“Social democracy is as much about a successful market economy as it is about an active state. When Labour forgets the first part of that sentence, we and the country lose. We’ve got to be as focused on wealth creation as we are on wealth distribution.” These words by Wes Streeting, former secretary of state for health in the Labour government, appeared in the FT last week. This is the right approach.
Unfortunately, data from the Conference Board shows that in 2025, the UK’s real output per head was 27 per cent smaller than it would have been if the 1970-2007 trend had continued. “Degrowth” Greens should cheer. But just look at how happy this is not making people. Economic growth is a precondition for almost everything. It was a necessary condition for the birth of the UK’s liberal democracy in the 19th and early 20th centuries. Today, it is a condition for its survival.
There are many reasons, no doubt, why Sir Keir Starmer’s government has become so unpopular. My colleague Robert Shrimsley blames it, plausibly, on a lack of hope. But hope must be grounded in reality. After almost two decades of disappointment, many people have given up on it. This is part of the reason why rage plays such a big role in today’s politics. As I have argued in recent columns, it is now even putting the UK’s political stability in danger.
A big question is whether a change in Labour leadership would transform prospects. I doubt it, for two reasons.
The first is that the obstacles are so many and daunting. Productivity growth has long been exceptionally slow. The country’s gross savings and investment rates are the lowest in the G7. It has left the EU. Its population is ageing. It faces growing fiscal pressures. Moreover, today’s rupturing world is challenging for medium-sized, open economies, and while AI offers opportunities, it also creates many threats.
The second is that our politics are hostile to making tough, but necessary, choices. As Tony Blair has argued in a provocative new paper, the “centre — properly defined — is where you put policy first and politics last. So, you begin with the question: what is the right answer? And only once you have that do you engage in the political task of persuading people of it.” But, he continued, “Britain is in a mess precisely because in recent years it has done the opposite”.
In response to Blair, Andy Burnham, the outgoing mayor of Greater Manchester and victor in last Thursday’s Makerfield by-election, stated in The Times that, while the Blair governments did good things, “It did not . . . take us off the direction set by Thatcher . . . This has given us 40 years of neoliberalism and the simple truth is this: it has not been kind to communities in Makerfield and those like them across the UK.”
Burnham is now thought to be prime minister in waiting. The constitutional and political implications of his ascension are many. One I definitely like is the defeat of Nigel Farage, whom I have despised since he first emerged on the scene. But, and it is a big “but”, there is a huge jump from being a popular mayor to being a successful prime minister, especially in today’s harsh conditions.
The main policy point Burnham made in his article was that the “lesson from Greater Manchester is that you can’t just leave it to the market . . . If you want higher growth in areas that don’t have it, you need strong public control and direction over both the investment strategy and the enablers of a more productive economy, such as transport, energy, water, education and housing.”
In addition, he argues for reforming the government: “We need to remodel the state around the principle of place and maximum devolution of power out of the Whitehall silos into the regions and nations . . . We need a huge transfer of power, resources and personnel to combined and local authorities to create more agency at the ground level.” With this, I agree. I also agree that more cross-party co-operation would also be good.
Yet if Burnham is to succeed where his predecessor has failed, he will need to force both his party and himself to confront difficult choices. Labour does not believe incentives really matter. They do. Labour does not believe that higher spending means higher taxes. It does. Burnham himself seems to think that government intervention will easily accelerate growth. It will not. Burnham seems to believe, too, that governing Manchester is like governing Britain. It is not. Starmer showed that conceding to “Old Labour” instincts does not work. Would Burnham really dare to be any braver?