February 1, 2024 - 1:00pm

It’s time for a “new economic model”, Shadow Chancellor Rachel Reeves declared earlier this month. “The old model is broken and has not served us well.” Keir Starmer has likewise vowed to establish “a new economic consensus”. Several commentators, meanwhile, have detected a dramatic plan for change. “Labour’s quiet radicalism is getting louder,” writes the New Statesman; “Keir Starmer’s caution conceals a radical plansuggests the Times; and Starmer is “a radical who could transform the country,” claims the Observer.

But there is no such plan. Labour’s radicalism is a fake radicalism, combining strident words with some very familiar priorities. Under Starmer the party stands for the established model: a rentier capitalism which favours asset-owners over workers, with a leading role for the financial sector. 

Reeves’s U-turn this week, in which she announced that Labour would in fact retain the Liz Truss policy of leaving bankers’ bonuses uncapped, is a small thing in itself: arguably all the cap ever did was increase bankers’ fixed pay. But add in everything else — Labour’s courting of City donors, the endless warm words and photo ops, the trumpeting of tax cuts for high earners at Davos — and it points towards a general truth. Under Starmer, the financial sector will be treated with respect, even reverence. Its excesses will be indulged, and its size and power will not be carefully scrutinised but instead uncritically protected.

Labour’s new consensus, according to the party’s leader, means “above all” that “government can and must hold out the hand of partnership to business.” But a partnership between government and business was exactly what defined the consensus of the last 25 years. Hence the surge in outsourcing, and the hundreds of private finance initiative deals which are set to cost taxpayers £200 billion over the next couple of decades.

Similarly, when outlining Labour’s “new economic model”, Reeves says she is asking “some of the world’s biggest financial companies to work with me to look at how an incoming Labour government can boost investment in national infrastructure”. But nothing could be less innovative: the remarkable thing about British infrastructure is how much has been handed over to the private sector. From 2010-15, the UK made a thousand such deals — more than the next 10 European countries combined.

I have written before about the striking coincidence between Labour’s discovery of the City’s virtues and the party’s resolution of its funding issues. There is a more sympathetic view: that whatever the damage done by the financial services industry, it is so central to the British economy that challenging the City is simply impossible — or at least impossible without extraordinary political skill and imagination. But in that case, the Starmer and Reeves approach should be seen as an admission of failure, a meek acceptance that they have no idea how to change the current model.

Just two years ago, after all, Reeves was complaining that “private equity fund managers […] asset strip some of our most valued businesses.” Now she meets the biggest PE firms to get them more involved in the economy. Starmer promised that as Labour leader he would “support common ownership of rail, mail, energy and water; end outsourcing in our NHS, local government and justice system,” on the grounds that “public services should be in public hands, not making profits for shareholders.” Now his great hope is to get shareholders more excited about investing in public services.

What was it that attracted the cash-strapped Labour Party to the City of London? Perhaps a sober appreciation of economic realities. But it looks more like a case of no money and no ideas.

Dan Hitchens writes the newsletter ‘The Pineapple’ and is former editor of the Catholic Herald