Response to Will Hutton
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# The Political Quarterly Publishing Co. Ltd. 1999 Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA 103 Response to Will Hutton RUTH KELLY Hutton’s analysis is powerful, but ultimately unpersuasive. He appears to have five main concerns about new Labour and the Third Way. First that it oers ‘no critique of the capitalist system’. Second, he believes that new Labour oers no systematic programme of reviving public institutions or institutions of civil society that might oer a countervailing force against the power of capital. Third, he argues that new Labour has no confidence in public initiative. Fourth, he thinks welfare is seen as bad. And fifth, he believes that new Labour has lost Keynes’ insight that the international financial system is a locus of instability. Perhaps the most fundamental concern is the first one. Does new Labour oer any fundamental critique of the capitalist system? I think it does. The Treasury’s core economic insight is that Britain has suered years of under- investment and under-performance resulting from deregulated market forces and that this has resulted in a significant ‘productivity gap’ between ourselves and our nearest major competitors, Germany, France, the US and Japan. And not only has Brown set about challenging the conventional orthodoxy that the underlying British growth rate cannot be raised by increasing public invest- ment, he has set about doing just that. As Hutton has indeed argued elsewhere, Labour has embraced New Keynesian growth theory—a theory which states that investment in vital public services such as education and transport can raise the underlying growth rate of the economy. Public investment over the next five years is planned to be larger and more sustained than at any time since the 1940s. The departments which won cash in the July 1998 Budget were the only ones likely to contribute to begin to lift the British growth rate and move more people into work—education, health, transport; the losers, those departments least likely to contribute to growth—agriculture, defence, the Foreign Oce, the Home Oce. At the same time as investing in infrastructure and in the workforce, Labour has had a systematic programme of making work pay, drawing people back into the workforce and tapping their potential: the minimum wage underpins the Working Families Tax Credit; the tax on the privatised utilities (which made excessive profits under capitalism) has been used to fund the New Deal. There has also been significant redistribution—with the minimum income guarantee for pensioners, the increase in child benefit and the help for working parents. Second, does new Labour have a programme to reinvigorate civil society? Yes, it does. The Fairness at Work Bill will give huge new incentives to unions to enrol members in order to reach the 50 per cent membership threshold which grants automatic recognition in the workplace. Nor have other institutions of civil society been ignored—the voluntary sector, the family.
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Transcript of Response to Will Hutton
d:/1pqyr99/Kelly.3d ^ 3/8/99 ^ 9:5 ^ sh
# The Political Quarterly Publishing Co. Ltd. 1999
Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA 103
Response to Will Hutton
RUTH KELLY
Hutton's analysis is powerful, but ultimately unpersuasive. He appears tohave ®ve main concerns about new Labour and the Third Way. First that ito�ers `no critique of the capitalist system'. Second, he believes that newLabour o�ers no systematic programme of reviving public institutions orinstitutions of civil society that might o�er a countervailing force against thepower of capital. Third, he argues that new Labour has no con®dence inpublic initiative. Fourth, he thinks welfare is seen as bad. And ®fth, hebelieves that new Labour has lost Keynes' insight that the international®nancial system is a locus of instability.
Perhaps the most fundamental concern is the ®rst one. Does new Labouro�er any fundamental critique of the capitalist system? I think it does. TheTreasury's core economic insight is that Britain has su�ered years of under-investment and under-performance resulting from deregulated market forcesand that this has resulted in a signi®cant `productivity gap' between ourselvesand our nearest major competitors, Germany, France, the US and Japan. Andnot only has Brown set about challenging the conventional orthodoxy that theunderlying British growth rate cannot be raised by increasing public invest-ment, he has set about doing just that. As Hutton has indeed arguedelsewhere, Labour has embraced New Keynesian growth theoryÐa theorywhich states that investment in vital public services such as education andtransport can raise the underlying growth rate of the economy. Publicinvestment over the next ®ve years is planned to be larger and more sustainedthan at any time since the 1940s. The departments which won cash in the July1998 Budget were the only ones likely to contribute to begin to lift the Britishgrowth rate and move more people into workÐeducation, health, transport;the losers, those departments least likely to contribute to growthÐagriculture,defence, the Foreign O�ce, the Home O�ce. At the same time as investing ininfrastructure and in the workforce, Labour has had a systematic programmeof making work pay, drawing people back into the workforce and tappingtheir potential: the minimum wage underpins the Working Families TaxCredit; the tax on the privatised utilities (which made excessive pro®ts undercapitalism) has been used to fund the New Deal. There has also beensigni®cant redistributionÐwith the minimum income guarantee forpensioners, the increase in child bene®t and the help for working parents.
Second, does new Labour have a programme to reinvigorate civil society?Yes, it does. The Fairness at Work Bill will give huge new incentives to unionsto enrol members in order to reach the 50 per cent membership thresholdwhich grants automatic recognition in the workplace. Nor have otherinstitutions of civil society been ignoredÐthe voluntary sector, the family.
d:/1pqyr99/Kelly.3d ^ 3/8/99 ^ 9:5 ^ sh
As Tony Blair has written in the opening chapter to his Fabian pamphlet onthe Third Way, `A key challenge of progressive politics is to use the state as anenabling force, protecting e�ective communities and voluntary organisationsand encouraging their growth to tackle new needs, in partnership asappropriate'. The social exclusion unit has as its remit the task of includingevery citizen in a common and social and economic project, reintegratingthem into society and tackling there all sources of the alienation.
Third, Labour does have con®dence in public initiativeÐhence the extra£40 billion announced for health and education over the next three years, anenormous boost for public services. But, I agree, the state is (rightly) not seenas an end in itself, merely as the tool to achieve our goals.
Fourth, welfare. Before the last general election, the Labour Party com-mitted itself to reduce the costs of economic failure. But it is a foolhardyperson who would describe new Labour as slashing all state supportÐtheWorking Families Tax Credit is an extension of state support, making workpay for millions of families. The challenge for new Labour is to ween peoplewho can contribute to society o� bene®ts and ®nd them new opportunities inthe labour market: help for those who can, security for those who cannot.Individuals are no longer seen as atomistic, ¯oating detached in a world towhich they have no obligations. Instead, they are seen as participative citizensin society, capable of exercising responsibilities as well as claiming rights.
Fifth, the international ®nancial system. Yes, the international ®nancialsystem is a locus of instability, and has been responsible for much of thepresent crisis in the world economy. But Gordon Brown has been at theforefront of attempts to rethink the world's ®nancial architecture, leading theG7 towards some important improvements in co-ordination of informationand regulation.
Hutton has argued that `apologists for new Labour will argue that there aretraces of all these themes in its thinkingÐas so there are, but they are not builtinto a coherent political story'. If that is the extent of the problem, then therecord is not a bad one.
Ruth Kelly
# The Political Quarterly Publishing Co. Ltd. 1999104
