D Miliband: Labour must buck the trend to prevent the return of mass unemployment

Our guest writer is David Miliband, shadow foreign secretary and Labour leadership candidate

Today’s figures showing that GDP grew by 1.1 per cent in the second quarter of this year are encouraging. They suggest that Labour’s action to get the economy back on its feet were working. Contrary to what the Chancellor has been saying, public spending played a significant role, particularly in boosting the construction sector. However, there are still reasons to be nervous about the near term prospects for the British economy.

Many commentators and economists have argued that early and deep cuts to public spending – while the private sector is fragile – risks crushing this recovery. For instance, a series of surveys have shown business confidence slipping while falling house prices and low levels of bank lending are adding to the grim economic picture.

And this is before the vast bulk of the planned cuts have been fully detailed let alone implemented. The victims of this folly will be the hundreds of thousands who lose their jobs in the public and private sectors.

This Government will bear a very heavy responsibility for the choices that they are making – which are far from ‘unavoidable’. But there is a huge responsibility for Labour as well.

The grassroots opposition to cuts to Building Schools for the Future show that the British people will not take the Tory plans lying down. But ultimately, the only force that can stop the Conservatives for good is the Labour Party, with the support of the wider labour movement.

We have to be honest and acknowledge that, in the past, we have not been quick enough to halt the Tory vandalism. After the 1931 election loss, it was 14 years before Labour won again – a period when people desperately needed our party to be in government doing everything to help those suffering in the Depression.

After 1979, Labour’s lack of intellectual confidence and political unity left the jobless at the mercy of a heartless Government for eighteen long years.

This time around I don’t believe our Party and our movement is content to let history repeat itself. There is a deep commitment to get back into power as soon as possible. This is based on enduring Labour values: stronger together, not each on their own.

However, these values alone will not be enough to stop the Tories. We need to convince the British people that we also have the mettle to stand up for them and face up to the tough challenges our country faces.

As the Chancellor’s economic gamble begins to bite, Labour will need to not only oppose, but offer a credible alternative economic vision. With 2.5m people looking for work, as Labour leader, I would make reducing the jobs deficit central to my economic agenda – through a plan to protect, create and improve jobs.

That means, firstly, reducing the deficit in a way and at a pace that promotes jobs and growth – which is essential to balancing the books in a sustainable way. When the Swedish government reduced its budget deficit in the 1990s it made halving unemployment the top priority – and achieved it. By contrast our government is doing the exact opposite.

Its cuts will cost 610,000 public sector jobs in the coming years, despite no evidence that the private sector is yet strong enough to fill the gap. Over the last year our economy lost almost a quarter of million private sector jobs, making the Tory strategy not only immoral but terrible economics.

That’s why I believe the Office for Budget Responsibility not only needs to be made accountable to Parliament not Ministers, but should have a stronger remit to advise government about when it is safe to reduce the deficit without damaging jobs and growth.

Creating new jobs in the private sector will be hard work. The OBR is predicting 2.5 million new jobs over the next six years, but it took 11 years to achieve that level of job growth after the early 1990s recession (based on higher annual average growth rates than the OBR is predicting).

The innovative, well-funded companies that can survive in an ultra-competitive global economy and create jobs in Britain will not spring up by magic – which makes the government’s tepid growth plan even more worrying. Labour should make it clear that there is a realistic and more effective alternative to Osborne’s back to the future economics.

Reducing the jobs deficit rests on the fundamental belief that secure, fulfilling jobs and decent pay are not a drag on business but are the key to success in the modern economy – where innovation and imagination will make the difference.

A serious plan to create and improve jobs would include considering the establishment of a British Investment Bank to facilitate investment into infrastructure and to accelerate our transition to a low carbon economy. It would marshall all the powers of government – regulation, taxation, planning and procurement – to incentivise and resource the most innovative and jobs-rich businesses. That is the basis for a modern industrial strategy for Britain.

It would set itself the goal of 60 per cent of 18-30 year olds going in university, higher level vocational learning or apprenticeships by 2025. And it would also pursue a new workplace settlement for the British economy – because well-rewarded, highly motivated workers will be the cornerstone of the productive, innovative economy we must become.

Labour needs to show the British people that it wants to improve their working lives. For too long, the Party relied too heavily on taxes and benefits to reduce inequality. We neglected private sector reform to ensure working people are properly respected and rewarded in the workplace in the first place.

We need to think creatively about how government, business, unions and industry experts can work together to tackle low productivity and poor quality work in some sector in our economy.

This is also the way to address the absurd income disparities within firms that have emerged in recent years. For example, a living wage in the public sector and greater employee representation on the pay committees of top firms would redistribute power within firms.

Labour cannot go into the next election thinking, once again, that it has opposed the misery faced by millions on the dole but not done enough to stop and reverse it. The Party needs to be ready right now to lead the fight back against the Tories and their Lib Dem allies.

We must be fit to do the job of sinking the Conservative Party before it can damage millions of lives all over again.