What is Labour for?

Labour needs to re-build its founding purpose argues Elsbeth Johnson, one based upon creation of the Striver’s Society.

Any organisation – whether a company or a political party – has to choose, and then be able to defend, how it will spend its money. Some companies do this by having supposedly smart arithmetic models that help them identify where the highest return on their investment will come from. Better companies choose how to spend their money by referring to their core purpose, their reason for being.

An obvious example is Apple, whose claimed purpose is not to produce beautifully-designed, user-friendly phones and laptops, but rather to challenge the status quo and think differently. How they achieve that goal – the ‘what’ – is by producing beautifully-designed, user-friendly phones and laptops. Because, as the management guru Simon Sinek has pointed out, ‘people don’t buy what you do, they buy why you do it.’ For those who don’t think the difference matters, consider how easily Apple moved from computers into iPods and iPhones. It did so because it had a guiding philosophy that helped it decide how to invest; whereas Dell or HP – with similar ambitions for what products to sell – had no fundamental guiding philosophy and so invested badly and ultimately lost market share.

The corollary is also true: companies that lack a clear purpose often end up explaining why they’re not making an investment by saying ‘we can’t afford it’ – a purely arithmetical explanation. While shareholders of course expect companies to be competent on the arithmetic, they also demand more: purpose is what delivers sustainable growth over the long term. Arithmetic might be necessary, but it is seldom sufficient.

As in business, so too in politics. I would argue that a purely arithmetic argument is also insufficient for parties that seek to govern. And yet arithmetic has been trumping purpose in the Tory party since Thatcher, and in the Labour party since Blair. Not least in the leadership contest we have just witnessed – with Jeremy Corbyn being the depressing exception. I suggest that Labour’s future lies, as the name of the party implies, in work.

Of course, given that economics has utterly dominated the political discourse for the past six years, some might say that the arithmetic is the purpose. For both the anti-austerity Left and the small-State Right, the question of how high public spending should be has a correct answer. But most politicians in the election-winning centre have internalised that the real, and much more difficult, question is the composition of spending – what and who the resources are spent on. The language of priorities is not simply the religion of socialism, but the reality for all political parties who stake a realistic claim to power. In that sense, arithmetic should follow, and enable, purpose; but it cannot be its substitute.

Articulating a clear view about the composition of spending – which spending is good and which bad – is also the level at which most voters engage. In 1997, Labour’s five (and, with hindsight, very small) pledges explicitly used this technique, promising, for example, to stop paying for assisted places in private schools for the few, and instead use the money to reduce class sizes for all. Those who saw these pledges as merely micro examples of hypothecation missed the point: they were symbols of Labour’s guiding philosophy – its core purpose – that this party was for ‘the many, not the few’.

In a very different economic climate than in 1997, what is Labour’s guiding philosophy now that can help it determine which spending is good and which is bad? In the recent leadership campaign, the three ABC (Anyone But Corbyn) candidates all claimed to have one, but I’m not so sure. For example, one candidate suggested using the married couples tax allowance to fund universal childcare, but what was the guiding philosophy that they were trying to signal? ‘Children, not married people’?

Without a philosophy, such a hypothecation is just that – a transfer of funds which might add up arithmetically, but which in no way communicates a larger purpose. In effect, all three ABC candidates are trying to sell iPods, rather than a purpose. But people don’t buy what you do, they buy why you do it.

In contrast, Corbyn articulated a clear view not only about the size the state should be – large – but also what its purpose is. For him, what matters is reducing income inequality and pretty much all money spent on doing that is a good thing. I might disagree with his views about the purpose of Government, and therefore with his definition of good and bad spending, but all the policies he announced in the campaign clearly flowed from his guiding philosophy.

Which side are you on?

In politics, and particularly for parties of the Left, one of the constant questions asked of them is how they will pay for their plans, by which is essentially meant ‘who will you take money away from?’, either in the form of higher taxes or lower benefits. The answers to this question will reveal whose ‘side’ you are on – a highly visible demonstration of your core purpose. Indeed, if you really believe in your purpose, you will actively seek to answer this question – and evangelise for its implementation (think Lloyd George, Bevan, Thatcher).

Again, Corbyn was the only candidate in the recent leadership contest who could clearly answer this question. Put simply, he would take money away from people who earn a decent amount, and he’d give it to people who don’t, in order to reduce the income gap, because as part of his core purpose he believes that income gap is morally wrong.

So the task now for all moderates in the Labour party is to articulate an alternative purpose for our party, one that can be appealing both to those people inside Labour, and those in other parties, who share our view of the world. And we need to evangelise for this alternative purpose not because we think it is necessary in order to win an election, but because we believe it is right.

For much of Labour’s history, its core purpose was the alleviation of poverty: if you were rich, you should pay more to help those who weren’t. The tax and benefit system, since 1911 but more obviously since 1945, was set up and then endlessly tweaked to try to achieve that purpose.

But the unintended consequences of this system have been manifest since the 1990s. The party established to help the ‘working man’ – and those who wanted to work – had in effect ended up supporting a system where working actually made people worse off (the so-called ‘unemployment trap’) and where, even if they were working, they would be worse off if they worked more (the ‘poverty trap’, where additional hours worked lost them more in aggressively tapered benefits than they made in wages).

The first New Labour government made some attempts to ameliorate this situation. The introduction of the National Minimum Wage together with the US-inspired Working Families Tax Credit were aimed at making work pay. The WFTC’s explicit link to work even tried to address the poverty trap, including a bonus if the claimant or their partner worked for 30 hours or more each week – worth an additional 20 per cent of the basic adult amount at the time. But this link between work and rewards was fatally undermined when the WFTC was folded into the new Child Tax Credit in 2001. The underlying philosophy became supporting the costs of bringing up children, irrespective of their parents’ attitude to work. As a result, this new benefit inadvertently broke the vital link with work.

So in our attempt to alleviate poverty, we have contributed to the creation of a society, where, if you are poor, you have to be irrational to work, let alone work hard.

This has gone on for too long. The time is now for Labour to re-embrace the values of work and aspiration that were at the heart of its original purpose. I believe we should be on the side, at all times and in everything we do, of those who want to work hard and get on. I believe Labour’s re-discovered core purpose should be the creation of a ‘Striver’s Society’.

The Striver’s Society

What would a Striver’s Society look like? It would be one where working hard is incentivised and rewarded. Where effort and talent are the way you get on. Where the objective of the welfare state is not the reduction of the income gap between rich and poor, but the generation of a meaningful income gap between those who choose to work and those who choose not to.

Let’s be clear that the way to identify a striver is not by their income but by their attitude. You are a striver – and therefore deserve support – even if your endeavour doesn’t earn you much. Which is why continuing to subsidise families on low incomes because they are doing the right thing (looking for, finding, and keeping a job rather than living a life on benefits) is the right thing for the welfare state to do. Equally, someone who is a striver by attitude may not have the ability to work, or work sufficient hours to make enough money without the state’s support. This is precisely the role the welfare state should be playing in a Striver’s Society.

So what should Labour say to prove its support for the Striver’s Society?

First, it should state that the purpose of the Labour Party is to help everyone, from whatever background, to have every chance of making a good life for themselves, provided they work hard (to the extent they are able) and save.

Second, Labour needs to make clear that the outcomes for people who choose not to work hard or save will no longer be underwritten by people who do work hard and save. These people will be poorer.

Finally, it must use this as the guiding philosophy behind all policy decisions, so that a Striver’s Society is incentivised, rewarded and institutionalised at every opportunity.

Crucially, the reason for adopting this core purpose is not because this would get us elected – although I believe it would – but because we believe it is morally right.

It is only Labour that could make this purpose its own. While the Tories might claim they are on the side of strivers, they’re really not. We can see their true anti-striver colours in their latest Budget. In the same speech that announced the benefit cap, Osborne also announced the abolition of maintenance grants for students from the poorest families. The Labour Party, absent of a guiding philosophy, hamstrung by a school of thought that sees all benefit-claimants as victims, regardless of their attitude to work, couldn’t decide whether to vote for, against, or abstain.

But if Labour’s purpose is to support people who want to work hard and get on, then it becomes pretty easy to know which policies to support and which to oppose. You would support the benefit cap not because we can’t afford not to, or even because we think it might be electorally popular, but because it is morally wrong that people who don’t want to work can earn more than those who do. But you would oppose the ending of grants for students from the poorest families because it is also morally wrong that they be denied the opportunity to better themselves.

Osborne and many other Tories do not distinguish between these two cuts: for them, they are both just ways to cut the cost to the State. And so, it is conceptually possible for them to have a Budget that contains both the benefit cap and the removal of grants for poor students. But such a Budget has no claim to any philosophical footing – it is just an arithmetical way to cut spending. And it certainly cannot claim to be a Budget on the side of strivers.

Labour is about to face greater scrutiny than at possibly any other time in its history in opposition. As always, core to the Right’s attack will be questions about how we afford our priorities. Currently, only the extreme Left of the Labour Party can answer this question because currently only they have a core purpose from which to derive their answers. The moderates in the Labour Party need to be able to answer this question with clarity and conviction and that requires a renewed sense of purpose, rather than just saying “we can’t afford it”. I have advocated here a re-discovery of the founding principles of our party, updated for the times we are in. I believe this purpose is creating the Striver’s Society and that championing it must become Labour’s true calling.