Matthew Lesh is a Public Policy Fellow at the Institute of Economic Affairs and a Director at Freshwater Strategy.
Andy Burnham is expected to use his first Labour Party conference leader’s speech this week to once again declare a break with the 40 years of ‘neoliberalism’. The Prime Minister is indicating a new social and economic model is on its way, though what shape that will take and how and whether it will actually deliver growth remain, to put it politely, murky.
But before we get to what’s next, it’s important to pause and figure out what Burnham actually means by ‘neoliberalism’. He often uses it as a pejorative strawman. That is, neoliberalism is simply defined as ‘what went wrong since the 1980s’, without any detail. This is a weak theory that ignores that, for significant periods over recent decades, Labour was in power, including with him in Cabinet. It also ignores that the size and power of the state have markedly increased, whether in spending or the regulatory state, which few could attribute to neoliberalism.
When used as a broad brushstroke to describe recent decades, therefore, neoliberalism is meaningless, both academically and for the public – who also have little sense of what the terminology actually means. But in a more concrete sense, according to Tom McTague’s recent profile in the New Statesman, he seems to believe it involves (1) centralisation in Whitehall; (2) deindustrialisation outside of London and the South East; and (3) privatisation of utilities and public services.
On the first point, it’s hardly neoliberal to want to centralise power; in fact, quite the opposite. In 2015, the IEA, an organisation often associated with ‘neoliberalism’, published Federal Britain: The case for decentralisation, arguing that the British state should devolve power to encourage experimentation, better matching of services to local preferences, and greater competition between providers of government-funded services. A key part of this has always been decentralising fiscal power, that is, linking local service delivery to revenue raising to ensure accountability, and putting downward pressure on taxes, something that Burnham has shown less interest in.
On the second, there is significant confusion and nostalgia around industrialisation. The reasons Britain has become less industrial are aplenty, from productivity gains that have allowed factories to make more with fewer workers, to rising incomes shifting demand towards services, to the opening of global trade that allowed Britain to specialise in what it does best further up the value chain – the likes of financial services, consulting, law, technology, and higher education.
None of these is a peculiarly British or Thatcherite phenomenon. Manufacturing’s share of employment has fallen across virtually every rich economy, including those rarely accused of neoliberalism: France, with its dirigiste traditions, has a manufacturing sector not much bigger as a share of its economy than ours. The decline in manufacturing employment also goes back much further, beginning in the mid-1960s. On the other hand, the state has tended to encourage deindustrialisation, with our planning system making it painfully slow and expensive to build a factory, industrial electricity prices the highest in the developed world, and Net Zero policies making Britain uncompetitive. Hardly neoliberalism to blame on all these counts.
There’s an interesting interrelated point here, which brings us to the third bogeyman, privatisation. The industrial model failed atop nationalised, loss-making industries that were kept afloat by the taxpayer, precisely the kind of state-directed model Burnham seems nostalgic to recreate – or is he? The British state didn’t just own water and the railways; it also owned the National Coal Board, Rolls-Royce, British Airways, British Telecom, and British Leyland, the carmaker that became the emblem of industrial decline and strikes. We don’t actually hear very much from Burnham about nationalising these particular industries.
Our latest City AM / Freshwater Strategy poll provides some interesting insights on this front. While a majority of the public supports renationalising water, railways, energy companies, local transport, and Royal Mail, the same doesn’t hold for much of the rest of the economy. Just 20% would support bringing airlines into government ownership, 15% want to see telecommunications in state hands like in the days of British Telecom when it took weeks to months to get a phone line installed, and even fewer, 13%, want a re-run of British Leyland.
When asked specifically about the aviation industry, a majority (53%) agree with the notion that competition between airlines has made flying cheaper and more accessible for ordinary people, while keeping service at an acceptable level; just one-third (33%) believe competition has been bad.
It’s a similar story in the telecommunications sector, where a majority (55%) back the concept that competition between mobile phone and broadband providers has made staying connected cheaper and more accessible for ordinary people, with 36% taking the opposite view.
The dichotomy here is interesting: the industries people are happy to keep in private hands are those perceived to be working best, benefiting from competitive market dynamics, and providing the most benefit to consumers over recent decades. This suggests that support for nationalisation stems from frustration with the status quo, rather than from any grand ideological attachment to the concept of a state, as in the past. It also means that, for those involved in these sectors, people want better outcomes as much as, if not more than, a change in ownership structure.
Whether Burnham likes it or not, we are not actually in a re-run of the 20th-century ‘third way’ dynamics that led to the earlier bipartisan nationalisations. A ‘real’ socialist would be disappointed here – a bit of talk about ‘more public control’ is hardly the same as putting the means of production into the hands of the proletariat. Burnham isn’t really proposing the end of neoliberalism, more like a bit of fiddling on the edges.
Nationalisation. The railways were never privatised. Track and infrastructure were privatised and owned by a consortium - Railtrack, subsequently taken back into public ownership and now Network Rail. But rail services were never privatised, they are franchised. But a franchise can only be given by the owner of a brand/service. The Government caps rail fares and awards subsidies of around £12 billion annually. That doesn’t sound like privatisation. Franchise periods are too short, capped rail fares and the fact trains travel mostly empty for about 70% of the time, mean service operators struggle to make a profit and hand back the franchise. Nowhere in the World can a railway run without significant taxpayer support. They are 200 year old technology which would be replaced except for Governments insistence they are not, hence massive subsidies to keep them going.
Water. Grossly under-invested prior to privatisation. Companies forced by the regulators to have “environmental” regulations as their priority rather than investing in upgraded distribution and sewage collection. Again, price caps and restriction on dividend payments making attracting investors impossible. Plus of course 15 million more people since privatisation.
Energy companies are the victims of 30 years of reckless, confused, ruinous Government policy.
Royal Mail. A public monopoly became a private monopoly. It must provide a postal service - delivery/collection everywhere. That is ruinously costly given mail volumes have dropped. Its day is done. Take away its monopoly and let companies compete in all areas if and where they can.
The public mostly are uninformed, brainwashed and dumb as a bag of spanners. Government is the cause of all our problems, so let’s have more Government involvement. The Great Unwashed imagine nationalised companies will be “more efficient”, have lower prices - yes you dummies they will, but you will pay more taxes to subsidies them. £1 off bus fares = £1 on your taxes!
I despair.
An interest piece Mathew.
But like most observers you are clouded by a biased point of view.
The reasons why businesses fail is simply because of a lack of SPENDING by the general public businesses and government. Mainly because of a lack of money from an insufficient amount of money and SPENDING in the economy so they were bound to fail.
It wasn’t because of an overall lack of money. Money didn’t suddenly disappear.
No! It was the same then as it is now. A lack of willingness to SPEND the money they hold. An overall lack of weight and speed of SPENDING from higher rotation.
If there was a sufficient amount of that total money being SPENT then they would not have failed!
They were set up to fail because if the lack of receipts and then a lack of investment and together that’s a spiral into the depths of the abyss.
It had did all to do with nationalisation. But it had everything to do with a lack of money! A jack of investment because our then governments were themselves bankrupt!
The overall lack of or willingness or confidence to SPEND money by those holding that money meant that our governments were underfunded and we were underpaid and so insufficient money was being rotated to trigger a sufficient amount of tax take to properly fund those companies and industries.
It’s the same now! Too much money is being withheld in bank accounts here and abroad that sits idle unused unspent and contributing sod all to the money supply nor is it even taxed!
There is no tax on unspent money! None!!
And also successive governments have been so blind to how tax is triggered!
Tax is triggered by SPENDING. We j ie this because NOT SPENDING MONEY triggers NO TAX. None at all!
So tax has to be triggered by SPENDING MONEY because NOT SPENDING MONEY triggers NO TAX. NONE.
Like income tax is triggered by the SPENDING of Money by employers on the wages and taxes of employees. It’s SPENDING that triggers TAX.
So it should be very clear to all that to give sufficient money and TAX revenue then money has to be SPENT.
Keynes was correct. But he had no clue as to how to properly control money and Spending because…… He didn’t have computer bank accounts and smart payment cards Rodney!
So until you start to see the real truth of how businesses fail and how nationalisation fails and his tax is triggered you will continue to get the wrong outcomes as we have all endured because of ignorance to the real truths.
So Mathew I’d like you to think about what I’ve said and stop thinking wrongly and perhaps you might start making proper policies to ensure money flow in sufficient amounts to give government surpluses instead of waiting for confidence and growth to return!
It certainly won’t while those holding money get paid more for NOT SPENDING than forcing SPENDING!