The Proactive State

Last week, Owen Jones threw out a challenge to Labour. This coming year, he argues, we should focus on what our economic alternative to Osbornism should look like.

I absolutely agree. We lost the election in part because voters did not trust us on the economy. This is of critical importance for a party aspiring to govern; we need to be able to convince people that we will spend the country’s money wisely and effectively.

I think there are two strands to where Labour goes from here on the economy. One is to discredit the Conservatives’ economic record, as at the moment George Osborne is getting a much easier time of it than his performance as chancellor warrants. I intend to blog about this soon.

The second part concerns putting forward a positive, distinctive, Labour plan for the economy. Clearly, it’s going to be a move away from Osborne’s cutting, outsourcing, privatising, slash-and-burn approach to running the country. But we need to do more and think harder than our current approach too. At the moment we seem to be merely proposing to reverse every cut and renationalise industries. That’s a hugely defensive, backward-looking programme.

Don’t get me wrong, after ten years of Conservative government, spending will need to be increased to protect public services. But to stop the argument there is not enough, and leaves us as nothing other than oppositional, everything we do defined in terms of the Tories. We need to be on the front foot, and we can chart a more imaginative course than just turning the spending taps back on.

I’m going to call my approach the proactive state, as that’s the broad idea; in government, use the levers of power to drive the change we want to see in society as best we can. Not just by chucking money at every problem, and not by compulsion, but by identifying where the greatest impact can arise within potentially limited budgets, and using incentives to promote outcomes we would like to generate. An approach where the government can use the powers it has to support best practice without discouraging innovation and investment in the private sector.

How would this work in reality? A prime example would be investment in our regions. We should incentivise companies to set up in poorer parts of the country via grants and tax breaks. We should train people in those areas to be capable of working in these industries. And we should build transport links to improve business effectiveness around the country. This, in time, should grow the economy, and drive tax revenues up; but it will also leave a lasting legacy that the Tories cannot just cut on returning to office. There are huge amounts of potential in the country currently lying dormant, and we should make the most of it.

What else could a proactive state do? Consider student fees. Realistically we may not be able to afford to abolish them, and the electorate may not believe us if we say we can. But could we use student debt as a way of incentivising socially benefical behaviour? What if some student debt could be written off if graduates contribute their time to local charitable organisations, or help out by mentoring children from disadvantaged backgrounds? Perhaps graduates would continue volunteering long after the financial incentives have disappeared, helping to build a more cohesive society.

We could propose to reduce a company’s tax payable if they pay their employees a proper living wage. Similarly, we could legislate to ensure any companies contracted by the public sector meet certain criteria as regards their treatment of employees and environmental credentials.

Ed Miliband pledged to freeze energy prices if he won the general election. This was a blunt instrument, which would have temporarily restricted energy companies, without any long-term plan. What if a proactive state set up its own energy company to operate alongside established private competitors? Free marketeers might cry foul, but then they’ve always argued that private companies are more efficient than government at running such organisations; if they opposed such a move, it would mean they didn’t believe what they said.

Maybe a proactive state could implement a sugar tax to benefit the health of the nation, and hopefully reduce future healthcare costs. Offsetting this, healthier food could be subsidised. We could encourage greater PE participation in schools, and prohibit the sale of school playing fields, in an attempt to promote healthy living and exercise in the country.

Labour can and should own this terrain. The Education Maintenance Allowance was along these lines, as was Gordon Brown’s vehicle scrappage scheme. Underpinning it all is a belief that the state can be a force for good, something that clearly separates us from the Tories.

Both Conservatives and Labour have been too keen to support businesses by talking in negatives; we won’t tax you too much, we won’t impose too much red tape. Let’s talk in positives; we will support you if you invest here, we will give you the contract if you ensure the wellbeing of your staff.

Fundamental to it all is the idea that we can make a difference as a government beyond getting out of the way, that we can take the initiative and improve the country, support businesses, and boost conditions for employees.

You might think my proposals are unworkable, too expensive, or rubbish, and that’s ok; the main point is that we should be having a conversation about what a Labour economy should look like in 2020, and this represents my opening bid. Regardless of whether you agree or not, this is the kind of discussion we need to have, and need to have now. So if you disagree, my question to you is: what do you think?