means extra pay.
Analysis for BIS shows the difference in earnings between a high quality level three apprenticeship and a GCSEs, is £117,000 over a lifetime.
But for most it’s a degree that’s the key to a middle-class life.
Economists may disagree on what technically constitutes ‘middle-class’, but the marketeers tell us it’s the difference between earning £37,000 and £47,000 a year.
That’s the kind of earning power a degree level qualification gives you.
On average, degree holders earn more than £100,000 more than someone with only two A-Levels.
Shifting more people into ‘top gear’ with a degree is one of the best things we can do to earn our way out of this cost-of-living-crisis.
But, right now it’s too hard for students to shift into ‘top gear’
There’s the traditional degree route which is well-established and open to half of our young people, thanks to changes that Labour made in office.
But what about everyone else?
More and more want an earn-while-you-learn route into higher-level skills.
Yet look at the figures: the number of under-25s starting on an apprenticeship isn’t rising, it’s falling under this Government.
In the last year alone, we’ve seen 11,400 fewer young people starting an apprenticeship.
That’s why Ed Miliband has made it a central mission to change the future for the forgotten 50% who today do not have a good enough or clear enough choice of high
quality vocational education.
They do not have enough apprenticeships and there’s no real vocational route to degree level technical and professional qualifications.
Right now a vocational route to higher-level skills is like navigating rapids: risky, a bit haphazard with a high risk of drowning.
First up, it’s very hard to get your foot on the ladder.
Last year, there were 11 applications for every apprenticeship vacancy.
That means it’s now twice as hard to get on an apprenticeship as it is getting into University.
High-quality apprenticeships, where firms are prepared to sponsor you to degree level skills are even harder to win.
It’s almost three times more difficult to enrol on a Rolls Royce apprenticeship than going to Oxford.
For BAE it’s 2.5 times harder than getting into Cambridge
So we have frustrated companies and we have frustrated workers
We need a new way forward.
A path that’s pro-company and pro-worker.
So today I want to out some principles for change.
First we have to accept the big, bold principle of devolution for skills that Andrew Adonis has set out.
Today I want to say more about how that might work in practice, and as I do I want to say a huge thank you to my advisory group, co-chaired by the Rt Hon Stephen Timms, Rushanara Ali, and advised by, amongst others, Cllr Keith Wakefield, Leader of Leeds and Cllr Sue Murphy, Deputy Leader of Manchester City Council.
Let me say at the outset that as we give employers and LEPs and Combined Local Authorities more say over how skills funding is spent, no-one is advocating for the proliferation of funding agencies, handling cash or contracts or countering fraud.
Second: We think the role of employer-led sector bodies, built on reformed SSCs and their industrial partnerships, are critical to fostering a ‘something-for-something’ deal with big employers and their supply chains to drive up apprenticeship numbers.
So we’ll give employers, working collectively through reformed sector bodies, more control over the standards and assessment criteria for training in their sectors, and enable them to broker a significant share of the £1.4bn apprenticeship budget to address their skills needs.
In return, we will ask them to work to drive up the number of high quality apprenticeships in their sectors and supply chains – and we’ll use the power of public procurement to help.
Large firms will need more apprenticeship to win big government contracts. Full stop.
Third: Combined Local Authorities and Local Enterprise Partnerships should shape the broad goals for adult skills in their neck of the woods.
To win this freedom, these authorities will have to show us that they are up to the job and Andrew Adonis has set out some tests for quality governance.
But I think these broad plans will have some important things in common.
First, they should include what Lord Adonis calls Business Hubs – and what I’ve described in this post as City Apprenticeship Agencies.
One stop shops that provide information and advice in particular to small and medium businesses with a real focus on support for apprenticeship recruitment.
It’s a model like we’ve seen in Leeds – a solution that’s seen apprenticeship numbers doubling in the city.
In an age where SMEs are creating jobs five times faster than big business, we need solutions that works for all firms, regardless of their size.
So in the future, if I run an SME in Birmingham I will have on my doorstep, a hub that can offer me advice on how to set up a high quality apprenticeship with a choice of apprenticeship arrangements: some put in place by sectors nationally; or as a service delivered locally.
Second, we want LEPs and combined local authorities (CLA) to shape some goals for the adults’ skills in their area.
Back in December 2006, Sandy Leitch set down an important principle: “The skills system must meet the needs of individuals and employers. Vocational-skills must be demand-led rather than centrally planned”
This is an important principle.
But for the £2.4bn 19+ Adult Skills budget we need to bring a better balance to the ambitions of learners on the one hand, and the ambitions of business to employ them.
So: we desperately need better information and guidance so ‘demand’ is better informed.
We need a different relationship with DWP, as you see work so well in Germany, where students are far better informed about the local world of of opportunity.
But I think we also need LEPs/CLAs and providers together to forge the kind of ‘Outcome Agreements’ that are tried and tested in Scotland and over the medium term, aim to eliminate the skills gaps in a demand-led system.
Third, I think there is a need for the CLAs/LEPs to directly commission what you might call a strategic core of skills, where serious local skills gaps have been identified.
This flexibility is absolutely critical in a world where we envisage Combined Local Authorities and LEPs are taking a much bigger role in co-commissioning Work Programme contracts.
This will – for the first time ever – ensure that skills provision meets the needs of local areas, balancing social and economic demands with identified areas for growth.
Many parts of Britain, including my own constituency, have very high-levels of unemployment alongside firms crying out for skills.
Mike Wright of JLR has spoken about JLR’s challenges.
Yet on the south side of the M6, half a mile from the Castle Bromwich gates is my constituency with the highest youth unemployment in Britain. The balance between the ‘commissioned core’ and the ‘market margin’ will obviously look different in different places.
Giving local areas the flexibility and freedom to commission against local labour market priorities will help us join up the skills system and the welfare to work system for the first time.
Naturally, there is still a great deal for us to work through, and I look forward to those discussions ahead.
Already clear is that two funding systems, split between the adult and young people’s skills budget, is a complex set-up.
So we’ll want your advice on whether to move post-19 funding to a per-student, not per-qualification basis, as works for under-19s and in Scotland.
The changes we propose offer the chance of a creating a far stronger ‘triple track’ for skills, for young and old alike.
Some will want to take the well-established academic route from A-Levels through to University
Others will want to progress through the vocational track, with opportunities to move through colleges specialising in delivering technical and provisional skills, on courses better aligned to the needs of local employers.
And we hope many more will secure high-quality apprenticeships with high-quality training ahead.
But every track will need to offer something more.
A surer route to higher-level skills.
Back in 2006, Sandy Leitch advised an increased focus on L5 and above skills.
Yet today it’s incredibly difficult to take an apprenticeship or college route to degree level professional and technical skills.
Just 2% of apprentices are given the chance to study to degree level each year.
None of our competitors are making the same mistakes.
Back at the end of the 19th Century, the huge explosion of our university system was in part driven by the need to equip a new generation of businesses and a new generation of workers with the skills to shift into ‘top gear’ with the qualifications that can unlock a middle class life.
Beginning with the creation of my alma mater, Owens Colleges, Manchester in 1851, eleven universities were opened over the course of fifty years with a clear empathy for the German model, pioneered by the University of Berlin in 1810, and what Rev. J Percival described as:
“Teaching [the people] things which would help them in their occupations”
In the years that followed, science and engineering expanded whilst classics declined until finally under the pressure of World War One, a modern relationship was finally forged between government, academia and business.
This was a spirit and a purpose which Harold Wilson rediscovered in his famous ‘white heat’ speech.
Before the 1964 election, Labour’s Higher Education Study group concluded:
‘Economic expansion is only possible if university and technological education expands rapidly and continuously to provide the necessary brain power and skill’.
This was the analysis that inspired the great explosion of Polytechnics.
Today, we want colleges, universities and business to come together in a new alliance as they did in the 1960s.
Not in two different worlds. But in one, world-class system.
We want to open many routes – not just one road – to a degree and the better life degree level skills can open.
When we were last in office, we began the job of reform.
Bill Rammell gave colleges the right to apply for powers to award foundation degrees.
John Denham pioneered the Workforce Development Programme.
But the truth is today there are many rocks in the path of building the vocational path to degree level professional and technical skills.
Over the months ahead, we want your advice on turning this ambition into action.
Every so often in British politics, we arrive at this point where we see the skills challenge in a stark and profound way.
Back in 1944, Lord Percy, Rector of the Newcastle Division of Durham University put it like this: ‘the position of Great Britain as a leading industrial nation is being endangered by a failure to secure the fullest possible application of science to industry; and second that this failure is partly due to deficiencies in education’
I couldn’t put it better myself. And we are determined to change it.
There is no other way to a prosperity that is inclusive.
And a recovery for the many and not the few.
Thank you very much.
I wanted to let you know about the Royal Society’s excellent Vision report for science and mathematics education. You can access the full pdf copy here.
Published on Thursday, just two days after our science green paper, this is an insightful reminder of the kind of ‘supply line’ of science which our country needs if we’re to see science and innovation-based growth.
Just like our science green paper (which you can read here) this report sets out a number of concerns that the Royal Society has about the state of science in our country. Research for the report highlights some of these concerns. For example; in 2011 57% of university science staff reported that practical skills of new undergraduates had declined in the previous five years and just 13% of young people in the UK study mathematics beyond the age of 16.
Great Britain has a glorious scientific history. Many of the scientific discoveries and innovations that have shaped our modern world were made here in the UK. But this status as a world-class player in science and research is now under threat.
As Sir Paul Nurse sets out in his introduction; if we are to continue shaping the world in the centuries to come we need a plan for science and maths education which can; “…enable people to make informed choices, empower them to shape scientific and technological developments, and equip them to work in an advanced economy.”
I am pleased to say that the Labour Party is already committed to maths education until 18 and I am sure we will be looking very closely at some of the other recommendations that this report makes.
I met with Prof Jim Al-Khalili, one of the board members behind this fantastic report, earlier this week. We discussed the report as well as our science green paper; ‘Agenda 2030: One Nation Labour’s Plan for Science.’
My speech to Parliamentary Links Day 2014 – Launching Labour’s Green Paper on Science – 24 June 2014
It was an honour to launch Labour’s Science Green Paper, entitled: Agenda 2030: One Nation Labour’s Plan for Science and Innovation, this morning at the annual Parliamentary Links Day 2014.
You can read the paper here.
My speech is in full below:
Strengthen British Science and Strengthen Britain
Launch of Labour’s Green Paper, Agenda 2030: One Nation Labour’s Plan for Science and Innovation
Rt Hon Liam Byrne MP
Speech to [Parliamentary Links Day], House of Commons, London. Tuesday, 24th June 2014
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It is a tremendous honour to help mark the greatest day of the year for science in parliament.
I want to pay an enormous tribute to Dr Stephen Benn and the Society of Biology for helping bring the day together.
I want to commend you all for the way so many people and so many organisations have come together from across the worlds of science and engineering to talk, debate, speculate and lobby and leave us here in parliament with fresh impressions, fresh analysis and fresh evidence of how important both science and engineering are to the future of our world.
I want to thank you above all for the inspiration of your example.
I count myself as very lucky to have known an extraordinary scientist from a very young age.
She was a biologist and a teacher and a head of science at comprehensive schools including my own.
She was someone who inspired in me a lifelong wonder for science, a curiosity, and an admiration.
Ruth Byrne was not only my teacher, she was my mother.
And when she died at the age of 52 from cancer of the pancreas, she left me not only with a sense of scientific possibility but a sense of how much work still lies ahead.
Science and Parliament
Your theme this year is about Parliamentary links to Science and Engineering. I want to offer you a view about how we cement science and engineering centre-stage in the run-up to the General Election. As we are in Parliament I thought it would be apposite to reflect on the way science and engineering, industry and politics come together today and the relationship that lies ahead.
Around 300 years ago, a very great writer left London on his travels around the country to write a book, which is today one of our finest records of Britain on the eve of the industrial Revolution.
Daniel Defoe’s ‘A plan of the English commerce, being a complete prospect of the trade of this nation’ paints a portrait of a country amidst tremendous change.
‘The most flourishing and opulent country in the world,’ he called it and the cause he said was clear; ‘Trade’ and its two daughters, ‘Manufacture and Navigation’
Defoe suspected that for all the advance he saw, something bigger was coming.
And he was right.
By the time ’A Plan’ was published in 1728, the Royal Society, founded in Gresham College, was 50 years old. Sir Isaac Newton, its great master, had died the year before and in Birmingham, one of founders of the industrial revolution, Matthew Boulton was born.
Over the next six decades, Boulton, together with his friends in the Lunar Society in a story wonderfully told by Jenny Uglow, took the traditions and methods of those great founders of the Royal Society and fused them to industrial method, helping trigger the industrial revolution.
A nation of explorers and traders quickly became a nation of inventors and industrialists. The worlds of science and industry were irrevocably connected.
Back in the early days of the Enlightenment, the French writer Diderot had observed that uniquely in Britain:
‘philosophers are honoured, respected; they rise to public offices, they are buried with kings’.
Well, it wasn’t long before we were putting great inventors and industrialists like James Watt alongside our philosophers and our kings.
But it was to take another century before science and industry were really fused with the dirty and difficult business of politics.
From the 1850s and 1890s, concern with the state of our science base, and the state of our schools gathered pace until under the burning pressure of world war one a real partnership came together;
- The Department of Scientific and Industrial Research was founded in 1915.
- Universities came to play a mission critical role in the work effort and crucially a new alliance between science, industry and government was hard-wired together.
And we’ve been trying to get the relationship right ever since.
Now that alliance has never been more important.
The scale of the problems, which I realise are merely solutions in disguise and which we are tackling today, are simply too big for one scientist, one university, one company, or one government to tackle alone.
The new partnerships that you see in such spectacular collaborations like the Gaia One Billion Star Surveyor, or the Hadron Collider are gigantic incarnations of the same ethos and approach that drove the Lunar Society, but they are global in scale.
These journeys of curiosity, exploring the endless frontier, are rightly your principal concern.
But there is a second reason the alliance is so vital.
Your country needs you.
Searching for some inspiring words for today’s speech, I stumbled across these in the House of Commons library last week;
‘the position of Great Britain as a leading industrial nation is being endangered by a failure to secure the fullest possible application of science to industry; and second that this failure is partly due to deficiencies in education’
Those were the words of Lord Percy, Rector of the Newcastle Division of Durham University, reporting to the government in 1944.
They could have been written last week.
Two years later, Lord Barlow agreed;
‘If we are to maintain our position in the world and restore and improve our standard of living’ he wrote ‘we have no alternative but to strive for that scientific achievement without which our trade will wither’.
What was true back in 1945 is true again today.
The Challenge Today
Our old enemy, ‘British disease’ is back with a vengeance.
That traditional crisis, of extremely low productivity while other nations streak ahead, now scars the recovery and haunts industry, making it even harder to escape today’s cost-of-living crisis.
Producing more with less, as every business owner knows, is the key to doing well and the fastest way to give your workers a pay rise.
But look at the figures today.
Since the last election, output for every hour worked has not gone up; it’s actually gone down. Equally, output per worker has not gone up. It’s gone down. We’re actually less productive than we were four years ago.
This appalling record is far worse than the last years of the 1970s, long deemed the moment when ‘British disease’ reached its peak but a period when output per worker, and output per hour worked actually rose by over 5%.
Worse, we’re now falling rapidly behind our competitors. The gap in productivity per hour between the UK economy and G7 average is now 21 per cent – the widest gap there has been since 1992.
This is absolutely fatal for any escape from the cost of living crisis. If companies can’t produce more then it’s not easy for firms to give their staff a pay rise.
As someone who started work behind a fry station in McDonalds, I know that any job is better than no job.
But I also know that a good job is better than a bad one and right now we’re simply not producing enough good jobs.
Today, the average full-time worker has to work an extra one hour and 52 minutes a week in 2013 to earn what they earned in real terms in 2010.
Look at our ‘knowledge economy’ and it becomes clear what is going wrong.
Economists and scientists now know that science and research is the key to growing productivity.
As the breakthrough report from Research Councils UK put it;
‘The greatest long-term productivity advances come through breakthroughs in basic knowledge’.
In the US, the authors of the Gathering Storm remind us that 85% of growth in wealth per capita is driven by innovation.
The knowledge economy is the powerhouse of productivity growth, creating better jobs with better wages.
Yet, with the honourable exception of automotive and aerospace, which Labour did so much to save during the global crash, the story isn’t good.
Getting innovation policy right is not actually rocket science. It is about people, ideas and money. You need great people, great institutions and strategic investment.
Yet, look at what is happening in the UK.
In 2012, the last year data is available, UK investment in R&D by government and business together has fallen by nearly £1 billion – (£923M) – the largest annual fall since consistent records began in the mid-1980s.
Amongst advanced Western nations, Britain now ranks 23rd out of 33 in the league table of R&D spenders.
In our most important research industry – pharmaceuticals – which accounts for a quarter of all UK R&D spending, research budgets have fallen by a huge £467 million since 2010, that’s a 10% fall.
In telecoms, one of our other leading R&D sectors, budgets have fallen by 20% – that’s £240M.
Look at our great institutions.
In our universities, the great epicentres of science and knowledge, we have the world’s best thinkers.
But their labs and classrooms now rest on a mountain of debt. University borrowing will reach £7.3bn worth of debt by 2015, an increase of £1.8 billion from 2012. That’s £45.6 million for every university in the UK.
Vice-chancellors tell me that falling research budgets now mean that the brain drain has been gathering pace for at least the last 18 months.
And that’s nothing when we consider the black hole that’s been created in the finances of the Department for Business, Innovation and Skills by the Government’s unsustainable funding system.
The Public Accounts Committee now estimates that at current rates, students will be borrowing nearly £200 billion over the next twenty years to fund their studies and 45 per cent of this will be written off. It’s universities and our researchers of the future who will be paying the price.
And let’s not forget that other great institution that is important here.
The European Union.
European policy makers now understand that innovation is the only way out of austerity.
And the creation of the Horizon 2020 programme is proving crucial for the strength of British science, as UK universities, research centres and businesses can expect to receive £2bn in the first two years of the new funding round.
Leaving the EU, as some propose, would be absolutely catastrophic for science funding.
Third we must address human capital. The skills gap across the country grows worse. A fortnight ago, KPMG reported that skills shortages are bringing to a halt the plans of manufacturing firms to ‘re-shore’ work.
Since 2010, the number of people working in ‘Scientific research and development’ has fallen by over 12,000.
The Migration Advisory Committee has now added 117 high skilled roles to the shortage occupation list, which employers can fast track onto visas, because there are not enough skills in Britain.
The Royal Academy of Engineering estimates that we’re currently 36,000 short and at the rate we’re going there will still be big gaps to fill.
In our schools, Michael Gove’s disastrous School Direct scheme for teacher training has produced a huge shortage of physics teachers.
Half of state schools now send not one girl to do A Level physics.
Practical experiments have been taken out of the exam curriculum. The careers service has been destroyed. Apprenticeships for the under 24s are actually falling.
We cannot go on like this.
That’s why today I am pleased to be launching our green paper on science and innovation.
Our message is simple.
We need to strengthen British science – because British science will strengthen Britain.
We want to start a big debate on how business and government come together to grow the strength of science.
We want to work with the science and engineering community, in all parts of Britain to get the answers right.
We want to work across parties – because wherever we can maximise cross-party consensus we will.
We know that predictability and certainty are important; that they help make your work easier.
We want a new culture of science and evidence in public policy.
We want stronger universities with a bigger share of global science budgets and a bigger role in their regional economies.
And crucially we want to strengthen every rung on the ladder up into a science and engineering career for our young people.
As NESTA argued two weeks ago, the debate around science and engineering is seen by the public as vitally important.
In part, that’s because the public knows science, engineering and the business of innovation is key to the development of new cures for diseases, earlier diagnosis, greener, cheaper energy and crucially the jobs of the future.
The public knows that if we are not the pioneers then others will be.
If we don’t develop the jobs of the future, then others will.
And that will irreparably damage the opportunities of our children and our grand-children.
After all they are the very people for whom we want better chances than the chances that we enjoyed.
I think we know how futures are really built.
I think we learned that lesson a long time ago.
And now is not the time to ignore the lessons of history.
  http://www.nap.edu/openbook.php?record_id=11463&page=1. The 85% refers to the work of Robert Solow and Moses Abramovitz published in the middle 1950s demonstrated that as much as 85% of measured growth in US income per capita during the 1890-1950 period could not be explained by increases in the capital stock or other measurable inputs. The unexplained portion, referred to alternatively as the “residual” or “the measure of ignorance,” has been widely attributed to the effects of technological change
This morning I will be sharing our Green Paper on Science entitled – ‘Agenda 2030: One Nation Labour’s Plan for Science.’
If we are to build an opportunity economy with high skilled jobs and the wages to go with them then science and innovation have to be central to our strategy. Britain needs a long-term vision for science and this paper intends to start a discussion about what that vision should look like.
Please do read the document here and share your views.
With all best wishes
Download PDF here
View my slides here
Watch my speech on YouTube here
Inclusive Growth: How New Ambitions and New Alliances Can Rebuild the Opportunity Economy
Speech to Oxford Martin School
Rt Hon Liam Byrne MP
Thursday 5th June 2014
It’s a real pleasure to speak here at the Oxford Martin School today.
In a short space of time you’ve put yourselves on the map as a place of people thinking deeply about the most important questions of our day.
We admire you not just for your search for truth, but your search for action.
You not just looking for ideas. You’re looking for answers.
And in politics right now we all need more answers.
You’ve quickly acquired a leading role in the chorus line that shaped up in the last four years, chanting for change
All crises expose the flaws in the political economy of the day.
And this one is no different.
But if we’re serious about answers then we need to recognise that change can only come from renewing an alliance that is now a century old.
This year we mark the hundredth anniversary of the Great War in which so many of our young men and women lost their lives.
The war was not simply an appalling human conflict – it was a crisis that revealed profound weakness in the British economy – a weakness that forced business and government to work together in radical new ways to first win the war, and then the peace.
When Queen Victoria came home from the Great Exhibition in 1851, she confided to her diary that her belief that ‘we are capable of doing anything’.
In 1897, hundreds of thousands had gathered in London to mark Queen Victoria’s Diamond Jubilee.
‘I remember the atmosphere’ said the young historian Arnold Toynbee;
‘It was ‘Well, here we are on top of the world, and we have arrived at this peak to stay there forever’.
Yet within two decades, World War One exposed Britain’s comprehensive failure to master the key technologies of the second industrial revolution.
As Correlli Barnett put it
“… British manufacturers were behind other countries in research, plant and method.”
We lacked machine tools, fuses, a coal-tar industry, ball-bearings, magentos, aero-engines, industrial gauges and optical glass.
Before the war, many had been calling for change, not least the appliance of science.
From the 1850s, scientists and engineers were agitating for reform; the ‘Cambridge network’ of scientists pleaded for more science on university curricula; Parliamentary committees were formed, the magazine Nature was founded in 1869, and a National Association for the Promotion of Technical Education (1887).
Some nineteen enquiries were undertaken into the state of elementary schooling, public schools, secondary schools, universities, scientific instruction and technical instruction.
Others made the argument free trade reform; Joe Chamberlain’s pronouncement in 1902, that
“The weary Titan staggers under the too vast orb of his fate”
sparked nationwide debate about free trade reform – an argument ultimately defeated by the Liberal landslide of 1906.
And the fiscal crisis that followed the South African war, coupled with rising domestic spending provoked a fundamental reappraisal of Britain’s global defence strategy, acquiescence in the Munro doctrine in the Americas and the Anglo-Japanese alliance (of 1901) – in essence, a retreat from the both the Western and Eastern hemispheres.
With the exception of the gold standard, the basic nostrums of the Edwardian political economy – the night watchman state, free trade, ‘splendid isolation’ – were all acute pressure in the years before World War I.
But it took the crisis of the war to fuse together government and business into a new alliance to drive Britain into the modern, industrial era where, as Alfred Chandler memorably argued, scope, scale, science and skill were the keys to success.
Back in the 1895, the Conservative prime minister, Lord Salisbury was all too clear that he;
‘detested the new plutocracy of industrial and financial wealth’.
Thus, there was only one man with an industry background – Joe Chamberlain – in the Cabinet; and only one industrialist – Vickers – on the board of the Bank of England between 1890-1914.
World War One changed all that.
It was the moment when Britain realised that business and government had to become partners if the country was to fulfil its promise, not waste its potential.
And for the last century we’ve trying to get that partnership right.
Today’s crisis is very different to the crisis of a century ago.
A century ago, we were debating how business and government could together build a different kind of economy.
Then we sought to make the second industrial revolution work in Britain.
Today, we’re trying to make the digital revolution work for Britain’s people.
A model of inclusive growth.
Since the short, sharp financial crash and the long, deep ‘wage crash’ that has led to a cost-of-living crisis, consensus has grown about the need to re-connect wealth creation and social justice.
Both the IMF and the OECD have now warned of the economic risk of big, new inequalities.
In February, the IMF reported;
‘We find that inequality is bad for growth…in and of itself. And we can say that redistribution by itself doesn’t seem to be bad for growth unless its very large’
Last week, Christine Lagarde argued that:
“[only] by making capitalism more inclusive [can] we make capitalism more effective”.
Business schools and academics, like my old teacher, Michael Porter at the Harvard Business School are making the case for ‘shared value’.
Business leaders like the Blueprint for Better Business group are arguing for reform to foster both a renewal of trust and new, long term horizons.
Around the G20, both business and labour organisations are now hammering out an agenda for reform.
Business finds its echo amongst faith leaders and trade unionists.
Both the Archbishop of Canterbury and Cardinal Vincent Nichols have called for a revived sense of the ‘common good’ between business and society.
Trade unionists like Frances O’Grady are arguing for a re-discovery of the inspiration of ‘progressive change’.
It’s the principle at the heart of Labour’s ‘Agenda 2030’ as set out by Chuka Umunna – our plan for long-term balanced and sustainable growth which works for all.
Rebuilding the Opportunity Economy:
In essence, when you boil down what everyone is saying: one challenge looms large.
How do we rebuild the opportunity economy, not just for some but for all?
The bald facts for families here in Britain are well known.
The great wage crash is now almost proving as damaging to workers’ livelihoods as the global financial crisis caused by the banks.
The wage crash has now destroyed 8 times more real income since 2008 than the financial crash.
Average earnings are now £1,600 lower per year than they were at the last election.
The average family has to work two hours extra each week, just to make what they did four years ago.
All these gains in productivity and creativity haven’t been fairly shared.
They’ve gone to those at the top.
At this rate, most households won’t win back their pre-recession living standards until 2020.
Now we can debate why:
The economics of super-star earnings are now much better understood.
Others argue that a global digital marketplace gives successful entrepreneurs the ability to sell in a multi-billion big market at almost zero marginal cost.
Thomas Pinketty argues that over the long term, returns on assets always outstrips the rate of economic growth.
But while we can debate the causes, the results are pretty clear:
Last month, the OECD confirmed that here in Britain, we’re now one of three countries in the OECD where the majority of wealth created goes to the tiny minority of people; an honour we share with the United States, Canada and Australia.
Back in 1981, just over 6% of pre-tax income went to the top 1% -
Now the top 1% has more doubled their share.
90% of Britons now only enjoy just over half [54%] of total income – this means that 44% of the country’s total wealth is owned by just 10% of people.
If this is not fixed, we will confront not just a political crisis but a moral crisis.
Hard work isn’t just vital to the economics of our country, it’s vital to the ethos of our country.
The spirit and habit of hard work is deeply engrained
Not for nothing is Rudyard Kipling’s ‘If’, the nation’s favourite poem, with its call to
‘fill the unforgiving minute, with sixty seconds worth of distance run’
Today people feel like their run is like a hamster, sprinting on a wheel.
No matter how fast they run, they don’t get any further forward.
A few weeks ago, the Daily Mirror’s leader column had two stories; one about the record number of billionaires in Britain and the second about loan sharks preying on mums at school gates.
In cities like mine child poverty is spiralling.
I’ve just finished a major enquiry into child poverty in the city of Birmingham; the birth-place of the industrial revolution.
The stories I’ve heard are horrifying;
- We’ve heard NHS leaders in the city tell us more children are presenting in A&E having tried to take their own lives, driven by the pressure of poverty and stress at home
- We’ve heard how school secretaries ring the city’s food banks for mums in floods of tears who’ve dropped their children off at school without breakfast – and no food in the cupboards for dinner
- We’ve heard how many families face ‘scrounge week’ at the end of every month as they beg and borrow from friends and families in order to make ends meet
- We’ve heard of households where there are 3 or 4 people sharing a bed or a parent having to sleep on the sofa so that their child could sleep in the bed. Children going to school exhausted because there is no space for peace and quiet at home.
Yet most of the parents of these children are in work.
And, up the road, in Britain’s corporate bank accounts is sitting £440 billion in cash.
I ask you:
How did we create a country where corporate bank accounts are full – and childrens’ stomachs are empty?
Is it any wonder people feel ‘the deal has broken down’?
Peoples’ worries for their children and grandchildren are even more profound.
Young people today leave college with higher debts, take longer to find work, need to save more to buy an home, and then face longer to work before they retire.
The lack of good jobs today means that it is harder than ever to make a living by working hard.
Nearly 80% of the jobs created since the election are in low skilled sectors.
We’re becoming a low pay, low skilled, low value added economy, out-paced and out-boxed by new powers, rising around the world and old nations who, unlike us, have got their act together.
We can’t go on like this. We have to change course.
Our challenge is enormous: to rebuild the opportunity economy so that hard work gets you on in life once more.
The challenge of the future
If you are in any doubt about the need to get this done, then simply take a causal glance at the future….
Let me start with where you start; the future of work.
It’s no secret that there are some big forces at play.
Technology has now automated huge numbers of what were once, reasonably skilled, reasonably paid jobs.
And sometimes it feels like what technology hasn’t killed, trade has moved to those parts of the world where workers are cheaper.
In America, economists Autor & Dorn are amongst many who’ve reported there’s been massive substitution of those
‘low skill workers performing routine tasks – such as book-keeping, clerical work and repetitive production and monitoring activities – which are readily computerized because they follow precise, well-defined procedures’.
It’s created what some call the hour-glass; high skill jobs, and low skill jobs and very little in between.
This is exactly what is happening here in the UK.
Indeed, the Resolution Foundation tells us that jobs in sectors with a high concentration of routine tasks fell by 5% between 2007 and 2012.
But guess what: there may be an awful lot worse to come.
A book that a lot of people are reading right now is the Second Machine Age.
It’s a positive book and its argument is simple:
Our ability to combine technology – processing power, cheap sensors, robotics, networks, social media, big data, means we’re now at an inflection point in our ability to combine and recombine technologies to do new things, revolutionising technology from Google’s driverless cars to better diagnosis of diseases.
- There’s now enough technology in a Nissan LEAF to render the car a fly-by-wire robot, the kind of technology that could revolutionise the logistics industry.
- GE already makes robots that can climb and repair wind turbines.
- Future Advisor already uses Artificial Intelligence that’s strong enough to offer personalised financial advice.
- Algorithms are taking on tasks once performed by para-legals, contract and patent lawyers.
- Oncologists at Memorial Sloan-Kettering Cancer Care use IBM’s Watson computer to provide chronic care and cancer treatment diagnostics.
What’s does this mean for jobs?
Well, here at the Oxford Martin School, you estimate that as many of 47 per cent of the jobs in our economy today may be automated.
First technology took the blue collar jobs. Now it’s the white collar jobs as well. The challenge of building an economy of inclusive growth is about to get immeasurably harder.
As someone who spent has spent half a career in business and half in politics, I happen to think business and government need to solve this together – with an awful lot of help from you.
What we need is enlightened self-interest from business – and determination from government to use it.
We need a new alliance between business, government, unions and civil society, to rebuild the opportunity economy so that it works for working people once more.
Once upon a time, this was a common place – especially for those non-conformist entrepreneurs who transformed Victorian Britain.
In my home city, the Cadbury brothers helped show the way.
And in the years before World War One, it was the founder of Britain’s first great multinational, William Lever, who took up the challenge; putting in place the 8 hour day, profit sharing, secondary and technical education, pensions, homes in Port Sunlight, health insurance, and half pay sickness allowance.
In his biography, William Lever’s son quotes his father:
‘The truest and highest form of enlightened self interest requires that we pay the fullest regard to the interest and welfare of those around us, whose welfare we must bind up with our own, and with whom we must share our prosperity’.
The expression said his son ‘crystallises his business philosophy’
Putting ‘inclusive growth’ back at the heart of the opportunity economy can’t simply be left to business.
And it can’t simply be delivered by governments.
But together: we stand a fighting chance.
So the task of policy makers and profit makers today is to zero in the win-wins to build a settlement that is genuinely ‘pro-company, pro-worker’ (to use a phrase from my colleague Maurice Glasman).
So, to help the debate, I want to propose today five big win-wins we have to get right.
First: We all have to recognise that inclusive growth is hard without growth.
So raising growth and raising productivity has got to be the first step.
Here, we’ve got to boost demand and supply-side measures that boost the markets we sell to, and second, boost the supply of science and technology which we know is good for productivity.
Countries that trade more grow faster.
So in this post-Doha world, we should set our sights on new, ambitious trade deals.
The EU-US free trade agreement could add an increase in UK national income of between £4-10 billion annually, or up to £100 billion over a ten-year period.
The EU-China Investment Agreement could up to £1.8 billion in growth every year to the UK economy.
And here in Europe, we need to be realistic that countries running big trade surpluses like Germany, do not need to suppress demand, they need to do more to reform their domestic services industry so there is truly an level playing field.
In short, we need to finish creating the Single Market, as writers like Charles Grant at the CER, have been arguing for years.
Now, if we’re to trade more, then we need trade-enhancing infrastructure; roads, ports, high speed railway lines.
Here in the UK, our infrastructure investment rate still lags the OECD average.
The World Economic Forum ranks the UK twenty-eighth in the world on overall quality of infrastructure.
Congestion on our roads will add some £10 billion of business costs by 2025
Our rail network is overcrowded at peak hours, especially in the south-east and north-west.
Demand for shipping is forecast to outstrip port capacity.
If we want to trade more, then quite simply we need not just trade deals but a new deal on infrastructure.
To these demand side reforms, we need to add some supply side changes.
Crucially, we need a bolder plan to boost the supply of innovation and science.
Let’s be blunt.
Innovation is the only way out of austerity.
The best way to raise average wages here in Britain is to grow the knowledge economy, the home of those jobs that pay on average £161 per week more than the national average.
And so, when we set out our policies for science and higher education a little later this year, you will see one lode-star: an ambition to build here in Britain a bigger knowledge economy.
That’s not something you can deliver by passing a law or raising a budget.
It can only be delivered by business and government working together in new ways. It is therefore a win-win that we have to work out together.
My third win-win is ‘Patient Capital’.
Reform of financial markets is widely regarded as critical to creation of inclusive growth.
On the one hand, the thirst for short term profits drives dysfunctional corporate behaviour which damages growth and jobs in the long term, and on the other limits the supply of capital for longer term investment in both infrastructure and innovation.
PWC recently forecast that globally assets under management will top by 2020, over $100 trillion. But as Michael Lewes’ recent book, Flash Boys, makes clear, predatory behaviour is still alive and well.
So how do change investor behaviour?
If anything, argue Dominic Barton and Mark Wiseman;
‘the shadow of short-termism has continued to advance’
In their survey of 1,000 board members, they found that nearly two-thirds reported that pressure to generate short-term results had increased over the last five years.
Nearly 4/5 said they were especially pressured to demonstrate strong financial performance over just two years or less – yet almost all said that a longer term horizon would be better for performance, innovation and financial returns.
It echoes the findings of John Kay here in Britain:
“We conclude’ wrote John, “that short-termism is a problem in UK equity markets, and that the principal causes are the decline of trust and the misalignment of incentives throughout the equity investment chain.”
The key reform, argue both Barton and Wiseman, is to change the behaviour of the asset owners – pension funds, insurance firms, SWFs, and mutual funds – who in the US own 73% of the top 1,000 companies (in 1973, they owned 47%).
There’s a range of changes that make sense; defining long term strategy; allocating more to illiquid assets like infrastructure and housing; taking a bigger role in companies when things head off track, and crucially they need to start measuring different things – the kind of corporate performance that drives long term gain like staff turnover…
Now public policy has a part to play.
Ed Balls has called for:
A shift in the culture and professional standards in the banking sector; imposing duty of care across all financial services, and reform of remuneration practices.
That’s why Labour will call an end to mandatory quarterly company reporting, because we know this will curb short-termism in the City.
And Gregg McClymont has argued for a change in the rules of the game for our pension funds:
“If we want financial services that prioritise the savers’ interest, fiduciary obligations deliver these. Fiduciary obligations will most effectively be delivered in pensions where pension schemes are managed by independent trustees.”
Labour is also leading the drive for a British Investment Bank, supported by a network of regional banks, which will become a key source of investment for long-term innovation.
Our fourth win-win has to be around productive workers – and the restoration of a very simple deal: where workers do more to boost corporate profitability, then boards need to give them a pay-rise.
Work is key to inclusive growth – and skill is key to raising productivity and therefore wages.
The goal of full employment now has cross-party support and there is a widespread view that reform of the education and vocational education system is critical to closing the gap between the class-room and the successful career – in work.
Here in the UK, that means action to stop people falling too far from the labour market. That’s why we propose a jobs guarantee. We want more people to enjoy the right to go to university. But critically, we know that we have to build a vocational track to higher level skills.
All over the OECD, countries are modernising their apprenticeship system to help apprentices train to higher level skills.
Here in Britain, we send just 6% of our apprentices to degree level skills. That isn’t good enough and it’s why we’ll propose reforms of our higher education system to fix it, adding to the proposals we have already announced to boost quality apprenticeship opportunities.
More productive workers however, need to be better paid workers. And if they’re not then we have to ask ourselves whether corporate governance is in the right place.
Around the world, campaigners are fighting for a pay rise. In China, last year. In Seattle. In Switzerland. In Germany. And here Ed Miliband is leading the charge with plans to strengthen the national minimum wage.
When productivity and profitability is rising – but wages are falling, then something is going wrong; and that’s why arguments for a Living Wage have such resonance.
I’m very proud that my home city of Birmingham is determined to become Britain’s first living wage city
If we can do it in Birmingham, then we can do it in Britain, and Alan Buckle’s report has shown the steps we can take to spread the idea nation-wide.
Fifth, we obviously have to look at the competitive intensity of markets, and the ease with which new high growth market entrants can challenge the status quo
Broken markets are markets that foster oligopoly.
They’re bad for prices, bad for consumers, bad for suppliers – and we have to fix them.
Sometimes that means upsetting incumbents – but competition is good for business – especially the new businesses which create jobs.
Competition and enterprise are good for jobs. That’s why we need a competition health check on all markets and that is why Labour have promised to act on the broken energy market.
Indeed, policy-makers are now much clearer about the huge impact that high performing entrepreneurial firms can have on jobs.
Not too long ago, in fact NESTA argued that ‘the vital 6%’ of new firms may account for upto half of net new jobs.
That is a very powerful case for supporting that handful of new challenger firms that can change the way we do business and employ an awful lot of people along the way.
There are then two further big issues which are key to inclusive growth.
First, we have to make sure that no place is left behind.
And second, we have to make sure that the burden of paying for all this is fairly shared.
Finally, there are two fields of policy where politicians are perhaps more important – but where companies have a big stake to getting the policy right.
Here in Britain, poverty is now more spatially concentrated than ever before.
We cannot create a country of inclusive growth if swathes of our country are left behind.
Fostering a better balance between rich and poor areas is critical to creating a country where wealth is better shared.
There are no signs that this too may be a matter of cross-party consensus – at least on paper.
Lord Heseltine’s review of growth was an admirable attempt to sketch out a practical plan for re-balancing growth across the United Kingdom by letting local areas take control of their own destiny.
It was simply a shame that the government which commissioned Lord Heseltine then did their best to ignore him.
I can assure you that when Lord Adonis presents his plan on many of the same issues, we won’t ignore him. We will turn his ideas into action.
Finally, we cannot ignore the question of tax.
As the OECD recognised in their survey of top incomes, tax policy absolutely plays a role in determining who profits from growth.
Quite simply, government cannot support policies for more inclusive growth – like good education systems, or tax credits, or regional economic development – unless people pay their taxes.
And business leaders know that a good level playing field on tax policy, where tax avoidance is not used to undercut competitors – is key to good business, and higher levels of public trust.
Writing in 1926, JM Keynes in the End of Laissez Faire wrote:
‘Devotees of capitalism are often unduly conservative and reject reforms in its technique which might really strengthen and preserve it for fear that they may prove to be the first steps away from capitalism itself’.
A century ago, society, government and business came together to win the war.
And for all the mistakes, a very different kind of economy was born – and a very different kind of partnership between business and government.
It wasn’t strong enough to defeat old prejudices like protectionism or old ideas like the gold standard – that took the hard work of the policy makers at Bretton Woods.
Today, the debate about a new economy, a more inclusive capitalism, where work once again commands it’s just reward now has the potential to unite us, not divide us.
It’s time to get round the table and talk.
 IFS ‘Living Standards’ 2013 – http://www.ifs.org.uk/budgets/as2013/as2013_david.pdf
 OECD, Top Incomes and Taxation in OECD Countries: Was the crisis a game changer’ May 2014
 Distribution of Total Wealth, ONS May 2014
 Lord Leverhulme, p243.
 D Barton and M Wiseman, Focusing Capital on the Long Term, Harvard Business Review, February 2014
 JM Keynes, The end of laissez-faire, 1926
My speech to Progress Annual Conference on Saturday 12 May.
30 January 2012
In the 1990s, progressives learned an important lesson about how to win elections: we built wide coalitions; we held firm to traditional values; but we freed the political mind for new solutions, new methods, new ways of doing business. We kept our philosophy. But we changed the policy. We forged a new path between old-fashioned leftwing statism and new-fangled rightwing laissez-faire.
That new approach worked for Bill Clinton’s New Democrats, the Australian Labor party, the New Democrat party in Canada, social democrats in Germany, the Netherlands, Norway – and, yes, for New Labour.
And today it feels like a long time ago. The political confidence of the third way has taken a battering. Yet faltering growth, worried financial markets, rising unemployment and social unease all point to one thing: the need for a new progressive politics. Yet outside the United States, Brazil, Norway and Denmark, progressives are not winning by default. We need a new way back to the centre-ground.
Now some, of course, will say: ‘New Labour was the mistake. Let’s go back to the 1980s.’ Others will counter: ‘We were not modernising enough.’ A debate like that will not get us far. In 2015 we face a new world: a new global balance of power between Asia and the west, and a budget £30bn in the red. So Ed Miliband is right: we need hard thought now about what to keep from the third way and what to change for new times.
So first, let’s move on from the 1990s. Why? Because, as the world changed, politics changed – and we did not. Tony Blair once argued: ‘What of policy? Our approach is “permanent revisionism”, a continual search for better means to meet our goals, based on a clear view of the changes taking place in advanced industrialised societies.’
But our politics did not keep pace with the change we helped to author. By 2005, progressives had helped create a vast new global market that linked six billion of the world’s seven billion people. Massive new movements of capital kept interest rates low but fuelled asset bubbles. The market, our society and technology changed fundamentally. New challenges emerged: a new inequality between the middle and the top and young and old; living standards plateaued; old solidarities, old communities felt pressured; asset bubbles burst; and banks crashed.
Back in 1958, Tony Crosland wrote: ‘The intellectual framework within which most prewar socialist discussion was conducted has been rendered obsolete.’ Economic growth and ‘a different configuration of economic power … call for a complete reappraisal of the socialist position.’ The revisionist’s lesson? Change as the world changes.
That is why, after the third way, we need a new way back to a new centre-ground. Let’s keep the insights of the 1990s but build on them for a different era. Let’s keep the best of New Labour, not least the late Philip Gould’s basic insight: ‘What most voters want is over time and without greed to advance and improve their lives. In short, to become better off.’
Let’s keep the insight that elections are won in the centre-ground by building an alliance around the values – aspiration, responsibility and community – that unite traditional supporters with footloose voters who change sides.
What does that centre-ground look like? It is bigger than before. More voters are more likely to switch sides. Look at Scotland. No one can win elections trading on old loyalties. That is true for social democrats everywhere. Attitudes have changed too. Take the latest British Social Attitudes Survey which found that support for tax increases to spend more on public services has halved from nine years ago and only a third now say that government should redistribute wealth.
This is no counsel of despair. Neither opinion polls nor by-elections point to any return to Maggie-mania. As Deborah Mattinson puts it: ‘When things get really hard the instinct to put nearest and dearest first is, understandably, paramount.’
This is why Labour’s leader is placing our party firmly in the centre-ground with new ideas not old attitudes. Globally, social democrats are pinpointing five basic principles that can deliver our values in tough times. But Labour is leading the way.
First, the deficit needs not denial but fiscal realism. That is why Ed Balls is tough on tax and public spending. But his approach marries aggressive short-term action to boost jobs and growth, with medium-term ideas to bring down debt. The crash taught us we cannot immunise the world from financial crashes; we have now had 40 since 1800. If we want to protect our room to act when future trouble breaks, we need to bring debt down. That is the best insurance policy for Keynesians. The Tories will leave us with debt at 80 per cent of GDP. That is too high, which is why we have to plan for budgets that are tight.
Second, new growth needs more than just any old jobs. We cannot compete with new economies like that. We cannot risk drawing so much of our tax from financial services. So we need a new active partnership between business and government to rebalance our economy, play to our national strengths, switch to low-carbon energy, strengthen infrastructure, redouble enterprise, and reform our banking system so that, once again, small business and entrepreneurs have the life-blood of credit to grow. This is the new bargain with business. And in return we expect business to behave in a way that values and does not vaporise trust. People want responsibility – on top pay and ethics – throughout society.
Third, we have to renew our welfare states to drive up the rate of employment. In tough times we need as many hands on the pump as possible. For some that means making sure services like childcare and social care are there to help families juggle the ‘care crunch’ so they are free to work when they like. For others it means firm action to ensure that if you can take a job, you do take a job. It is a renewal of William Beveridge’s belief that good social insurance helps people keep working.
Fourth, we know that to get through the next decade we need to draw not simply on the wealth of nations, but the ‘hidden wealth of nations’. The challenges we face today are too big to all be left to government. Governments and political parties alike need to help make it easier for good people to come together to make a difference through social action and innovation – and it is this kind of civic inventiveness that modern democracies need to renew the ties that bind strong communities together. That is why Refounding Labour is so important.
Fifth, we know that in tough times taxpayers’ money must go as far as possible. Standards in public service have to go up even when budgets are coming down. Only a revolution in innovation can square that circle. And that is very hard to mandate from the centre. So sometimes, the centre has to let go – set high standards, yes, but then free up the frontline and devolve power to speed up new ways of doing business, delivering for citizens better than before.
Finally, we need to advance this cause with confidence. Progressives win by mobilising an appeal to optimism. Conservatives want voters to feel disempowered and cynical. They want to diminish the appeal of politics. Where they are in power, they want a fearful electorate to cling to nurse for fear of something worse. Our task is to offer hope in an age of uncertainty, and optimism in an era of doubt. That is how we seize the centre-ground and build a new progressive majority.
Here is a link to my pamphlet “The new centre ground: how can progressives win a majority?” .
Full employment was the foundation for Beveridge’s welfare state. It should be the foundation for renewing it.
Every civil servant can tell you stories of ministers who are a bit demanding. I’ve had a few of those stories myself. But sometimes the same is true of civil servants. None more so than Sir William Beveridge. Back in 1941, Ernie Bevin faced mandarins in revolt at the idea of working with the illustrious knight. Looking for a diplomatic answer, Bevin shipped out Sir William to lead an enquiry into social insurance. A year later, ‘the people’s William’ had drawn up the blueprint for Britain welfare state.
Timing, as they say, is everything in politics – and Beveridge’s timing was perfect. In November 1942, the Allies had beaten Rommel, counter-attacked in Stalingrad and secured the Pacific base of Guadalcanal. It was not as Churchill said on 10th November 1942, the beginning of the end. But it was the end of the beginning. Interest in what it was the country was fighting for hit a new high, and that interest swept the Beveridge Report off the shelves.
But what turned an idea into reality, was the not the events of 1942, but 1943. After ferocious debate in the Commons – in which David Lloyd George cast his last vote against the Government – Churchill conceded that planning for Beveridge had to begin in earnest. And it was then, in government committees, that four great Labour leaders – Atlee, Bevin, Morrison and Jowitt – fused the ideas of Beveridge with a plan for full employment; the full employment that would pay to make the new welfare state a reality.
The campaign for work, for jobs, for full employment has always been Labour’s first demand. Labour. The clue is in the name. But throughout our history, Labour has insisted the right to work must come with the responsibility to work as well. Back in 1947, Herbert Morrison put it like this; ‘We have no hands and brains to waste and no resources to fritter away on those who don’t contribute to our common effort’.
Today, I would insist on the same principle. Those who don’t want to work but can are a tiny minority. But we must insist they do their bit. So, alongside our five point plan for jobs and growth, we want new ideas that enforce the responsibility to look for and take a job. Because we simply can’t afford to renew the welfare state for the 21st century without more people back in work.
New analysis of DWP’s accounts by my team reveals that the shocking costs of economic failure. The bills for the dole, housing benefit and incapacity benefit are now set to rise by an incredible £5.5 billion a year – that’s a lot of income tax.
Yesterday in the House of Lords, the government pressed its policy of a cap on benefits. It’s an idea we support in principle but we would like to see improved because we don’t want a massive new council tax bill to sort out a new homelessness. But there’s a bigger point: without work, the cap won’t stop benefits spiralling upwards. DWP’s own figures show, despite the cap, the housing benefit bill is set to rocket up £4 billion above the figure post-election, to an incredible £28 billion. That’s too high. And the way to bring it down is to get people into work.
Back in the 1940s, the British people achieved incredible things. In a famous broadcast, Labour leader Clement Attlee called on Britain to create a country where ‘all may have the duty and the opportunity of rendering service to the nation, everyone in his or her sphere, and that all may help to create and share in an increasing material prosperity free from the fear of want’. We not only won a war, we won a peace. A welfare state that gave families like mine the chance to achieve things my grand-parents could never have dreamed of. If we want a welfare state for the 21st century, that once again support working people in the lives they lead today – and want for tomorrow – then I say our starting point is simple. Let’s get Britain back to work.
At conference this year we published four reports which draw together what we heard from the public over the last year, and some of the emerging conclusions and findings from the shadow cabinet-led policy groups. These documents will now form the foundations of our policy work over the next year. If you’d like to debate these in your local Labour Party of CLP or trade union, let me know!