Is a post-war consensus revival too idealistic?

Labour’s repetitive mantra was/is that the Coalition is cutting “too far, too fast”. Now, with green shoots of recovery, the riposte from Grant Shapps and co. is that Labour are “talking down the economy”. Forgive me for sitting on the fence, but both approaches are reasonable. Growth is still nothing to shout home about, nor is an unemployment rate of 7.8%. However, Labour are yet to praise such measures as increasing the income tax threshold to £10,000, and I had clamoured for Barack Obama’s re-election with similar unemployment statistics in the US. However, the point of my post this time is that further down the road, even with a recovery, will we be ambitious enough with unemployment?

My investigation has found a fascinating link covering historical unemployment from 1881-1995 (see references; first link), which shows that unemployment hasn’t averaged below 4.2% since 1975, with an average of 5.8% the lowest rate in the Thatcher period, ironically at the end of her tenure in 1990. Even in the New Labour boom years (see second link in references for statistics), the lowest unemployment rate was around 4.8% in 2005. These may not sound like significant figures, and politicians (especially of a conservative nature) will probably tell you that seeking a rate of around 5% is ideal. However, 5% of the workforce unemployed would equate to around 1.6 million people, a huge figure even with increasing population figures, and that general statistic does not take into account the more deprived areas where unemployment is more endemic. With this in mind, is it possible (or will it ever be possible) to return to levels of unemployment below 3%?

It’s time for me to put my New Deal hat on once again. My love and admiration of FDR has been expressed numerous times, but I cannot fail to praise his work and the work of the post-war consensus. One of my favourite Prime Ministers of all time is Clement Attlee. Some would say this is odd coming from a Liberal Democrat. However, he was arguably influenced far more by Keynes and Beveridge (both Liberals) than Marx and Engels. Whilst no doubt influenced by ideology, his nationalisation of key industries could be argued as a pragmatic response to failing workplaces rather than left wing zeal. Furthermore, “building a New Jerusalem” is infinitely more inspiring than “if it’s not hurting, it’s not working”. Added to this, there were incredible achievements in terms of unemployment during the post-war consensus period, overseen by successive Labour and Conservative governments; the averages of 1.6% in 1950, 1.2% in 1955 and even the comparatively high rate of 3.8% in in 1972 would be unheard of today. Can’t we clamour for these goals again?

The immediate answer is an emphatic no. The old-school method would not be electorally viable, namely nationalisation. Could you imagine the reaction to Ed Miliband in PMQs? “In response to the Prime Minister’s accusation that the Labour Party are policy-lite, we have committed in our next manifesto a promise to renationalise all of the utilities and industries which were privatised under the last Conservative government”. ‘Red Ed’ would be hounded from all sides. Even the ‘One Nation’ Tory approach of the post-war consensus era merely maintained nationalised industries rather than nationalising other ones. With getting the deficit down the Coalition’s top priority, a Labour Party desperate for economic credibility wouldn’t possibly countenance anything that could be construed as a return to the Michael Foot era. Added to this, with Miliband on the fence about whether to commit to permanently restoring the 50p tax rate in 2015, can you imagine him saying “we’ll go further than that; we want the top rate of tax at 83%”?

The Party closest to advocacy of a return to the consensus era (with the exception of the Socialist Workers Party and other similarly affiliated groups) is the Green Party, who in their 2010 manifesto called for a raise in taxation “from 36 percent of GDP in 2009-10 to around 45 percent in 2013” and to “introduce the new higher rate of income tax at 50% for incomes above £100,000” rather than £150,000. Further, the 2010 manifesto wished to “abolish prescription charges, reintroduce free eye tests and NHS dental treatment for all, and ensure NHS chiropody is widely available”; almost a 62 year response to the introduction of prescription charges. The Greens, who have 1 MP in Caroline Lucas, also called for rail renationalisation. Despite these policies, the Greens did not capitalise on Labour’s unpopularity in their last years of their administration, nor did they fully benefit from the collapse in Lib Dem support in 2010. The simple truth of the matter is that, despite a disenfranchising voting system, not enough people in the country voted for a return to consensus politics in 2010, whatever dubious opinion polling may indicate the contrary.

The post-war consensus period was a truly admirable period, and a beacon of increased social mobility. However, that doesn’t mean that it was perfect, nor that Mrs Thatcher was wrong to reverse parts (I stress ‘parts’) of it. The top rate of tax shouldn’t go any higher than 50%; whatever the honest and egalitarian intentions, the top rate of 83% when Mrs Thatcher came to power was, apart from being ludicrously high, incredibly ineffective and piecemeal. Furthermore, the ‘Winter of Discontent’ showed that the trade unions did need reforming, and allowing people to buy their own council homes was a good thing (although not if it would be at the detriment of building new social housing, or affect those who couldn’t afford to buy them). In this sense, certain consensus policies wouldn’t be electorally viable now, but with good reason.

What to propose? Tony Benn would tell me that ‘the movement’ is needed. However, I personally disagree. Trade union cooperation with Government is always welcome, but with my Mum and sister recently threatened as Teaching Assistants with single status, has ‘the movement’ helped them? Progressive policies are needed. A living wage would harness the socially-democratic conscience of the post-war era, but this would be ideal in conjunction with the Lib Dem plans to raise the income tax threshold to around £12,500, exempting minimum wage earners from income tax altogether. This shows that a radically left-wing party isn’t necessarily needed to achieve these aims. However, more needs to be done. It doesn’t have to be a radical thing to propose rail renationalisation in the face of ever escalating inefficiency and unaffordable rail fares (and considering a near profitable publicly owned company was disastrously privatised under John Major); indeed even Peter Hitchens supports it. However, more needs to be done. Rather than accepting 5% as a good benchmark of unemployment, public works schemes for the long term unemployed and those in the 16-25 youth unemployment bracket would not only drastically reduce unemployment, but could boost growth, especially as there is a dearth of affordable housing being built. I’m all for free trade, but we need to export more by boosting manufacturing and investment in Britain.

Whilst Keynes would argue for deficit spending, the current political narrative strongly goes against it. However, Vince Cable has already suggested in the Cabinet that some deficit spending be made for capital investment projects, plus certain progressive tax measures could boost employment projects; the Mansion Tax on households worth over £2 million would be a great start, not to mention the Tobin Tax (the ‘Robin Hood tax’ is a misleading and radically left wing title for what is a pragmatic and sensible taxation policy on risk taking). However, with the current largely centre-right Thatcherite consensus, getting such policies through are difficult, plus social democracy was a far easier model to implement in post-war Britain than the current globalised age.

A revival of the post-war consensus is too idealistic. However, there should be (and sometimes there is) a place for idealism in politics. The Thatcherite/classically liberal model was once considered archaic and unfashionable, and an unlikely return to consensus politics cannot be ruled out in the future. Pragmatism is sometimes needed, but not to the ‘Third Way’ fence sitting extent, where rhetoric often blurred the lines; in the end, ‘Thatcherism with a human face’ was adopted rather than a brave renewal of social democracy. The post-war consensus should not be renewed per se, but reformed parts of it should. We don’t need to (and shouldn’t) propose the top rate of tax exceeding 50%, nor does radically increased spending have to be the norm again in tandem with widespread nationalisation. However, it’s not radically left wing to push for unemployment to drop below 3%, nor is it to propose pragmatic nationalisation or part-nationalisation when affordable and/or where industries have patently failed to produce for the public over time (such as the railways). Furthermore, in terms of building a fairer society, it makes far more sense to cut taxation at the bottom end of the scale rather than to increase spending on certain benefits.

The spirit of the post-war consensus should be emulated, not its nuts and bolts. The methods and composition need changing, but not the overall goal. It is the Centre-Left’s (not the radical Left’s) mission to propose social democratic renewal in an affordable, progressive and effective way, and with boldness. Could a post-2010 Lib/Lab Coalition achieve it? Social democracy needs a clear mission. In terms of political parties, the Conservatives have a clear mission; they want to prove their supposed economically competent credentials, and restore their previous hegemony. The Liberal Democrats have a clear mission; to achieve a more liberal and fair society, and to prove that Coalitions can work. As for Labour? “We oppose the cuts being made, but are not promising to reverse any of them” is a blurred message to say the least. The former bastions of social democracy need to tell people what they stand for, and the Centre-Left needs to invoke Keynes as much as Attlee.

Unemployment links:

file:///home/chronos/user/Downloads/unemploymentbackto1881_tcm77-267536%20(1).pdf

http://www.tradingeconomics.com/united-kingdom/unemployment-rate