Frances O’Grady is General Secretary of the Trades Union Congress.
26 April 2013
It’s a great honour for me to deliver this year’s Clement Attlee Memorial lecture.
Although the TUC, of course, is not affiliated to any political party, the shared values and ties between the trade union movement and the Labour Party remain strong.
The two sides of the labour movement don’t always agree on everything, and indeed our history has been punctuated by periods of tension.
But there can be no doubt that party and unions will always be stronger together. As the late, great leader of the T&G Jack Jones once said of our relationship: “murder yes, divorce never.”
I’m also always pleased to be back in Oxford, the city where I grew up. My mother worked for the NHS at the Churchill hospital, and my father worked for British Leyland on the production line at Cowley. And, following a disastrous experience of serving at table in a college, this is the place I first joined a union.
I want to talk you this evening about where next for Labour and the trade union movement.
About what we can learn from Clement Attlee and his great 1945 government.
About why the post-war consensus it established broke down.
About how both Labour and unions can learn from the lessons of the past, and forge a new ideological settlement for post-crash Britain.
And the argument I want to put to you is this: if we are to build a future that works for all, then both sides of the labour movement need to change.
For the Party, there must be a decisive break with New Labour managerialism, the notion that deregulated markets can somehow be given a human face. And for us in the trade unions, there can be no retreat into a comfort zone of narrow sectionalism or oppositionism. Because our long-term viability ultimately rests on our capacity to shape a new economy, not from the sidelines but from within.
With the general election now just two years away – an election that could be as seminal as those in 1945 and 1979 – this is a good time to be having this discussion.
The past few weeks have been dominated of course by the death of Margaret Thatcher. There have been efforts to rerun battles and re-write history with a fierce debate about her legacy. But as political commentators of all stripes acknowledge, she was one of only two post-war prime ministers to change Britain – and the world – in profound ways.
The other, it hardly needs saying, was Clement Attlee.
A few weeks back I went to see Ken Loach’s documentary film “Spirit of ‘45”, appropriately enough in the Picturehouse cinema in East London.
You couldn’t help but be uplifted by just how great the achievements of that time were.
Cinematically, it is a beautiful film and, in parts, deeply moving. Jon Cruddas who gave the inaugural Attlee lecture spoke about Labour’s romantic tradition. Much of the film spoke to that although, for Loach, the line between romanticism and nostalgia can be a thin one.
For example, the film glossed over the extent to which reconstruction depended on cheap immigrant labour – from Ireland and the Caribbean in particular, although the State’s preference was for ex POWs from Germany and Italy. And, there was prejudice too. A 1948 government committee expressed the concern that: colonial labour might find the unemployment benefits so generous they might not bother to seek work. Sound familiar?
The film failed to fully explore the role of women both in building and benefiting from the New Jerusalem, with women contributors being largely consigned to offering testimony rather than analysis.
But what the film did convey was our capacity, through collective action, to really change things.
That’s something Clement Attlee discovered soon after studying here at University College Oxford, when he worked with children from the slums in the East End. The type of experience from which today’s ministers could perhaps learn a thing or two.
There Attlee realised that charity, however generous, could not alleviate poverty – let alone tackle inequality; that only by harnessing the resources of the state could social reform be achieved.
And it was this insight that inspired one of the great political careers of the twentieth century.
But I think two forces shaped the Attlee government above all else.
First, an overwhelming desire never to go back to the stagnation and mass unemployment that characterised much of the 1930s. After the sacrifices of the war, ordinary people simply wouldn’t stand for it.
And second, the positive experience of the nation pulling together between 1939 and 1945 – working class and middle class; men and women; industry and unions – to defeat fascism. Unity that was facilitated by a strong, active state.
The headline achievements of that great Labour government are well known.
The creation of the NHS. The welfare state, putting the Beveridge Report into practice. Fuller employment. Over a million new homes built, fit for heroes, mainly council houses. The nationalisation of strategically important industries.
All delivered, remember, at a time Britain was on its knees after war – when our debt to GDP ratio was over 200 per cent. Far, far higher than now. And much higher than the 90 per cent ceiling erroneously propagated by today’s advocates of austerity.
But just as important in their own way are the other things Attlee did. The Fair wages resolution. Sick leave for workers. Compensation for the victims of asbestos. Better working conditions for miners, dockers and seafarers. The right to join a union for workers in firms awarded government contracts. The determination to end rural poverty and exploitation through the creation of an Agricultural Wages Board.
Both in its broad brush strokes and its fine print, the Attlee government set out the contours of a new social democratic, Keynesian consensus that lasted a generation. And that changed Britain for the better.
That post-war settlement is always said to have run out of steam at the end of the 1970s.
But there was nothing automatic about the UK’s path. Indeed the ‘working together’ spirit helped us absorb some of the oil shock in the mid-1970s. And the Social Contract managed to both bring down inflation and limit unemployment.
It is a testament in fact to the strength of the post-war settlement that Mrs Thatcher’s most powerful criticism of Labour was that they had allowed unemployment to go over a million. A figure that soon came to be seen as nostalgic.
Of course the victors get to write history, and the 1970s get a bad press today. But even allowing for all the strife, we should not forget it was the most equal decade Britain has ever known. A period when ordinary people shared in economic growth. And while the Social Contract broke down, that was by no means inevitable and was as much due to ministers not being flexible enough, as shopfloor frustration.
Remember too that the UK’s experience under Thatcherism was not universal. It’s true that Britain embraced free markets, privatisation, and banking and finance deregulation with an ideological zeal that was rivalled only by Reagan’s America. Unions were systematically marginalised. The profit motive reigned supreme. And if that involved a bit of creative destruction along the way, then it was a price worth paying.
But most of Europe – from Mitterand’s France on the left to Kohl’s Germany on the right – took a very different course. Yes, other countries experienced industrial restructuring but it was more planned and less painful, better managed and kept more manufacturing capability. Inequality was not allowed to rocket out of control. Rather than tax cuts for the rich, there was investment in infrastructure for the future.
So why did Britain – like America – embrace the neoliberal model with such gusto? Why was the Conservative government here able to rip up Attlee’s post-war settlement so quickly and recklessly?
Well, there are a number of reasons, but for me business culture offers one compelling explanation.
While unions have never been strong in the individualistic ethos of the USA, union density in the UK was at its highest in 1980.
Arguably unions in this country were reaping the consequences of a strategic error made in failing to seize the opportunity of the European model of co-determination and industrial democracy.
Ernest Bevin was acutely aware of the German system. As Foreign Secretary he played a large part in creating it. But alas not here.
In 1945, we had an important opportunity to lift our gaze beyond the immediate task of improving terms and conditions and play a different role within the emerging mixed economy: giving workers a voice and a stake in strategic decision making, in the newly nationalised industries and the new welfare state. But it was one that we squandered.
Rather than rising to the profound challenge of collective ownership – not just redistributing power to workers, but also to those who depended on the goods and services we produced – we chose instead to take the easy option.
The historian Martin Francis wrote: “Union leaders saw nationalisation as a means to pursue a more advantageous position within a framework of continued conflict, rather than as an opportunity to replace the old adversarial form of industrial relations. Moreover, most workers in nationalised industries exhibited an essentially instrumentalist attitude, favouring public ownership because it secured job security and improved wages rather than because it promised the creation of a new set of socialist relationships in the workplace.”
And it was this strategic failure than led eventually to the breakdown of the Social Contract, the subsequent Winter of Discontent and the Thatcherite counter-revolution. All disasters both for the Labour Party and trade unions.
Our desire to rely purely on shopfloor power in order to avoid the charge of cooption proved insufficient when we faced mass unemployment and growing inequality. Legal changes that reduced union influence did not help either, although in my view they were secondary to the economic onslaught.
With no institutional stake and a collapse in our bargaining power we were no longer part of the solution, and instead were easily and systematically vilified as the problem.
Mrs Thatcher set out to drive a wedge between unions and communities. Unions were seen as the last line of defence of collective values that she despised and an obstacle to unfettered free markets. She did not always succeed. But a series of union industrial defeats showed how our limited tool kit could not cope with the new world. Despite valiant efforts, too often we proved unable to defend our members let alone the communities who, in fact, rallied to our aid.
The argument against Mrs Thatcher was not one against change, but that she left in her wake a huge trail of social and industrial destruction. Something she was able to hide to an extent, thanks to the big stream of new cash from North Sea oil and the fire-sale of assets through privatisation – neither of which was used for investment in the future.
Into that gap came a bubble economy, where people prospered not by making things, but by speculating in the property and financial markets.
Self evidently, this economic restructuring reduced union membership and so influence, and marked the beginning of a slow erosion of living standards. But it also had a big impact on our politics.
It was always a caricature that Labour won elections purely on the union vote, but undoubtedly organised labour was the biggest component of Labour’s electoral support from the end of the war to the 1970s.
This was why the political Right was always so keen to divide non-union workers against union workers – just as they try to divide private sector against public sector workers today.
But the truth is that unionisation lifts all workers. It’s no coincidence that when unions were at the peak of their powers in the mid-1970s, the share of GDP going to wages stood at 65 per cent. Today, with just one in five workers in the private sector holding a union card and collective bargaining covering less than a a third of the total workforce , that share of wealth is barely more than 50 per cent.
Union led campaigning also won important gains such as the minimum wage, pension rights, and health and safety protection and the right to a weekend. De-unionisation avoids the inconvenience of that.
But the Right’s success in making unions a political problem, even while we retained support for our representational and industrial role, has turned Labour’s traditional alliance with us into a challenge.
New Labour responded with a strategy of triangulation. Tony Blair ran against old Labour as much as against John Major. As my predecessor but one John Monks once said, unions were sometimes treated as “embarrassing elderly relatives”.
With union members desperate for change in the run up to 1997, that caused few problems. And of course Labour won a huge majority in 1997. Polling evidence suggests that the great British public had already made up its mind to put Labour in Number Ten when the party was led by John Smith. But New Labour’s narrative became that distancing itself from the unions was a necessary ingredient for success.
But it also stored up problems, as it took traditional supporters for granted rather than actively building an electoral coalition.
Triangulation can only ever be a tactic – it cannot work as a strategy, as no party can continually run against its own past and values.
And of course we know now that Labour’s valiant attempts to bolt social justice on top of the neoliberal economic model – a sort of humanised Thatcherism – would end in tears when the bubble burst. Even after 13 years of Labour government, even after the convulsions unleashed by the collapse Lehman Brothers, Britain’s rabid model of financial capitalism survives to this day essentially unchanged.
As the Labour leadership now recognise, it’s an economic system that simply isn’t fit for purpose. Too much power, wealth and influence is concentrated in the hands of too few.
And in this post-crash world, the problems are plain for all to see.
A tiny elite at the top continue to prosper regardless, while real wages for ordinary workers are back where they were a decade ago. Bankers trouser huge bonuses, while lending to small businesses dries up. Corporations avoid a fortune in tax, while our public services are slashed. Property developers rake it in, while millions of people lack a decent home in which to live.
Be in no doubt: the bill for this free-market free for all is enormous.
Today, taxpayers spend billions subsidising employers who pay poverty wages. Billions more go on Housing Benefit, ending up in the pockets of private landlords. But in a sense this is just the tip of the proverbial iceberg.
As the coalition government undermines the benefits of millions of people, multinationals gain from what can only be described as corporate welfare on an epic scale. Subsidies to privatised rail operators now far exceed those paid to British Rail. Companies such as G4S and Serco are paid a king’s ransom to run outsourced public services, with limited evidence of value to the taxpayer. And many of our banks – heralded during the boom as exemplars of private sector efficiency and innovation – continue to survive on massive taxpayer bailouts.
The Thatcherite right always liked to castigate nationalised industries such as coal, steel and indeed British Leyland for their reliance on handouts. But the reality is they enjoyed a fraction of the public largesse now lavished on our banks. The masters of the universe in the City are always quick to dismiss state subsidies – except that is when they’re the beneficiaries.
What we have today is a model of capitalism that privatises gains and socialises losses. Capitalism has succeeded in reinventing itself time and time again: it’s been said that the first phase of modern capitalism was profiting from manufacturing and industry; the second was profiting from finance; and the third, where we are now, is profiting from our public realm.
Back in the early 1980s, Margaret Thatcher said how odd it would be to future generations that the likes of Pickfords or the Gleneagles Hotel were nationalised. And yes, in some respects she had a point. But if anybody had been told back then that our railways, swathes of the NHS and many of our schools would be privatised, then frankly I suspect they would have been marched off by men in white coats.
And that’s a measure of how profoundly Thatcherism has changed Britain, how the economic centre of gravity moved so far to the free-market right. But with that model failing the vast majority of people in Britain today, the case for a paradigm shift is overwhelming. If Labour wins in two years’ time, its job will be to build a new political economy.
And if a future Miliband government is to avoid the sclerosis that has afflicted the Hollande Presidency in France, the groundwork for that transformation needs to be laid now. Some of the intellectual heavy-lifting has begun. The focus on responsible capitalism. The idea of pre-distribution. The concept of the “relational state”, putting human relationships at the heart of public service modernisation. The challenge now? To turn this wonkish terminology into a popular – dare I say it populist – agenda to put to the country in two years’ time.
So today’s Labour party faces a big challenge – admittedly not as great as recovering from a world war, as in Attlee’s time, but still huge.
And we need to be alert to the powerful vested interests that stand in the way of progress.
Those who benefitted from the neoliberal era have not gone away – and are keen to go back to business as usual. Many in the current government seem to have retreated to their default position in which they deny that inequality, deregulation and letting markets rip were in any way the causes of the crash. Instead they want the same old policies, but to an even greater degree.
That’s why we need to be bold in winning the battle of ideas, setting out our alternative vision for post-crash Britain. As Ed Miliband rightly said in his speech to Scottish Labour last week, we need a brand new settlement to heal economic and social divisions. A new start – comparable to the change offered by Margaret Thatcher in the 1980s and Clement Attlee in the 1940s. So far, so obvious.
But the difficult bit is how we achieve this amidst austerity, with the public finances in a mess, and with the costs of social democracy rising in an ageing society.
For the TUC, none of this ought to preclude radicalism. The central lesson of the Attlee government is that even when times are tough, great things can be achieved. We may be in crisis; but remember crises offer a genuine window for change.
Just after Attlee died in 1967, Harold Wilson remarked that: “Fainter hearts than his would have used the nation’s economic difficulties as a reason for postponing social advance. He felt, on the contrary, that the greater the economic difficulties, the greater the need for social justice.”The same is true today.
So what would a bold vision for change look like today?
In the short term, I share Labour’s conviction that we need an alternative to austerity. With yesterday’s GDP figures underlining the chronic weakness in our economy and even the IMF now calling on the Chancellor to rethink his spending cuts, the case for change is clear.
Even on its own terms, austerity is failing. Deficit reduction targets will be missed by a country mile. Borrowing is £200 billion higher than expected. And we recently lost our coveted triple A status. Twice.
The Chancellor likes to tell us that unless we deal with our deficit, then we won’t have growth. But as economic history has repeatedly shown – most notably in the post-war period – it is the reverse that is true. Unless we get growth, then we won’t be able to pay down our debts.
That’s why the TUC is calling for investment in growth and jobs, reflecting the fact that interest rates on our sovereign debt are not only at historic lows, but below inflation; we want a fairer balance between spending cuts and tax rises; and we want a proper clampdown on tax avoidance by the super-rich and corporations; and for a financial transactions tax in the City.
In the long term, though, our task is surely to build a new and very different economic model. One that works for ordinary people in all parts of Britain.
We need an economy that is fairer – because in place of spiralling inequality, we need just rewards for all. A living wage. Fair wages set by modern Wages Councils. A new duty on companies to report pay ratios. Worker representation on the remuneration committees that set top pay.
We need an economy that is greener – because in place of environmental degradation, we need a bold plan to decarbonise Britain. A strategy to deliver green skills, jobs and industries in the regions that need them most. Investment in emerging technologies such as clean coal, financed by a proper Green Investment Bank. And a bold vision for world-class public transport: integrated, affordable, publicly-run.
And we need an economy that is stronger – because in place of free market fundamentalism, we need an active, intelligent role for government. A smart industrial strategy to rebalance our economy, nurturing new sources of manufacturing strength,with the creations of decent jobs at its heart. A State Investment Bank to provide funding for new infrastructure and industrial development. Fundamental reform of the rest of the banking system, so we have banks that serve us not themselves.
Above all, economic strength demands economic democracy, a recalibration of the relationship between capital and labour. New models of corporate governance that empower all stakeholders, not just shareholders. Greater worker and union involvement in corporate decision making – as in Germany. New institutions to promote pre-distribution otherwise known as collective bargaining, so that wages start rising once again and we get away from the debt-fuelled growth that led to the crash.
I could go on – but I think you probably get the idea by now.
Obviously much of this chimes with what Labour has been saying over the past few years under Ed’s leadership. And we in the trade unions want to work with Labour to turn all of this from an attractive theoretical proposition into a practical political reality.
The aim? To move away from American-style Wild West capitalism towards best practice in Europe. The equality of Scandinavia. The collaborative industrial culture of Germany. The quality of life …
What then does all of this mean in practice for Labour and the unions?
I’ll start with the union side.
We need to be smart and realistic about what we seek from a new settlement. Much as we would like the next Labour government to be like a videotape run backwards undoing all the coalition policies we dislike, we have to recognise that there will be a difficult and different starting point. Of course we need to undo the damage done by this government and the crash, but there will need to be new thinking and a recognition that not everything will be achieved at once.
That does not mean that Labour or trade unions should be timid in what we seek. We know that even with an end to forced austerity, there will no longer be the illusory resources generated by the finance bubble. But if there is less to spend, then we need to look for precisely the big structural changes in the economy that the last Labour government shied away from. We will have to tackle problems such as low pay at root, not spray money at them by subsidising low-paying employers.
And in seeking radical economic change, we need to avoid the strategic error we made after the war. We should embrace industrial democracy and take up every chance to re-shape economic relationships. Trade unions cannot afford to stand aside as we did after 1945. This time, history would simply pass us by.
As even some Conservatives recognise, industrial relations in many companies is very good. Of course there are differences of interest and opinion, and imbalances of power still characterise the employment relationship. But there is also a wide recognition of mutual interest in generating good, rewarding jobs, investing in skills and tapping the undoubted expertise of the workforce.
In the future, unions and working people need to be at the heart of the economy, having an effective voice, winning fairness, building the businesses that will deliver our prosperity in the decades to come. That poses a challenge to government, to business and to managers. But I make no apologies for that. We have too many complacent business leaders who run organisations that are coasting, using command and control to avoid the challenge of inclusive decisions we all need to take to raise our productivity.
But most of all, industrial democracy poses a challenge to us in the trade union movement. It implies a role that is not just more ambitious, but more demanding, than the one we usually have now. It means accepting responsibility, moving out of a comfort zone of short-termism, to taking the long view and championing the greater good. We already play such a role in the best workplaces, and also in policy areas such as the environment, pensions, skills and health and safety, where mutual advantage is clear for all to see.
Of course none of this means giving up on our defining purpose of winning a better deal for workers. The majority of EU countries now guarantee workers seats on company boards. It doesn’t stop them from fighting maltreatment and exploitation. Nor from taking industrial action where there is no other option.
I’ve been frank about the challenges facing us in the unions. But what about the Labour Party?
It too needs to recognise that limited resources means we need more, not less, structural change. And it needs to recognise that some of the electoral tactics and approaches that worked 10 and 15 years ago are now as much old Labour as what worked in 1945 or 1966.
Labour instead needs to start where the people are – and the problems of stagnation, declining living standards and poor prospects now afflict a huge majority of the electorate, whether they tick the traditional supporter box or not.
So rather than a rainbow coalition of different promises and messages for different groups, Labour needs a compelling vision and lived values that demonstrate the benefits of a new approach.
And while ministers would of course need to be clear what they will do when the red boxes arrive, the wider challenge is not to build a Labour policy encyclopaedia but to rediscover the inspirational language of progressive change.
Attlee’s political genius was to give people a sense of hope, a clear route map out of depression, war and austerity towards the social and economic justice they craved.
Re-reading the 1945 manifesto, I was struck not just by the directness of the language, but the relevance of the message now.
There is criticism of the “hard faced men” who “controlled the banks, the mines, the big industries and largely the press”. These were people who “felt no responsibility to the nation”. It talks of how the interwar slumps “were not Acts of God or blind forces, but the sure and certain result of too much concentration of too much economic power in the hands of too few”.
And the 1945 manifesto restates Labour’s commitment to freedom in its most meaningful sense. “The Labour Party stands for freedom . . . but there are certain so-called freedoms that Labour will not tolerate: freedom to exploit other people, freedom to pay poor wages and push up prices for selfish profit, freedom to deprive people of the means of living full, happy, healthy lives”.
Of course this is a different era, and we may be fighting an economic war rather than recovering from a military one, but for Labour that sense of conviction is as necessary today as it was seven decades ago.
I started this lecture with a quote from Jack Jones, and I want to finish with one.
He said of Attlee: “His message was clear, forthright, honest, dignified and essentially humane . . . he was a great patriot and socialist”.
And it’s that same clarity of purpose that we need now.
I believe the people of Britain are crying out for change, for a sense of hope about what the future holds for them and their families.
In just six years, Clement Attlee transformed our economy, our society and our country. And if it is elected in 2015, Ed Miliband’s Labour Party must do the same.
We can face the future together.
Thanks for listening.