“It’s the economy, stupid,” says the US advertising slogan. Starmer better learn it Ann McElwee

TThe future direction of UK plc now seems more likely than the current woeful management of Starmer and Reeves. Government. In the chaos of 2022, the Tories lost their claim to be the natural stewards of the British economy. There is an opportunity for the opposition to fill this gap.

The attack on the government’s record here is simple: the economy has grown little for most of its 12 years in power (on a per capita basis, the economy has grown by just 7% since the 2007-2008 financial crash). Perhaps most troubling for any potential replacement, productivity lags behind competitors. Voters feel the result in real household incomes, and low-income people now find the basics, let alone treatment, cheaper. So “the Tories screwed up the economy” is a line with a lot of truth in it. Planning to get the economy back on its feet is a more daunting task. This will have to change in 2023 as voters want to know more about the direction Labor wants to take.

The big reality check is that the political economy no longer has a “natural elasticity,” which makes things fall back into a vicious cycle. Conservatives discovered this the hard way after opting for austerity in the hope of rapid stability afterwards. It never really worked, and it seems like something similar in the wake of the pandemic, where the attacks Appearance improvement is slow.

System tweaks may help to some extent. As a former Bank of England economist, Rachel Reeves must have noticed that her old employer was too restrictive on inflation targeting. These days, central banks have a more flexible, more concise way of looking at inflation and employment, making them more connected to the big picture. Gordon Brown’s 1997 version of central bank autonomy should not be the last word on the role of the bank, so the debate should not be interrupted by the shadow chancellor before it begins.

Reconnecting the workforce with more power to business is the most important overall priority, along with a clearer understanding of what is needed to help medium-sized companies develop and become export champions. This means a subtle corporate tax calculation for the workforce. “Sharing the pain” is a worthy message at such times. But ensuring there are incentives for companies to grow must be firmly in the mix, along with commitments to compensate for research and development, and promote better quality machinery and digital capacity. These are not “sexy” issues in the way that taxing and borrowing motivates MPs and voters. But tax incentives that favor giants with offshore accounting facilities over newcomers are one of the causes of productivity problems.

I gather that Keir Starmer is quietly spending a lot of time talking to industrial giants such as JCB (despite the staunch backing of Boris Johnson by its boss, Lord Bamford). Understanding where and how the commitment to “green jobs” connects to broader economic thinking will be critical. There will certainly be tension between the commitment to “blue” hydrogen produced from methane and “green” hydrogen made with renewable energy, which is more environmentally sound but harder to scale. This raises complex questions about what is meant by green jobs. Much else, in terms of energy supply, cost and impact on the economy, depends on which Labor chooses – and those who advocate one or the other will be disappointed.

There will also be calls to “rebalance” the economy in the north, where investment has been shockingly weak. However, it should not be seen as a zero-sum game in which the party turns its back on the power of new technology and industry clusters in the South. Labor needs to embrace a better and more innovative future for the economy, not just squander resources.

Rebuilding relations with major economic powers in Europe should be a higher priority. Stormerism is partly to avoid a row over whether it wants to rejoin the single market, and partly because, frankly, the upper echelons of today’s Labor Party in Berlin, Paris or Brussels don’t get on very well. The order has been refused. But when it comes to resolving trade tensions and healing post-Brexit damage, the Labor government is seen as a fresh start and has something in common with the SPD-led coalition in Berlin and the French Socialist government. It could begin to show greater commitment to the task of dialogue with Europe for trade and mutual benefit.

The opposition needs plans, projects and passion, but they also need to look at why some seemingly good ideas haven’t worked – and the answer isn’t always that Tories are stupid or greedy cynics. Labour’s pledge to “provide a level playing field for small companies to win contracts, cut red tape, simplify the tendering process” is one I read with nostalgia and about trying to make this happen in 2011. I wrote David Cameron. It didn’t work because the legal complexity and efficiency were too high, and the logistical challenges often favor the big players. It is a dead certainty that Labor will also fight this problem. Be open to learning from better-intentioned failures, even conservative ones.

A labor economy needs to protect the interests of those who have been left behind in the national prosperity story. But the party must also think beyond merely distributive ideas to ideas that move the growth needle. The current focus around reorienting and reinvigorating jobs, without a plan to boost immigration for skilled workers or to feel better connected to the outside world, risks deviance.

Tempting as it is to play up Blair-Brown’s greatest hits album, Starmer cannot rely on a return to 2000s defaults, or the assumption that toppling an unpopular government is the answer. Next year, many voters who went Conservative in 2019 will be surveying the damage and asking what awaits them if they switch their vote to the left. We have the start of an answer – 2023 should give us a better understanding of where the Labor compass is pointing.

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