Keir Starmer’s speech to the CBI will have been a huge disappointment to remainers, especially at a time when polling shows growing support for their cause. He made it absolutely clear that a Labour government will not seek to rejoin the EU, or the European Single Market, nor will it propose a return to free movement of people between the UK and the EU. The fact that he did not close the door on improving relationships and regulatory cooperation will do little to alleviate the pain.
Predictably, the media have focused on the issue of immigration, but that was not the main theme of the speech, and he wisely refused to be drawn into setting arbitrary targets for numbers.
A history of avoiding challenges
He did not focus on immigration. Nor did he base his argument on “honouring the referendum”, or on the toxicity of reopening the Brexit debate in the “left behind” regions where voters have abandoned Labour since 2016.
Rather, the core of his argument was that membership of the EU has allowed Britain to avoid some difficult and very long-standing economic challenges, which now must be faced. By comparison with our competitors, we have an economy trapped for decades in a low-skilled, low-wage cycle. And as he pointed out, online, the present government’s industrial strategy is a single page headed “archived”.
His diagnosis is probably right. The UK’s economic model has, for decades, been flawed. We have some highly successful sectors and areas, but the benefits have been highly concentrated, by sector, region, and class. Our underlying economic growth has been based on consumption: buying and selling stuff that other people make.
We have failed to invest in people or technology at the rate of our economic competitors. Rather than upskilling British workers to keep pace with new challenges, we have imported people, trained at others’ expense. We have allowed our vocational training institutions, which were never strong, to wither (once again, Further Education is not included in the current government’s protection of the education budget). This was as true in health and care, as in hospitality and construction. We have allowed our manufacturing capacity to decline, and focused on short-term fixes, rather than long-term strategy.
A new long-term partnership model
So, does his prescription match the challenge? At its core were two notions: a focus on the long term, and a new partnership between government, employers and trades unions. On the former, he accepted that there will be a need for immigration to deal with immediate problems, but that on its own, in the long term, it keeps us in the economic trap. Immigration should be managed as a part of a strategy to upskill British workers. So, to manage the flow, a “points- based system” of migration would remain (though not necessarily the one we have now).
Ironically, his plans for industrial partnership sound remarkably European. For decades, British labour market economists, and some politicians, have admired the German model. There, strong sectoral partnership bodies play a critical role in long-term planning, training and wages. However, we have no firm tradition of such bodies. Partnership at national level fell apart in the 1970s, and the Sector Skills Councils created by New Labour excluded Unions, and had a much narrower remit, and much less effective support.
Creating bodies with real power to bring together employers, employees and government at sectoral level will mean major cultural and organisational change, and will meet stiff resistance from some quarters. Defining the powers of new sectoral bodies will not be easy, especially in our highly centralised State, where difficult issues tend always to be referred up to government, or left to individual employers.
British employers do not naturally cooperate with rivals, and past attempts to create “employer led” qualifications have foundered on the inability to form strong sectoral bodies. British employers have traditionally been reluctant to train for fear that rival employers would “poach” their trained workers. The present government’s Apprenticeship Levy has not produced a boom in training. The number of apprenticeships has fallen and the levy fund has over £3 billion left unspent. For many employers, it has become simply another tax to be paid.
Making a contract work
At the centre of the Starmer plan is a contract between the partners over investment, especially in people. Starmer was clear that immigration would be needed in the short term, because training people takes time, but that it would not be a long-term solution. Employers would only be allowed to import people as a temporary part of a plan, which would include investment in upskilling British workers as well as improvement in working conditions and pay.
This raises questions about who approves such plans, and who polices them. Previous initiatives, like New Labour’s Learning and Skills Councils, have foundered over government anxiety about losing control. What is an appropriate level of detail for a plan? Most critically, who will monitor the delivery of the plans, and what sanctions will apply to those who fail to deliver? These are complex and delicate balancing issues. Even if there is goodwill in principle (which cannot be taken for granted), micro politics will intervene. Who will arbitrate when the interests clash?
Do we have enough people?
A final concern is whether we simply have enough people to do the work. We currently have near full employment, with record numbers of unfilled vacancies chasing a shrinking number of workers. Covid has had a devastating effect on the workforce. We have a large number of people awaiting delayed treatment from the struggling NHS. Many older workers who fell out during the pandemic have become discouraged, and chosen “early retirement”. Lack of affordable childcare and flexible working keeps many women out of the workforce. There are technological substitutes for some kinds of low-skilled work, but employers may be reluctant to risk the investment. But even if we were to fix all these, it is still doubtful if there are enough people to do all the jobs. Certainly, the OBR expects net immigration to remain a driver of productivity for the foreseeable future. An improved points-based immigration system can flex to accommodate this, but is that really Starmer’s intention?
Do we dare?
It seems likely that the next government will be Labour, so there is no escaping the disappointment of those of us who enjoyed membership of a welcoming community of half a million fellow citizens. But Starmer carefully left unanswered a string of questions about other aspects of our relationship with the EU.
Labour is not going to take us back into the EU, but this is a positive plan for the economy, based on more than the empty rhetoric of “getting Brexit done”.
This is a radical plan. It will not be easy for employers or unions. Whether as a nation we are up to such a challenge remains to be seen.
