Will Hutton is a political economist, author, think tank and academic leader and columnist. He is currently President of the Academy of Social Sciences ( since 2021) regular columnist for the Observer ( since 1996) and co-chairs the Purposeful Company ( since 2015) – a think tank who argues that companies’ intrinsic purpose should drive their strategy, values and ultimately profit. He also chairs the advisory board of the Fairness Foundation, is trustee of the National Institure for Economic and Social Research, a member of the Progressive Economic Forum and editorial advisory board of Prospect magazine.
Every reader of this blog can recite their particular litany of woe, whether it be crumbling public services, sky-high rents and property prices, millions on sickness benefit, cost of living pressures or stagnating real wages and productivity. Nor is Britain alone . Similar complaints are voiced across Europe and North America , and its one of the reasons Donald Trump is now US President – and felt emboldened to try to remake the international order to stop making victims of blue collar America - as he and they saw it - with his tariff war.
The Starmer government, scarcely ten months old, has already attracted the opprobrium attached to incumbent governments everywhere. People voted for change and there is little tangible evidence of it. Instead it has added to the gloom by talking up the seriousness of the crisis it inherited, the gravity of the evolving international economic and political situation in the wake of the unpredictable Donald Trump and how hard it will be for matters to improve. It is right on all counts, but lacking both a credible, popular ideological compass and the breadth of support that comes from having such a compass it fails to convince – let alone inspire..
Yet absent Donald Trump and there would be reasons for some qualified hope. Britain’s economic problems are not irredeemable. Although beset by an unwanted recession in venture investment since Brexit, British venture capitalists – the biggest industry in Europe – have established Britain as Europe’s innovation hot spot. We boast more unicorns than most of the EU combined, and have the highest number of startups in the world. We are one of the most entrepreneurial countries on earth, and with the right mix of policies and fit-for-purpose ecosystem of support we could become the tech capital of Europe.
The Starmer government gets little credit, but it is making some of the right economic moves. It is right to prioritise the consolidation of British pension funds as a precondition for boosting the supply of risk capital both to investment in quoted securities and perhaps more importantly our venture capital industry. Building up both the British Business Bank and National Wealth Fund equally make good sense. Lifting public capital investment and keeping it at 3 per cent of GDP until 2030 is a breakthrough – the highest sustained level ( ex the nationalised industries ) since the war. The parallel ten year commitment to sustaining our R & D spend is welcome and important. The reforms to planning law are long overdue and widely welcomed, and even the Office of Budget Responsibility concedes that British house building will rise even if the commitment to build 1.5 million homes by the end of this parliament is likely to be missed. The state trying strategically to nurture strategic industries has been the recipe of success elsewhere: the industrial strategy promises to be an useful start.
Although it is widely criticised, no UK government could survive a potential bond market attack if it continued to budget for a deficit in current public spending and receipts in five years time. The incoming Labour government was compelled to raise taxes substantially last October, raise spending on key services like the NHS and then find cuts in current spending this Spring – preserving the crucial capital and R &D budgets given the darkening international outlook – to sustain financial market confidence and give any hope of growth. I would have made different choices on which taxes to raise – employees national insurance contributions should have risen along with those of employers , council tax should rise along with tax on environmental ‘bads’ – but strategically there was no choice. The Tory party in government had behaved disgracefully and left the most baleful legacy of any post war administration: it was literally an anti-Britain anti-government.
The problem is the international situation, made worse by Britain not being part of the protective shield offered by the EU. Nobody can foretell the impact of tariffs nor the impact of prolonged economic uncertainty. But it cannot be good: an international recession is a near certainty and depression cannot be excluded. These are moments to batten down the hatches and shelter with the big battalions – but on that Britain gave into the populist right and is now paying fearsome consequences with no voice in either American or European councils. Starmer and co are trying to mitigate the worst, but fewer sanitary and veterinary checks on EU food imports along with an UK-EU defence pact, although useful and in the case of defence important steps – are wholly inadequate. What is needed is serious access to EU markets along with extensive collaborative action on innovation to boost European scaleups and on energy to lower electricity prices via a major commitment to renewables. And beyond that closely to associate the UK with EU responses to Trump.
All that takes ideological and political conviction. In” This Time No Mistakes; How to Remake Britain”, which I published last Spring, I argued that progressive politics should now aim to combine the best of the social democratic and social liberal traditions into a ‘ We Society ‘ framework. We should have each others backs by creating a social floor below which no-one can fall , but equally should promote ladders of opportunity up which everyone can climb – all housed in a stakeholder, innovation oriented capitalised curated by a strategic and agile state. Without this kind of clearly understood anchor, the government zig zags between conservative (cut welfare spending, abolish the winter fuel allowance and retain the two child limit on child credits), liberal (promote prisoner rehabilitation and release many early to ease the pressure on jails ) and social democratic ( raise the minimum wage, strengthen trade unions, nationalise rail and boost capital spending ) policies with no clear compass. Such a mix may be pragmatic and often individually justifiable – but as an inspirational compass and view of what kind of Britian it wants to build, it doesn’t cut it. Britain could not survive another period of rule by the right, especially of the Faragist hue. It is crucial the Starmer government finds that compass, sells it to the nation – and above all acts on it. Its failure would be a calamity.