Lodestone Insight: Labour’s constitutional plan for a New Britain
What you need to know
- Labour’s constitutional reform proposals are not an earthquake, but neither can they be ignored. A Labour government could significantly alter the balance of power between nations and regions, if such reform is given priority.
- The tying together of constitution and economics is relatively novel for Labour. While discussions around electoral reform and the House of Lords are often considered esoteric and a ‘second term issue’, a genuine rebalancing of power and finance – ‘levelling up’ to coin a phrase – is closely connected to Labour’s electoral prospects.
- Partnerships between private companies and public sector institutions will become increasingly strategically important. The report places weight on the role of public and quasi-public organisations like universities and NHS trusts to promote innovation.
- Proposed local government powers, including longer-term fiscal certainty, would likely create commercial opportunities. Businesses providing outsourced services in areas including social care, digital transformation, transport and infrastructure will be competing for contracts with guaranteed 3- or 5-year funding.
- New remits for government investment could incentivise regional deal-making. Labour are likely to favour a more coordinated approach to equity finance outside London (which currently provides 66% of SME equity deal value).
The Labour Party under Sir Keir Starmer’s leadership has progressed to a point where it is clearly a potential government-in-waiting. Despite this advantageous position – borne out both in 20+ point poll leads and in real-world by-elections, most recently in Chester, one of the criticisms of Starmer’s Labour, notably from Corbyn-aligned members and activists, continues to be a lack of clarity and boldness on policy.
The report published this week by the Labour Commission on the UK’s Future, co-launched by Starmer and former Prime Minister Gordon Brown in Leeds, attempts to project ambition on constitutional reform. The 155-page report claims to set out a ‘vision of a New Britain’. Constitutional changes are often criticised for their irrelevance to the ordinary voter, a charge that the report actively attempts to rebut.
What is proposed?
The report’s central argument is that concentration of power in Westminster and Whitehall has held the country back, creating an unresponsive and unaccountable system of government that fails to address the needs of the whole country. It claims that this is bad both for the economy and for democracy itself. The economic aspect is not new ground: all major political parties have previously advanced versions of this message, with Boris Johnson’s ‘levelling up’ slogan the most recent example. The attempt to tie the economic to the political is, however, more distinctive and allows Labour to continue its attacks on current and recent government ethical scandals.
This argument is also designed to shore up support for the Union, a cause very close to Gordon Brown’s heart. As arguments for a second independence referendum continue to emanate from the Scottish National Party, the report envisages the UK as a ‘Union of Nations’ set out in a new constitutional statute. Rather than ‘devolve and forget’, an approach criticised for creating ‘division and resentment’, a more collaborative relationship between Scotland, Wales, Northern Ireland and England is imagined. The same legislation would also introduce new requirements to respect the autonomy of local government, enabling a ‘rebalancing’ of power, prosperity and investment.
Innovation is a key element of the report’s vision. It notes that the UK has immense institutional capacity through its universities, and a leading technology sector, but that investment in innovation is well below the OECD average. It suggests that universities and public sector organisations (like NHS trusts) should be brought more closely into local economies, including by bringing them formally into the development of local and regional economic strategies.
The most eye-catching constitutional recommendation in the report is a return to a long-running issue: the replacement of the House of Lords with a ‘smaller, more representative and democratic’ second chamber. This should have ‘electoral legitimacy’ according to the Commission, but no detail is given on the composition or method of election for the new chamber. Heavily trailed before the report’s launch, this has already met with opposition from Labour peers, primarily on the basis of such reform acting as a distraction from more important priorities.
What does it mean?
Political reform is rarely a headline-grabbing topic. For Labour, releasing a lengthy report is arguably a means of ending a conversation, rather than starting one. Having now published a laundry list of proposals, it’s apparent that this exercise was as much about bolstering support from Scottish unionists and continuing to capitalise on Conservative errors and scandals as about serious reform. While the Commission claims to promote real change over cosmetics, the most notable absence from the report’s pages is any mention of structural reform to the House of Commons – despite Labour’s membership voting in favour of proportional representation at the party’s conference in September.
Nonetheless, for business and investors, there is substance to be aware of here. Assuming a Labour majority government is returned at the next election, the economic proposals in this report are likely to be adopted sooner than the constitutional ones. That has real implications for how local government, the regions and the nations that make up the United Kingdom are funded, and how they can use those new powers.
While Labour governments are often cautious or indeed hostile to private sector involvement in delivery of public services, the pragmatism of Starmer allied to the parlous state of UK public finances means that greater certainty for government decision-makers at all levels is likely to benefit quality service providers, especially those who have an existing track record of innovation and partnership with public sector clients.
Two years out from a general election, it is already worth starting to plan how to establish closer relationships with a wider set of political and economic stakeholders in Labour’s New Britain.