Reducing the jobs deficit: Protecting, creating and improving jobs
South Durham Enterprise Agency
July 23rd, 2010
It is a pleasure to be here to launch the South Durham Enterprise Agency – which I wish a very successful future.
Many people are quick to talk down the North East economy, not least the current Prime Minister before the general election. Like other regions, we have big challenges ahead. And I fear the current government are hindering, not helping.
But we also have real strengths – in construction, retail and low carbon technologies. NETPark, with its links to our universities, is the UK’s fastest growing science park in the UK, promoting science, engineering and technology across County Durham and the wider North East.
The SDEA has launched with a simple, but powerful mission: to create and sustain jobs in the community. And that is exactly the subject of my remarks this evening.
I want to talk about the most pressing deficit facing our economy right now. The jobs deficit that leaves 2.5 million people in our country – and 121,000 in the North East – looking for work and many more fearful about the future.
If elected Labour leader, reducing the jobs deficit would be central to my economic agenda. It’s essential both to balancing the books and to fulfilling Labour’s mission to give everyone the chance to live decent, secure and rewarding lives.
This means not only opposing the dogmatism and short-termism of the Tory-Lib Dem government, but developing a credible and radical plan to protect jobs, create jobs and improve jobs in the years ahead.
The power of work
At its best, work can be a route to affluence and fulfilment. At its worst, it can mean exploitation and insecurity. For too many people, work has become something other people do.
The demoralisation and alienation of unemployment in the 1980s motivated me to join the Labour Party. And it motivated our government to do everything we could to prevent it during the recent recession. We were determined never to leave people and communities – including those in this area – to their fate in the way the Tories had.
We remembered the worst consequence of the 1980s recession. The ghost towns and the lost generation of long term unemployed, who struggled to take advantage when the good times returned. This was a human and an economic tragedy for Britain.
So, when demand for labour collapsed following the financial crisis, we recognised that government had to step in as employer of last resort. When there are people who need work, and work that needs doing, it’s not just a market failure, it’s an imperative to act.
The Future Jobs Fund not only guaranteed work for young people at risk of long term unemployment – it helped stimulate a stagnant economy.
It is a terrible error for the Tories to abandon the Future Jobs Fund just when it is beginning to deliver real results in helping youngsters get a break in the jobs market. Instead of scrapping it, the government should extend the job guarantee to anyone at risk of long term unemployment.
Labour must oppose the Tories’ dogmatic, old fashioned economics that pose a huge risk to the jobs and livelihoods of working people and their families. But there is also a responsibility on Labour to develop our own alternative economic agenda. For me, that must have jobs at its heart.
Not just because decent, secure and fairly rewarded work is the foundation of a good society. But also because the driver of our economic success in the future will be how imaginative, confident and positive our people can be.
Protecting jobs while reducing the deficit
The first task is to reduce the deficit in a way that protects and promotes jobs. That means steering a course between deficit masochism and deficit denial – both of which risk higher unemployment.
When the Swedish government reduced its budget deficit in the mid 1990s, it made halving unemployment the top priority – and they achieved it. By contrast, George Osborne is cutting the deficit irrespective of the consequences on unemployment.
The Chancellor chose to cut by an additional 40 billion pounds, beyond the plan Labour had set out, despite the fact that this plan was consistent with the IMF’s path to budget sustainability.
The Office for Budget Responsibility says the Chancellor’s cuts will cost 610,000 public sector jobs. The government hopes these will be more than replaced by the 2.5 million new jobs the OBR expects will be created in the private sector over the next six years. But it took 11 years to achieve that level of job growth after the early 1990s recession, and that was with higher average annual growth than is predicted now.
If public sector job losses hit each region in equal proportions, it would mean 30,000 more people unemployed in the North East alone. With a drop in private sector employment of 5,000 in the last year alone, it is difficult to see how private companies will make up for such a significant job loss.
Nationally, private sector employment has fallen by nearly a quarter of a million in the last 12 months. And with business confidence fragile, where is the buoyant private sector recovery that is supposed to fill the gap? Especially when public spending cuts – such as to Building Schools for the Future and affordable housing developments – will also hit private sectors jobs.
Today’s GDP numbers are encouraging – driven, in fact, by a very strong quarter for the construction sector. They demonstrate that Labour’s action to get the economy back on its feet was working.
However, there remain considerable risks to growth on the horizon for the British economy. Private sector investment is low, employment flat is lining, external demand is weak, and surveys of business confidence show continued uncertainty.
If Tory austerity sets back this recovery it would make it harder to reduce the deficit over the long term – with more people on the dole for longer meaning higher benefit payments and lower tax receipts.
My message is that There Is An Alternative. Deficit reduction should be driven by the outlook for jobs and growth. Instead we’ve got George Osborne’s austerity straitjacket.
That’s why I think the Office for Budget Responsibility must be truly independent so it can genuinely challenge the Chancellor’s claims. The Treasury Select Committee should appoint its members and it should report to the public, via Parliament, not just to government.
And I would also give it a new remit – not to make dubious forecasts that suit the Chancellor’s purposes, but to advise government about the pace and timing of deficit reduction with the twin goals of promoting growth and protecting jobs.
Creating and Improving Jobs
Reducing the jobs deficit is about more than how we reduce the budget deficit however. It’s also about how we create and improve jobs – which I think, in today’s economy, are fundamentally linked.
As many of you in the room will know much better than me, fulfilling, well-rewarded work is not just good for people; it is also the secret to business success. Let me explain why I think this point is more important now than ever before.
The financial crisis of 2008 was not just a bump in the road. When we faced crises on a similar scale – in the 1930s and in the 1970s – they ultimately led to complete transformations in the way business was done and the way the whole economy worked.
We are at one of those transformational moments again, not least because the challenges and the opportunities we faced before the crisis have only been magnified further by it.
We knew that there were important emerging players in the global economy in the shape of China, India, Brazil and others. Now they are more confident and more dynamic than ever before.
And the idea that these countries are only going to compete with us on low value goods and services is already an outdated one.
A Chinese company like Suntech produces some of the most advanced and efficient solar energy equipment in the world and is now the third biggest company in its sector. Bharti Airtel in India is now the fifth largest telecoms provider in the world and already operates in eighteen different countries.
North East companies need to be in the new markets in China, India, Brazil and elsewhere creating jobs and wealth back at home here in County Durham. Breaking into overseas markets, strengthening domestic markets, and responding to the complex pace of today’s world means creating a modern economy built, above all else, on innovation and imagination.
Of course, we need entrepreneurs who epitomise these qualities. But with so many complex and fast-paced challenges facing businesses today, the capability to respond and innovate must pervade our whole workforce.
That’s why the work that the SDEA is embarking on is so vital – maximising every ounce of potential from our people and places.
That’s why I think creating and improving jobs in order to drive innovation must be a core goal of a modern economic policy. Achieving that rests on three fundamental challenges:
First, how do we ensure investment and capital are channelled to productive parts of the economy and to people with good ideas? This is about reforming the banks, but is also a wider question about how we regulate capital and put it to productive use.
Second, how do we transform British workplaces to meet the needs of an innovation economy – driven by autonomy, respect, engagement and security? This is partly about what government does, but also the spirit and attitude of companies and workers.
Third, how do we use the power of the state to unleash the wealth creating potential of the private sector and to challenge the rest to raise their game up to the best? This is not about finding a silver bullet policy, but crafting a modern, innovation-led industrial strategy.
In the remainder of my remarks I want to say something briefly about each of these challenges.
Cracking the UK’s investment deficit
Creating an economy driven by innovation and imagination will not happen by chance. It needs serious investment.
New ideas need capital to generate jobs and wealth. I’ve said before in this leadership campaign, we need markets and capitalism to work far better for the people of my constituency in South Shields.
We have to address something that has been a problem for the UK economy for decades. This is the failure of our banks and businesses to consistently put money behind the most productive ideas and the most innovative practices.
Before the crash, too much money was sucked into an inflated property market or dodgy financial products – or was siphoned off for bloated fees and bonuses. The short term, speculative gains offered by the City of London deprived areas like this of the capital they needed to grow.
We do need to reform the banks to prevent another financial crisis. But we also need to take this opportunity to reform the banking system to help rebuild and rebalance our economy in the years ahead.
We need to get money flowing to the people, the companies and the workers with the best ideas and the best strategies to seize the opportunities of the modern economy.
Over many decades, our European neighbours have had a much better record on productive investment. This has created a weight around the ankles of the British economy.
To crack this problem, the government’s Banking Commission needs to address the question of how the British banking sector should be reformed to ensure it serves its proper role in allocating capital to drive growth and jobs – not just seek the quickest, speculative gain.
One option I think it should consider is the case for establishing a British Investment Bank to facilitate investment for vital infrastructure, to support good small businesses and to accelerate our transition to a low carbon economy.
As an example, a bank along these lines – owned by the public but controlled by an independent, commercially-orientated board tasked with delivering long term returns – would be ideally placed to provide loans to companies like Sheffield Forgemasters.
A New Workplace Settlement
But investment alone is not enough. Capital needs something to invest in – and that requires innovation and imagination. That means invigorating the inventiveness and creativity that is Britain’s greatest economic advantage.
And that has to start in the workplace. We don’t know exactly what the jobs of the future will be. We don’t know what new ideas, new products and new services will be developed and demanded over the coming years.
Government cannot predict what will be the big ideas of the future – and neither should it try. But we do know the kinds of workers and the kinds of workplaces that give us the best chance to put Britain in the economic fast lane.
As we are hearing about tonight, the best workplaces are those that inspire innovation and foster commitment, because employees are respected and engaged by their company.
Workers are given the freedom to develop and use their skills. They are given the space to think for themselves and to use their knowledge to improve the service or product they are working on.
And that respect is backed up by fair rewards. Employees in the best firms know they get a fair reward for the effort they put in. If the company does better, they do better.
This is why it should be a matter of far greater concern than it is that wage growth has lagged behind productivity improvements in recent decades. In other words, someone has been enjoying the financial benefits of that improved efficiency and, in many cases, it is not employees. I’m proud of the minimum wage, but we also need to make sure that workers on middle incomes get their fair share of the wealth they help to create.
This is why a new workplace settlement is central to my strategy for reducing the jobs deficit. Where the best employers who get the best out of their workforce become a model for all. And where those employers that are happy to coast along with inefficient practices and a miserable workforce change their ways.
The truth is that for too long British prosperity has been dragged down by a two-tier economy.
Many companies recognise that being a decent employer and a profitable enterprise go hand in hand. British Aerospace, Rolls Royce, Nissan and Argos are all examples of firms that have built their strength on upskilling their workforce and working in partnership with trade unions.
But there are others who think the route to success lies in squeezing every ounce of effort out of their workforce in return for low pay and poor conditions – as a substitute for management vision and investment.
For many decades governments of all colours have tolerated this situation and it has done little for the long-term health of the UK economy or for the well-being of its population. The result is a polarised labour market – which delivers good work and good rewards for some, but poor quality work and poor rewards for many.
For the sake of workers and UK PLC, the two-tier economy must end. The great contribution that agencies like the SDEA can make is to address this problem by supporting the rest to aspire to the best.
A new workplace settlement cannot be directed from Whitehall, nor should it be if it could. It will require power and responsibility to be balanced and negotiated within firms, between employers and employees. Successful workplaces will be those characterised by autonomy, engagement and innovation.
But there are things that government can do. For instance, I would like to see the minimum wage increased at least in line with earnings each year. And we should explore how the living wage can become the norm across the whole of the public sector.
We should also think creatively about how government, business, unions and industry experts can work together to transform those sectors of the economy operating in a low pay, low productivity equilibrium so they can shift themselves up the value chain.
Reforming corporate governance should also be part of this new settlement – including giving employees a say in decisions about top pay so that those decisions are negotiated and a culture of reciprocity is strengthened.
Instead of striking out in this new progressive direction, the Tories want to re-fight old battles over strikes. Industrial disputes are at a far lower level than the 1980s – and the last thing Britain needs is a throwback to the defunct, confrontational prescriptions of that decade.
What they haven’t understood is that we don’t need a less satisfied, more exploited workforce to succeed. We need a vision of the ultra-modern, innovative workplace that delivers for firms and for employees.
Unleashing private sector wealth creation
The final element of Labour’s agenda for creating and improving jobs should be to use the power of the state to unleash the potential of the market.
The Tory version of this story is simple: slim the state and cut corporation tax and all will be well. The public sector, they argue, “crowds out” private sector activity.
But where is the evidence for this? Some of the most innovative, affluent countries have far bigger public sectors than the UK, some do not
Rather than obsess about the size of the state, we need a clear vision for the type of economy we want to create – and the role of government, business and workers in shaping it.
A smart industrial strategy requires action in a wide range of areas – maximising the role of taxation, regulation and procurement to promote high-innovation businesses and good jobs.
In each of these areas the government plays a significant role in affecting the climate for business decisions. We should be more confident in asserting that there are no neutral choices here. We should be clear that our goal is to make it easier for firms to pursue ‘high road’ business models – and harder to follow ‘low road’ strategies.
In developing such a smart industrial agenda, we can draw on existing British strengths – like the support for Nissan’s electric cars here in the North East, the relocation of parts of BBC to Salford and the industrial spin offs from our world class universities.
And we can also learn from what other countries have achieved. Such as Portugal, where the government has regulated to create a viable commercial basis for investment in electricity cars. Or Germany’s activist policy towards renewable energy. Or Israel’s generous tax breaks for enterprise zones, developed alongside universities.
We can learn from this experience overseas but, in the end, we will need to develop an agenda that works in the British context. But it will be an agenda based on the belief that government can be the ally not the enemy of private sector wealth creation.
Conclusion
These are serious times for our economy, for our businesses and for our people. We must make the right choices now – not just to reduce the budget deficit in a sustainable way, but to tackle the jobs deficit too.
I know that everyone in this room will work hard, and work together to make that happen.
I don’t want us to look back in ten years time and wonder why, after a crisis created by the banks, ordinary working people and local businesses paid for that crisis with their jobs and their livelihoods.
I don’t want us to look back in ten years time and mourn the loss of good local businesses that couldn’t get the capital they needed to grow, or couldn’t get the backing for a great new idea.
I don’t want us to look back in ten years time and still despair that people work hard every day of the week and live in poverty while others who simply move money around the globe earn billions in bonuses.
Instead I want us to look back and feel proud that we learned the right lessons of this crisis and created a new economy built on decent, secure and well-paid work – in innovative, successful companies. I want us to look back in ten years time and know we got this historic moment right.
There is nothing less at stake than the future health of the UK economy and the long-term well-being of our fellow citizens. That is why, should I be elected Labour leader, I would put tackling the jobs deficit at the heart of my party’s economic agenda.
South Durham Enterprise Agency
July 23rd, 2010
It is a pleasure to be here to launch the South Durham Enterprise Agency – which I wish a very successful future.
Many people are quick to talk down the North East economy, not least the current Prime Minister before the general election. Like other regions, we have big challenges ahead. And I fear the current government are hindering, not helping.
But we also have real strengths – in construction, retail and low carbon technologies. NETPark, with its links to our universities, is the UK’s fastest growing science park in the UK, promoting science, engineering and technology across County Durham and the wider North East.
The SDEA has launched with a simple, but powerful mission: to create and sustain jobs in the community. And that is exactly the subject of my remarks this evening.
I want to talk about the most pressing deficit facing our economy right now. The jobs deficit that leaves 2.5 million people in our country – and 121,000 in the North East – looking for work and many more fearful about the future.
If elected Labour leader, reducing the jobs deficit would be central to my economic agenda. It’s essential both to balancing the books and to fulfilling Labour’s mission to give everyone the chance to live decent, secure and rewarding lives.
This means not only opposing the dogmatism and short-termism of the Tory-Lib Dem government, but developing a credible and radical plan to protect jobs, create jobs and improve jobs in the years ahead.
The power of work
At its best, work can be a route to affluence and fulfilment. At its worst, it can mean exploitation and insecurity. For too many people, work has become something other people do.
The demoralisation and alienation of unemployment in the 1980s motivated me to join the Labour Party. And it motivated our government to do everything we could to prevent it during the recent recession. We were determined never to leave people and communities – including those in this area – to their fate in the way the Tories had.
We remembered the worst consequence of the 1980s recession. The ghost towns and the lost generation of long term unemployed, who struggled to take advantage when the good times returned. This was a human and an economic tragedy for Britain.
So, when demand for labour collapsed following the financial crisis, we recognised that government had to step in as employer of last resort. When there are people who need work, and work that needs doing, it’s not just a market failure, it’s an imperative to act.
The Future Jobs Fund not only guaranteed work for young people at risk of long term unemployment – it helped stimulate a stagnant economy.
It is a terrible error for the Tories to abandon the Future Jobs Fund just when it is beginning to deliver real results in helping youngsters get a break in the jobs market. Instead of scrapping it, the government should extend the job guarantee to anyone at risk of long term unemployment.
Labour must oppose the Tories’ dogmatic, old fashioned economics that pose a huge risk to the jobs and livelihoods of working people and their families. But there is also a responsibility on Labour to develop our own alternative economic agenda. For me, that must have jobs at its heart.
Not just because decent, secure and fairly rewarded work is the foundation of a good society. But also because the driver of our economic success in the future will be how imaginative, confident and positive our people can be.
Protecting jobs while reducing the deficit
The first task is to reduce the deficit in a way that protects and promotes jobs. That means steering a course between deficit masochism and deficit denial – both of which risk higher unemployment.
When the Swedish government reduced its budget deficit in the mid 1990s, it made halving unemployment the top priority – and they achieved it. By contrast, George Osborne is cutting the deficit irrespective of the consequences on unemployment.
The Chancellor chose to cut by an additional 40 billion pounds, beyond the plan Labour had set out, despite the fact that this plan was consistent with the IMF’s path to budget sustainability.
The Office for Budget Responsibility says the Chancellor’s cuts will cost 610,000 public sector jobs. The government hopes these will be more than replaced by the 2.5 million new jobs the OBR expects will be created in the private sector over the next six years. But it took 11 years to achieve that level of job growth after the early 1990s recession, and that was with higher average annual growth than is predicted now.
If public sector job losses hit each region in equal proportions, it would mean 30,000 more people unemployed in the North East alone. With a drop in private sector employment of 5,000 in the last year alone, it is difficult to see how private companies will make up for such a significant job loss.
Nationally, private sector employment has fallen by nearly a quarter of a million in the last 12 months. And with business confidence fragile, where is the buoyant private sector recovery that is supposed to fill the gap? Especially when public spending cuts – such as to Building Schools for the Future and affordable housing developments – will also hit private sectors jobs.
Today’s GDP numbers are encouraging – driven, in fact, by a very strong quarter for the construction sector. They demonstrate that Labour’s action to get the economy back on its feet was working.
However, there remain considerable risks to growth on the horizon for the British economy. Private sector investment is low, employment flat is lining, external demand is weak, and surveys of business confidence show continued uncertainty.
If Tory austerity sets back this recovery it would make it harder to reduce the deficit over the long term – with more people on the dole for longer meaning higher benefit payments and lower tax receipts.
My message is that There Is An Alternative. Deficit reduction should be driven by the outlook for jobs and growth. Instead we’ve got George Osborne’s austerity straitjacket.
That’s why I think the Office for Budget Responsibility must be truly independent so it can genuinely challenge the Chancellor’s claims. The Treasury Select Committee should appoint its members and it should report to the public, via Parliament, not just to government.
And I would also give it a new remit – not to make dubious forecasts that suit the Chancellor’s purposes, but to advise government about the pace and timing of deficit reduction with the twin goals of promoting growth and protecting jobs.
Creating and Improving Jobs
Reducing the jobs deficit is about more than how we reduce the budget deficit however. It’s also about how we create and improve jobs – which I think, in today’s economy, are fundamentally linked.
As many of you in the room will know much better than me, fulfilling, well-rewarded work is not just good for people; it is also the secret to business success. Let me explain why I think this point is more important now than ever before.
The financial crisis of 2008 was not just a bump in the road. When we faced crises on a similar scale – in the 1930s and in the 1970s – they ultimately led to complete transformations in the way business was done and the way the whole economy worked.
We are at one of those transformational moments again, not least because the challenges and the opportunities we faced before the crisis have only been magnified further by it.
We knew that there were important emerging players in the global economy in the shape of China, India, Brazil and others. Now they are more confident and more dynamic than ever before.
And the idea that these countries are only going to compete with us on low value goods and services is already an outdated one.
A Chinese company like Suntech produces some of the most advanced and efficient solar energy equipment in the world and is now the third biggest company in its sector. Bharti Airtel in India is now the fifth largest telecoms provider in the world and already operates in eighteen different countries.
North East companies need to be in the new markets in China, India, Brazil and elsewhere creating jobs and wealth back at home here in County Durham. Breaking into overseas markets, strengthening domestic markets, and responding to the complex pace of today’s world means creating a modern economy built, above all else, on innovation and imagination.
Of course, we need entrepreneurs who epitomise these qualities. But with so many complex and fast-paced challenges facing businesses today, the capability to respond and innovate must pervade our whole workforce.
That’s why the work that the SDEA is embarking on is so vital – maximising every ounce of potential from our people and places.
That’s why I think creating and improving jobs in order to drive innovation must be a core goal of a modern economic policy. Achieving that rests on three fundamental challenges:
First, how do we ensure investment and capital are channelled to productive parts of the economy and to people with good ideas? This is about reforming the banks, but is also a wider question about how we regulate capital and put it to productive use.
Second, how do we transform British workplaces to meet the needs of an innovation economy – driven by autonomy, respect, engagement and security? This is partly about what government does, but also the spirit and attitude of companies and workers.
Third, how do we use the power of the state to unleash the wealth creating potential of the private sector and to challenge the rest to raise their game up to the best? This is not about finding a silver bullet policy, but crafting a modern, innovation-led industrial strategy.
In the remainder of my remarks I want to say something briefly about each of these challenges.
Cracking the UK’s investment deficit
Creating an economy driven by innovation and imagination will not happen by chance. It needs serious investment.
New ideas need capital to generate jobs and wealth. I’ve said before in this leadership campaign, we need markets and capitalism to work far better for the people of my constituency in South Shields.
We have to address something that has been a problem for the UK economy for decades. This is the failure of our banks and businesses to consistently put money behind the most productive ideas and the most innovative practices.
Before the crash, too much money was sucked into an inflated property market or dodgy financial products – or was siphoned off for bloated fees and bonuses. The short term, speculative gains offered by the City of London deprived areas like this of the capital they needed to grow.
We do need to reform the banks to prevent another financial crisis. But we also need to take this opportunity to reform the banking system to help rebuild and rebalance our economy in the years ahead.
We need to get money flowing to the people, the companies and the workers with the best ideas and the best strategies to seize the opportunities of the modern economy.
Over many decades, our European neighbours have had a much better record on productive investment. This has created a weight around the ankles of the British economy.
To crack this problem, the government’s Banking Commission needs to address the question of how the British banking sector should be reformed to ensure it serves its proper role in allocating capital to drive growth and jobs – not just seek the quickest, speculative gain.
One option I think it should consider is the case for establishing a British Investment Bank to facilitate investment for vital infrastructure, to support good small businesses and to accelerate our transition to a low carbon economy.
As an example, a bank along these lines – owned by the public but controlled by an independent, commercially-orientated board tasked with delivering long term returns – would be ideally placed to provide loans to companies like Sheffield Forgemasters.
A New Workplace Settlement
But investment alone is not enough. Capital needs something to invest in – and that requires innovation and imagination. That means invigorating the inventiveness and creativity that is Britain’s greatest economic advantage.
And that has to start in the workplace. We don’t know exactly what the jobs of the future will be. We don’t know what new ideas, new products and new services will be developed and demanded over the coming years.
Government cannot predict what will be the big ideas of the future – and neither should it try. But we do know the kinds of workers and the kinds of workplaces that give us the best chance to put Britain in the economic fast lane.
As we are hearing about tonight, the best workplaces are those that inspire innovation and foster commitment, because employees are respected and engaged by their company.
Workers are given the freedom to develop and use their skills. They are given the space to think for themselves and to use their knowledge to improve the service or product they are working on.
And that respect is backed up by fair rewards. Employees in the best firms know they get a fair reward for the effort they put in. If the company does better, they do better.
This is why it should be a matter of far greater concern than it is that wage growth has lagged behind productivity improvements in recent decades. In other words, someone has been enjoying the financial benefits of that improved efficiency and, in many cases, it is not employees. I’m proud of the minimum wage, but we also need to make sure that workers on middle incomes get their fair share of the wealth they help to create.
This is why a new workplace settlement is central to my strategy for reducing the jobs deficit. Where the best employers who get the best out of their workforce become a model for all. And where those employers that are happy to coast along with inefficient practices and a miserable workforce change their ways.
The truth is that for too long British prosperity has been dragged down by a two-tier economy.
Many companies recognise that being a decent employer and a profitable enterprise go hand in hand. British Aerospace, Rolls Royce, Nissan and Argos are all examples of firms that have built their strength on upskilling their workforce and working in partnership with trade unions.
But there are others who think the route to success lies in squeezing every ounce of effort out of their workforce in return for low pay and poor conditions – as a substitute for management vision and investment.
For many decades governments of all colours have tolerated this situation and it has done little for the long-term health of the UK economy or for the well-being of its population. The result is a polarised labour market – which delivers good work and good rewards for some, but poor quality work and poor rewards for many.
For the sake of workers and UK PLC, the two-tier economy must end. The great contribution that agencies like the SDEA can make is to address this problem by supporting the rest to aspire to the best.
A new workplace settlement cannot be directed from Whitehall, nor should it be if it could. It will require power and responsibility to be balanced and negotiated within firms, between employers and employees. Successful workplaces will be those characterised by autonomy, engagement and innovation.
But there are things that government can do. For instance, I would like to see the minimum wage increased at least in line with earnings each year. And we should explore how the living wage can become the norm across the whole of the public sector.
We should also think creatively about how government, business, unions and industry experts can work together to transform those sectors of the economy operating in a low pay, low productivity equilibrium so they can shift themselves up the value chain.
Reforming corporate governance should also be part of this new settlement – including giving employees a say in decisions about top pay so that those decisions are negotiated and a culture of reciprocity is strengthened.
Instead of striking out in this new progressive direction, the Tories want to re-fight old battles over strikes. Industrial disputes are at a far lower level than the 1980s – and the last thing Britain needs is a throwback to the defunct, confrontational prescriptions of that decade.
What they haven’t understood is that we don’t need a less satisfied, more exploited workforce to succeed. We need a vision of the ultra-modern, innovative workplace that delivers for firms and for employees.
Unleashing private sector wealth creation
The final element of Labour’s agenda for creating and improving jobs should be to use the power of the state to unleash the potential of the market.
The Tory version of this story is simple: slim the state and cut corporation tax and all will be well. The public sector, they argue, “crowds out” private sector activity.
But where is the evidence for this? Some of the most innovative, affluent countries have far bigger public sectors than the UK, some do not
Rather than obsess about the size of the state, we need a clear vision for the type of economy we want to create – and the role of government, business and workers in shaping it.
A smart industrial strategy requires action in a wide range of areas – maximising the role of taxation, regulation and procurement to promote high-innovation businesses and good jobs.
In each of these areas the government plays a significant role in affecting the climate for business decisions. We should be more confident in asserting that there are no neutral choices here. We should be clear that our goal is to make it easier for firms to pursue ‘high road’ business models – and harder to follow ‘low road’ strategies.
In developing such a smart industrial agenda, we can draw on existing British strengths – like the support for Nissan’s electric cars here in the North East, the relocation of parts of BBC to Salford and the industrial spin offs from our world class universities.
And we can also learn from what other countries have achieved. Such as Portugal, where the government has regulated to create a viable commercial basis for investment in electricity cars. Or Germany’s activist policy towards renewable energy. Or Israel’s generous tax breaks for enterprise zones, developed alongside universities.
We can learn from this experience overseas but, in the end, we will need to develop an agenda that works in the British context. But it will be an agenda based on the belief that government can be the ally not the enemy of private sector wealth creation.
Conclusion
These are serious times for our economy, for our businesses and for our people. We must make the right choices now – not just to reduce the budget deficit in a sustainable way, but to tackle the jobs deficit too.
I know that everyone in this room will work hard, and work together to make that happen.
I don’t want us to look back in ten years time and wonder why, after a crisis created by the banks, ordinary working people and local businesses paid for that crisis with their jobs and their livelihoods.
I don’t want us to look back in ten years time and mourn the loss of good local businesses that couldn’t get the capital they needed to grow, or couldn’t get the backing for a great new idea.
I don’t want us to look back in ten years time and still despair that people work hard every day of the week and live in poverty while others who simply move money around the globe earn billions in bonuses.
Instead I want us to look back and feel proud that we learned the right lessons of this crisis and created a new economy built on decent, secure and well-paid work – in innovative, successful companies. I want us to look back in ten years time and know we got this historic moment right.
There is nothing less at stake than the future health of the UK economy and the long-term well-being of our fellow citizens. That is why, should I be elected Labour leader, I would put tackling the jobs deficit at the heart of my party’s economic agenda.
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