If Andy Burnham is to have any hope of reversing the decline of the Labour Party he needs to have a fairly simple but compelling story.  One good story would be inequality.  He could say that he is going to reverse the inequality that has developed in the UK in the 47 years since Thatcher first came to power and set about destroying the post WWII political consensus of full employment and good public services.  

Such a story would have an immediate appeal to those sections of the working class who are drifting in desperation but somewhat reluctantly towards Reform.  It’s also a story in which there is a lot of interest at the moment.  Readers will likely be aware of the numerous podcasts by ex City trader Gary Stevenson on the matter.

Stevenson’s message is that all the assets of society (houses, water, energy, transport etc.) are being bought by the super-rich who then give working people access to these resources at the maximum rent they can extract from them.  The super-rich have wealth far in excess of what they can spend in consumption.  They use their excess wealth to buy anything that’s for sale.  If you sell your house, a super-rich person will always be able to outbid anyone else who’s interested in buying it and then let you live there at an exorbitant rent.  Stevenson argues for a wealth tax as a first step towards reducing the inequality that he believes is destroying British society.

Stevenson’s message has been taken up by Zack Polanski, leader of the Green Party which seems to favour a wealth tax.  Stevenson and Polanski both promote the works of the French economists Gabriel Zucman and Thomas Piketty in this area.  Indeed Zucman has just produced a book with the name ‘We need to tax billionaires” in which he proposes an annual wealth tax of 2% on wealth above £100 million.

A tax on the super-rich would certainly be seen as fair.  But it would not reverse Labour’s decline unless working people saw a real improvement in their standard of living.  There is no obvious reason why a wealth tax would improve their standard of living.    

How will a wealth tax allow people to own where they live or to rent good accommodation at a fair price?  How will a wealth tax give people secure well paid employment?  How will a wealth tax provide the infrastructure that communities need – affordable energy, good transport links, good education and health services?  

It won’t.  It may reduce the consumption and asset buying powers of the rich a bit, and that is to be warmly welcomed, but it won’t build houses, it won’t make energy cheaper, it won’t refurbish schools and reduce NHS waiting lists.  These are problems that can only be addressed by reclaiming the state as a central organizing force in society.  Thatcher handed the organization of the essentials of society over to the private sector.  The private sector failed to deliver in many areas.  Working people have wonderful communication devices but nowhere to live.  Burnham must reclaim the role of the state if he is to seriously reverse Labour’s decline.  A wealth tax would be a small part of any solution.

In fairness to Burnham, reclaiming the role of the state does seem to have been an important part of the way he went about solving problems in Manchester.  His powers to do that would have been limited in Manchester where he would have been financially constrained.  In other words, resources may have been unemployed but  he would not have had the money to acquire them.  But now as the prime minister of a currency creating state he is not financially constrained.  

His problem is not where does the money come from.  Any expenditure approved by Parliament will be made by the Bank of England.  In Manchester, Burnham could see unemployed resources that he did not have the money to employ.  Now his problem is where are the resources to do all the things that need to be done to reduce inequality and improve the lives of working people.  Where are the builders, plumbers, electricians, roofers to build new homes?  Where are the doctors and nurses to improve NHS care?

Rachel Reeves’ great failure was that she saw little role for the state in solving these problems.  She relied almost completely on the private sector.  She justified the inability of the state to do anything by saying she had no money.  Working people saw little improvement in their prospects and in the prospects of their children under Reeves’ tutelage.  They registered that fact in the May local elections and within a matter of months Starmer and Reeves will have gone from high office.  

Consider the matter of making energy affordable.  It should first be noted that energy prices have increased because of the war in Ukraine.  That war is a result of the eastward expansion of NATO.  The cost of energy has been further exacerbated by the US and Israeli attack on Iran.  It would make sense for the UK to try to wrap up the Ukraine war.  It is unlikely that Burham will have the ability or inclination to counter the Russophobia that grips the political elite.  Burham probably supports the eastward expansion of NATO and agrees that Britain needs to rearm against a revanchist Russia.  A first real test for Burnham will be the “Moscow test” – whether he goes further into turning the economy into a war-time one or commits to focussing on social spending.  Burnham’s social agenda will be seriously damaged if he does not address the total costs of the UK’s participation, active and passive, in imperial wars.

Consider the matter of making home ownership and renting affordable.  A huge home building program would be required.  Who would organize it?  If Burnham relies on the private sector then homes for the super-rich will be built.  Does Burnham have the ability and inclination to reclaim the role of the state in ensuring that there are sufficient good quality affordable homes available?  Here we think he may well have the inclination to do something useful.  But only if he recognizes that the problem is resources, not money.

Burnham should insist that every secretary of state should have Keynes’ famous dictum hanging on their office walls: “Anything we can actually do we can afford.” meaning that if the resources required to do something exist and are unemployed then the state can always afford to buy them and put them to good use.

If the resources exist but are being used by the private sector what should the state do?  For instance if the state needs builders to build social homes but they are all being used by the private sector to build luxury homes for the rich, the state could simply outbid the private sector for these workers.  But that would have inflationary consequences which are best avoided.  The correct thing is to use regulation or taxation to reduce the demand for these builders by the private sector.  It’s often not a simple matter to free up the resources that the state needs to implement what it sees as desirable policies.  But the first step is to recognize that it’s a resource problem and not a financial problem.  

A lot of what is needed takes time e.g. training construction workers, regulating private house building etc. This is not to say they should not be done but the working class will expect to see some positive results coming through quickly. Among these could be an emergency work programme for unemployed young people and a rapid improvement in bus services. People will notice this and it will make a difference to their lives. Restoring the education maintenance allowance for 16+ youngsters might be a winner along with a campaign to get more SMEs to offer apprenticeships (60% of the workforce, 37% of apprenticeship places). 

Burnham should make ending inequality his main public agenda.  But he must understand that reclaiming a primary role for the state is his main tool for realizing that agenda.  If Burnham makes the same mistake as Reeves, if he refuses to reclaim a much bigger role for the state in organizing the resources of society then the decline of the Labour party under Burnham will continue.