What will the distinctive economic legacy of two terms of Labour government be?
In the first term we showed that, consistent with our Labour values and Labour goals on fighting unemployment and tackling poverty, New Labour could also run a stable economy in a competent way.
In the second term, on that platform of stability, we are the first left-of-centre government anywhere in the developed world to raise taxes, not because we had failed on the economy, but because we were making the positive case for investing in public services. To win a third term we have got to show the public both that the money is delivering real results and delivering real results in a way that suits their needs.
People do want to be able to have booked appointments, to get the kind of support they need, and to be able to make the kind of choices they want to make in their lives. You can only do that if you match investment with reform.
I think that winning a third term on the basis of having shown that there is a progressive case for investment in public services and for the NHS is a huge prize for us, and a prize that will be looked at by governments and political parties around the world.
Don’t forget that in 1997, when we first came into government, one of the first things we did was to levy a £5bn windfall tax on the privatised utilities to put in place the New Deal, which has brought us closer to full employment than we have been in a generation. My sense is that, if you go around the country and talk to party members, they would also say that one of the most important things that we did in the first parliament was to cut the national debt. If your fiscal position is not strong then you can’t sustain increases in health and education or hope to get child poverty down.
You have to ask yourself whether, if we had a weak economy and our reputation was for running the economy badly, that would somehow make people more inclined to accept our advice that we should join the euro.I think that having a reputation for running the economy well is important for making a recommendation to the British people on the euro. Tony Blair and Gordon Brown have always said that when we assess the five economic tests, the national economic interest is the key decider. And because of our record and our reputation, if we were to make a recommendation to the British people that joining the euro was in the national interest, I think we are in a stronger position to make that recommendation now than we were seven years ago.
Has the Lisbon agenda for modernising the EU’s economy and setting the scene for job creation achieved anything, or has it completely faltered?
Nobody can be satisfied by the levels of unemployment across Europe, which are far too high – particularly youth unemployment in a number of countries. So the case for reform is as strong today as it has ever been in Europe. But we have made progress on the Lisbon agenda in some key areas like competition policy, telecommunications, liberalisation and other areas such as investment in research and development.
Enlargement is bringing in a whole new set of countries who also have seen that the ways to get low unemployment, high employment and prosperity is through that economic reform. So the consensus in Europe in favour of reform is growing and has been strengthened. Nobody would say that today we have done anywhere near enough, but I think that the Lisbon approach, with co-operation, but also sharing from different national experiences – what’s called the open method of coordination – is working.
We live in a global economy. Companies in Britain are now competing with companies all around the world. There is no future for Britain in trying to cut itself off. The Albanians tried that, and it didn’t get them very far.
But we need to be clear about what is happening in Britain. There are 1.9 million more jobs since 1997. The majority of those are in the private sector. If you look at the areas like where I live in Yorkshire, there has been a huge influx of new jobs.
Our challenge is to make sure that we have, in both the service and the manufacturing sectors, the kind of skills and the kind of research that we need here in Britain, the innovative people who can keep high-wage and high-skill jobs coming here from all over the world. We need to tighten the link between universities and business, so that you can actually get new ideas quickly spun out in new companies and new ventures.
We also need to address the gaps in skill levels in the adult workforce. If you look ahead ten years from now, 80 percent of the workforce in ten years has already left school today. If they haven’t got basic and decent skills, they will have up to 40 years with limited prospects, which is both unfair and holds our economy back. So I would say that a big push in a third term on adult skills is going to be essential.
It is a declared aim of this government to deliver not just full employment, but to deliver full employment in every region, and to narrow regional divides. Sometimes people talk about regional divides in Britain as though they were inevitable, but in the nineteenth century, it was the northern economies that were leading and the southern economies that were trying to catch up.
The three northern England regional development agencies have set up something called the North Way Taskforce. John Prescott and Gordon Brown have appointed me to it as their personal representative. It is looking at the polices we need on science, on transport, and on skills to close those regional divides so that the northern economies can catch up and lead Britain again in the 21st century. I think that up in those northern regions there is a real sense of confidence that it can be done.
Until we can see Britain combining full employment and the best level of productivity in the world, then we will not have finished our task at all. There are still big gaps in productivity, there are historic gaps in the amount of money going into investment, research and development and skills to be tackled.
These are long-term challenges but they are only going to be sorted out by a government that is willing to play its proper role within the market economy, to sort out market failures, to close investment gaps, and to work with the private and public sectors to make that happen. That is why it is Labour that is best placed to manage the British economy in the years ahead.