If there is any consensus in our otherwise fractured, toxic national debate it is that we cannot go on like this. Our economy is in crisis, exemplified by an annual £100bn shortfall in public and private investment, which must be lifted decisively for Britain to break out of today’s triple whammy of stagnant growth, productivity and living standards. Society reels from alarming gaps in the provision of crucial public services and the yawning unfairness in the distribution of income, wealth and opportunity. Our democracy and state seem incapable of acknowledging the full extent of these deformities, let alone adequately responding to them. Our international standing has plummeted at a time of geopolitical peril. A transformative response is an imperative. My new book, This Time No Mistakes: How to Remake Britain, tries to address the origins of this interlinked crisis – and offer a feasible way out. Nothing is immutable. We are agents of our own destiny.
The heart of the problem is a misconception about how capitalism and society work. Capitalism must be managed and regulated to work for the common good, just as society has to be curated to provide fairness and opportunity for all. Crucially, the vitality of the two are interdependent. Capitalism must be organised so it provides economic ladders that every individual can climb while a social contract must offer a floor below which they cannot fall. Britain’s problem is that the Conservative party, in power for all but 13 of the last 45 years, does not accept these truths or interdependencies. Worse, even if it did, neither the dominant culture and practise of our capitalism, nor the structure of our democracy, state and media would have made it easy to fashion the necessary responses.
Conservative ideology has been in thrall to the contrary proposition that markets will self-organise to produce the best economic and social outcomes propelled by individual energy and ambition alone. The British state confers near-continual unfettered power to the Conservatives, and so in their view needs no reform. Yet the reality is that capitalism’s unchecked rollercoaster rhythms create instability, inequity and monopoly and so must be managed and counteracted. Nor can capitalism be relied upon to best organise how firms are governed and ownership responsibilities discharged; how workers are properly trained and paid; or to ensure that fair dealing is the norm between firms and their customers. Of necessity enter the state, much better designed than at present.
The UK has its back against the wall to a degree unparalleled in its peacetime history, facing economic problems more acute than the successive sterling crises of the 20th century or the trade union militancy that prompted the general strike of 1926 or winter of discontent in 1979. The level of our national debt has climbed alarmingly over the past quarter of a century, with no compensating increase in public assets, so that the net worth of the public sector – assets less liabilities – is more dangerously in the red than any other country bar Portugal. Similarly, more than 20 years of imports of goods and services exceeding exports has meant our international debts have climbed by £1.5tn, so that our balance sheet – positive for centuries as a result of empire and as pioneer of the Industrial Revolution – is now dangerously negative. Fifty companies that could have been in the FTSE 100 were sold abroad between 1997 and 2017; we are running out of assets to sell. At the same time almost every metric on the economic and social dashboard – whether social mobility or the number of new companies launching on the London stock market – is flashing amber or red.
Rightwing ideological maxims, initiated by Margaret Thatcher in 1979 and continued by her imitators, have led to a sequence of policy disasters – monetarism, wholesale financial deregulation, austerity and then Brexit. Far from launching a renaissance, Thatcher was the author of pernicious decline. The doctrine is that the private “I” is morally superior to anything public, that the state’s “coercive” proclivities must be reined in to promote a “free” market, that regulation and taxation stifle enterprise, that unless ferociously means-tested and minimalist, welfare creates a huge underclass of undeserving “shirkers”, and that good public services follow from a successful economy rather than being integral to it.
Little of the policy that flows from this jumble of ideology and prejudice has any evidence base. As the totality of the failure has unfolded, so the Conservative party’s unity has fragmented into the blind alleys of libertarianism and the debacle of the Truss government, ongoing phobia about all things European and the temptations of anti-immigrant, anti-foreigner, anti-woke populism. It has become an ungovernable federation of cults.
In the 1980s, monetarism did not contain inflation as billed, but rather prompted mass unemployment, hollowed out much of our productive economy – manufacturing employment nearly halved in a decade – and eviscerated public investment. The areas so scarred by the experience would, 30 years later, vote for Brexit. Financial deregulation led to the fastest rise in private indebtedness in our history, propelling illusory economic growth buoyed not by investment and innovation but a flood of credit. It could only end in tears. Writing The State We’re In in the mid-1990s, to warn of an impending tragedy without a change of course, I did not anticipate the great financial crisis of 2007/8, felt most acutely in Britain, although it was obvious the whole rickety structure could only fail in some way. Nor did I imagine that Britain would repeat the failures with the economically illiterate budgetary tightening of austerity and then torch the one successful economic policy asset it had remaining, EU membership, which had boosted GDP by 10%. Yet such was the grip of the right on the Tory party that their bad ideas, once unthinkable, became our lived reality.
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And Britain’s liberal left cannot absolve itself of blame. If Conservatism has over-emphasised the “I”, the left has not yet found an electorally attractive way of making the case for “We” – or, better still, blending it with the “I” to create a political philosophy, and attractive policies that flow from it, that would appeal to the majority. My proposition is that the “We” should be built on fusing an ethic of socialism grounded in profound human attachment to fellowship, mutuality and co-operation with the ethic of progressive or new liberalism that emerged 150 years ago as a challenge to classic liberalism. Essentially, liberal thinkers such as Thomas Hill Green and Leonard Hobhouse (forerunners of progressive liberals Keynes and Beveridge) argued that individuals and society were in a constant iterative relationship. Individuals shape society, society shapes individuals, and each and everyone has an obligation to make the social whole as strong as possible, which they are obliged to recognise even while they pursue their own ambitions and interests. Green called this the politics of obligation, which not only the great reforming Liberal government would follow from 1906-14, but later the Keynesian economic revolution and Beveridge’s welfare state.
Green called this the politics of obligation, which not only the great reforming , but later the Keynesian economic revolution and Beveridge’s welfare state.
Labour, as Tony Crosland diagnosed in the 1950s in The Future of Socialism, was founded on being all things leftist to everyone to encourage as big a membership as possible. It was a coalition of Marxists to gradualist Fabians – so laying the foundation for more than 100 years of feuding. Only the ethic of socialism, which has deep roots in western philosophy, the great religions and the Enlightenment, stands the test of time. It was Aristotle who declared that those who deny the primacy of a healthy society to their individual wellbeing are either “a beast or a god”, while the father of British empiricism, Francis Bacon, would write “wealth is like muck. It is not much good but if it be spread.”
Progressive liberalism and an ethic of socialism are not incompatible value systems: they are complementary. Progressive liberalism leans into the individualism that propels capitalism while accepting social obligations; an ethic of socialism leans into the foundation of a social contract and infrastructure of justice that underpin the sinews of a good society. Ideological socialism’s hostility to capital and liberalism’s association with the upper class and upper middle class initially made a rapprochement between the two impossible. Today those obstacles have faded. It was Tony Blair who saw the opportunity that could be grasped, and perhaps his best contribution to progressive politics was his rewriting of Labour’s infamous high socialist clause IV to articulate the fusion. New Labour may have shrunk from the full implications; it will fall to successors to make it live.
The vision is of a “we society” – a high investment economy populated by companies that take their social responsibilities seriously, underpinned by a rejuvenated social contract in which health, housing, education, justice, welfare and the labour market all combine to offer every individual the chance fully to participate in work, social and civic life. No more lost Einsteins and Marie Curies.
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The starting point must be to raise public investment decisively and so “crowd in” private investment radically to lift productivity and real wages (wages adjusted for inflation). Three targets select themselves – the vital need to close the disgraceful gap in productivity, infrastructure and economic performance between London and the regions; the commitment to achieve net zero by 2050 given the alarming rise in global temperatures; and the need to lift research and development spending dramatically. To move the dial in all these areas will require public borrowing for such investment to rise by at least 1% of GDP, or between £25bn– £30bn, with fiscal rules organised around real-world, rather than accounting, goals. The financial markets will be reassured if they know that the investment they are supporting is strategic and thought through. Britain can break out of its low growth trap without financial mishap.
Shibboleths about taxation need to be put to one side. Taxation represents the “we”, and as long as the demands on all sections of society are reasonable – involving at present a greater contribution by the wealthy, whose assets in relation to GDP have doubled since 1980 – there is no evidence that tax receipts at today’s level or even marginally higher will damage growth. What matters is that Britain does what it must to lift its growth rate. A “growth commission” should establish rolling targets for public investment and be held to account to achieving them – the means to vitally needed change.
Importantly, the savings and investment system must be reshaped to drive credit and equity investment to support the financial needs of the companies big and small that we need to feed off the surge in public investment. Two young institutions – the UK Infrastructure Bank and British Business Bank – must be turbocharged so they can operate at the multibillion-pound scale necessary. Banks must be incentivised to supply business loans on much less onerous and flexible terms, and the pension system must be boosted and organised to invest in fast-growing companies based on frontier new technologies. A big multibillion private sector wealth fund – already mooted by some in the City – must work in concert with a public sector wealth fund to invest in what will be the great companies of tomorrow, ensuring they stay British-owned to anchor our economy.
The law needs to ensure that companies make their prime objective the achievement of great social purposes rather than short-term self-enrichment. This should especially apply to all our regulated utilities. The best in British business and our utilities have already begun to move in this direction, putting achievement of great purpose at their heart: it needs to become the general rule. Competition policy must be stepped up so that there is much less incentive and capacity to rig prices in monopoly or quasi monopoly positions. This is particularly important for those businesses and sectors whose business models depend on strength in “intangibles” – intellectual property, human skills, data and digital advantages, research – whose growth has been cramped by so many financial and regulatory biases that favour incumbents. British capitalism, in short, needs to be repurposed both to grow and to work for the common good.
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No less essential is to repair the threadbare social contract. The new risks and inequalities that every citizen will confront in an ever faster moving environment, along with new centres of prosperity, need to be mitigated and managed to ensure the new economic world is underwritten by great education, health and housing – and income support when for any reason people find it impossible to work. The workplace needs to be reconfigured so employees are conferred dignity and voice, with trade unions as active partners of purposeful companies. There must be a proper system of social care. We cannot have children going hungry in their millions, with schools, training institutions and further education colleges allowed to decay. And lastly, housing must be restored as a central pillar of the good society. Council tax, the mortgage market, social housing and the system of tenure all require a major overhaul. It would all be integral to a British-style New Deal.
The British state that perforce must catalyse and lead all this must be reformed and recast. It needs the capacity to act strategically, but with far stronger mechanisms for being held accountable for what it does. Parliament must recover its capacity to deliberate and scrutinise along with making law. The reduction of MPs to mere lobby-fodder ciphers to service the transient whims of an unprecedented churn of ministers is surely one reason why nearly 100 this parliament – a record – have been sanctioned for gross lapses in their behaviour. Our second chamber, the Lords, must be democratised. Ethical standards, from conduct in office to political donations, need to be respected and enforced. Boris Johnson’s abuses cannot be allowed again. The independence of the judiciary must be better entrenched. The tone and content of our national conversation, framed by a dominant and frequently hysterically biased rightwing media magnified by social media, needs to be hosed down – a revival in public service broadcasting and regulation of content is a necessity.
Britain has the potential to become an envied European economic and social model. Indeed to re-engage with the European Union is another indispensable part of recovery. The case is not only economic, recovering lost markets, increasing trade intensity, and stimulating falling inward investment that are costing a lost 5% of GDP every year (and growing) but geopolitical. Britain must be “in the room” where the great decisions on Ukraine, defence, security, energy, climate emergency, and the regulatory standards are taken that will configure our continent. Empire and Commonwealth have gone; the 21st century will be shaped by three great blocs – the US, China and the EU. To be alone to assert a meaningless “sovereignty” to assuage the fantasies of rightwing populists is madness.
The emerging rightwing nexus of libertarian tax-cutters and immigration-phobes, so ready to put achieving those aims above the rule of law and respect for human rights, is unfit to govern. At the next election Britain needs a government that will sure-footedly reshape our capitalism and society to promote growth, enfranchisement and a country at ease with itself – respecting rather than deifying its past better to build the future. We can act to shape our destiny. This time no mistakes.
This article is an edited extract from This Time No Mistakes by Will Hutton, published by Head of Zeus (£25). To support the Guardian and Observer order your copy at guardianbookshop.com. Delivery charges may apply
• This article was amended on 31 March 2024 to restore a reference by the columnist to the Liberal government’s reforms of 1906-14. During the editing process the date had been revised to 1905-1915, which is the period when the Liberal party was in power, but the series of reforms it passed came between 1906 and the outbreak of the first world war.
