Labour is losing its mind

New Statesman​

25-06-2025

Labour is attempting to govern in extraordinarily difficult circumstances. In terms of the geopolitical order, demographics, class relations and technologies this is a period of revolutionary change and political reaction which is sweeping away the old political settlement and its established ideological forms.
There is widespread economic insecurity and disaffection. The country's criminal justice system, welfare system, water industry, universities, housing market and armed forces are either impoverished, broken or dysfunctional. Over-regulation stifles initiative and our ability to build. Governance and administration are hamstrung by a state bureaucracy mired in HR regulations, complacency and risk-aversion. Local authorities are bankrupt. Yields on 30-year government bonds are rising as markets lose trust in indebted Western capitalist economies, foremost being the US, Japan and the UK. 'Nothing works' is a common refrain.
The political corollary of 'nothing works' is what in France is called dégagisme: clear them out. Confronted with these systemic crises, Labour faces a populist revolt that is gathering energy and confidence. The party's difficulty in understanding populism risks echoing the American army in Vietnam. Its generals were fighting a previous war, incapable of adaptation, intellectual curiosity or revolutionary organisational change.
Labour won on an anti-Tory majority not on a pro-Labour coalition, and so it lacks popular consent to govern. It has a large majority but is politically insecure, already u-turning less than a year into office. And because it has no diagnosis of the crises assailing the country it has no political narrative or strategy to guide it in office. What are the obstacles relating to Labour's own politics that stop it taking the country into a new political settlement and how should it overcome them?
The obstacles
Since the 1990s, the professional and managerial class has surpassed organised labour as the dominant political force within the party. This change has happened in tandem with Labour's loss of the working class vote which in turn has been caused by the disintegration of the industrial working class and organised labour, a process first recognised by Eric Hobsbawm in Marxism Today in September 1978.
The dominance of this class and its culture – higher educated, socially liberal, based in the cities and regions of prosperity – replaced the old Labour collectivism with a liberal progressive politics. This enabled New Labour to build a majority coalition in 1997 around aspiration, globalisation, and individual consumer choice. Regional and class inequalities were offset by redistribution via a steadily growing economy. However the party failed to recognise that it was starting to sow the seeds of a populist revolt with its class-based cultural values, its support for high levels of immigration, and failure to recognise the early years of wage stagnation. In 2016, this class along with Labour suffered a profound political defeat when the Remain vote lost in the EU Referendum.
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Labour currently lacks a feasible alternative to the class ideology of progressivism and its cultural politics. The party membership is dominated by what the campaigning organisation More in Common describe as 'Progressive Activists', who form under 10 percent of the population. Like the Conservatives, dominated by an aging rentier class, Labour is no longer broadly representative of the voters it seeks to attract, nor is it able to intuit the populist mood of our times, and so forge a winning national cross-class coalition for 2029.
The economy and society have profoundly changed since the New Labour years. Progressivism as an ideology and worldview is incapable of responding. And yet Labour has made no radical reassessment of its politics or its political economy, nor has it sought one.Corbynism ignited energy but could never lift itself out of the politics of the 1980s. This failure is spread over its 14 years in opposition. The party lacks a diagnosis of the systemic crise and so it has no strategy to match Reform in breaking the political inertia. Instead it has fallen back on a pragmatism of 'what works' and technocratic solutions to systemic crises. These have proved grossly inadequate to the challenges of government.
Over this same period, the party did not give thought to renewing the media, intellectual, and policy making infrastructure necessary for its political renewal. Much of it has now disappeared or become ineffective. Successful attempts at fashioning new political and economic settlements, such as in 1979 or, to a lesser degree, in 1997, have all leant on such an infrastructure, yet Labour has allowed it to ossify. Both the government and the PLP find themselves isolated from pluralist cultures of intellectual curiosity, thinking and ideas.
How to respond?
There is a great deal at stake in resolving Labour's historical predicament. A divided right opens up the prospect of an unloved Labour limping over the line again as part of a progressive coalition. This would only cement the class, cultural and regional divisions in the country. More likely, though, failure in government will mean either Reform or a right-wing coalition wins the next election. And what comes with the failure of a Reform or right-wing government? The stakes are high in a country where disaffection is so great. Farage understands this. But does Labour? There is both deep threat and historic opportunity. Labour is unprepared for either.
Some may reject this analysis as too negative, pointing out that Labour has four years to turn things around. But four years to do what?
Labour possesses one highly significant advantage which is state power. To use this power with the necessary force requires a strategy and a powerful executive leadership able to overcome the obstacles facing Labour.
A political strategy would be based on a two-fold political purpose with different timelines. One part would be geared towards the short-term, building a Labour coalition for the next election. The other part would be longer term, defining a programme for a decade of national reconstruction and social renewal. Each would give definition to the other. Broadly speaking this means restoring Britain's broken social contract between government and citizens and developing an economic analysis and political economy that unites the national interest with the labour interest.
This coordinated work must go on inside the government machine, outside in a community of thinking and analysis, and within the PLP. Political choices and policy priorities must directly contribute to this governing narrative. The aim is to build popular consent for a Labour government.
The basic elements of a governing narrative already exist. The idea of a social contract has been a constant if irregular expression of Labour's politics both in opposition and in government. It offers the government a potentially powerful story about its national purpose, and provides a catalyst for building a new coalition across class, region, and nation for the 2029 election.
However to date the idea has remained unexplained and undeveloped. It has been used to suggest both a liberal social contract and the more radical idea of covenant.
Keir Starmer first used the idea of a contract with the country in a speech in Birmingham in 2022, when he called for a contract with the British people, defined by 'security, prosperity and respect'. It was soon dropped. It reappeared in a more covenantal form two years later in January 2024, when he spoke to the Labour and Civil Society summit. Starmer called for a 'social contract' with 'a new focus on those who build the bonds that connect us, the communities that nurture us, and the institutions that support us.'
In January 2025, and now Prime Minister, his statement on the murders of the three small girls in Southport acknowledged the loss of a social contract, recognising the growing sense that the rights and responsibilities that we owe one another, the unwritten rules that hold a nation together, 'have in recent years, been ripped apart'. 'More and more people retreating into parallel lives, whether through failures of integration or just a country slowly turning away from itself'.
He went on to say, 'We will have to ask British industry, British universities, British businesses, and the British people to play a bigger part; use this to renew the social contract of our nation, the rights and responsibilities that we owe one another.'
Economic security is national security but both will require 'a whole society effort that will reach into the lives, the industries and the homes of the British people'.
On February 25th in the House of Commons, responding in a way to this earlier speech, the PM defined the political future of the country as a form of national covenant. He committed the government to stand behind the people of Ukraine. It will require, he said, extremely difficult and painful choices through which the country must find social unity.
In March, in a speech on the reform of the state, he accused politicians of 'hiding behind a vast array of quangos, arms-length bodies and regulators' – a 'cottage industry of blockers and checkers'. The state demanded more and more from people as it failed to deliver on its core purpose.
And then in May, his statement on immigration reaffirmed this emerging narrative. The PM redefined Labour's view of immigration by describing the Conservatives 'one-nation experiment in open borders conducted on a country that had voted for control'. A country depended upon fair rules and responsibilities, 'the obligations that we owe to one another.' The current system of immigration was threatening to pull the country apart and lead to an 'island of strangers'. To settle in this country, 'is a privilege that is earned, not a right, easier if you make a contribution, if you work, pay in, and help rebuild our country'.
A new social contract
Instead of shying away from this language Labour needs to explain its social contract and identify the causes of social disintegration and political disaffection which have led to social anomie and the collapse in trust in the government. They extend beyond immigration and include crime and social disorder (including the perception of the contrast between the militant policing of 'online hate crimes' vs burglaries, anti-social behaviour and theft); restoring the visibly decaying public realm; the shortage of decent homes; the porous border of which the boats are a daily reminder; and the perception of asymmetric multiculturalism and 'two-tier justice' in which the elites, associated with identity politics, are perceived to favour minority cultures over the majority culture.
The first and essential task is to restore a social contract in order to secure democracy and start to win popular consent for a Labour government.
In the longer term, reducing social disaffection and restoring popular trust in our democratic institutions depends on national social and economic developmental growth and the reconstruction of the national economy across the UK.
In opposition, Labour defined its economic approach in a series of shifting abstractions and half-formed ideas – the Everyday Economy, Levelling Up, National Missions, Industrial Strategy, Green Prosperity Plan, Plan for Change, Securonomics, then Growth.
These culminated in Shadow Chancellor, Rachel Reeves' 2024 Mais Lecture, in which she argued that her economic policies represent a break with the liberal market order and the beginning of a new economic settlement. They herald a 'decade of national renewal' that will shape the institutional architecture of the British economy with the central mission to restore economic growth.
Reeves declared that globalisation 'as we know it' has ended. Where things are made and who owns them matters. The economy is rooted in the places people live, and industrial policy should focus on the Everyday Economy that sustains daily life. Entrepreneurial risk taking and workers capacity to move jobs to better their circumstances require economic stability, safety and security. Reeves called her thinking, Securonomics. The development of the national economy is linked to geopolitical strategy, social stability and national security, in order to reconstitute the government's social contract with the people.
By the time Labour took office it was trailing behind it a series of priorities, plans and commitments but no clear agreement about its economic thinking. The Everyday Economy quietly disappeared having never been properly developed. Levelling Up was left behind when Lisa Nandy was moved from her brief. The Green Prosperity Plan, stripped of its annual £28bn funding became a vehicle for wishful thinking. No-one spoke about Securonomics. Instead the new government had one answer to Britain's social and economic dilapidation: growth.
The 2024 Green Paper Invest 2035 the UKs modern industrial strategy is emphatic: 'growth is the number one mission of this government.' In addition to driving growth nationally, the government will support regional growth, net zero and the UK's economic security and resilience. It identifies eight growth-driving sectors. But as the economist, Andy Haldane has pointed out, in many regions these sectors do not cover 80-90 percent of the workforce, 'especially the poorest areas'. There is no obvious underlying methodology behind choosing so many sectors. Should the government focus effort and resources on areas of comparative advantage or on areas of deprivation? There is no clear answer.
Events have overtaken the Green Paper and it is being rewritten. But without undertaking the necessary work, much of this approach will remain in place.
The lack of theoretical depth and practical substance to Labour's attempts to reshape its political economy leaves it reliant on the liberal market model which cannot resolve the economic problems the country faces. Compounding this is Labour's commitment to fiscal rules designed to reassure the bond market, and the widely held perception that Labour expends its political energy not on ordinary working people as a whole but on small politically charged subgroups – migrants, benefits claimants, etc.
Who then does Labour stand for and who should growth be for? Growth is a precondition for national reconstruction but there are political choices involved in how and where it is generated.
The answer must be those who, 10 years ago, Theresa May called 'the just about managing class'. Without their support Labour has little chance of winning in 2029 and therefore limited ability to pursue its agenda. Today the living standards of many in this class are precarious. Working hard does not translate into being better off, and yet they are the workhorse of the economy. Aged around 35-60, their households have the highest proportion of people in jobs and the highest proportion of children. They are a mix of middle and working class (mostly B, C1, C2 and D) who work mostly in the private sector.
They are a generation beyond their parents'traditional lower middle and working class ways of life. They feel the loss of these cultures, but they want a better world for their children. Labour should be their natural home but they no longer see a party cast in their image or one which holds their values. They have diminishing confidence in any political party turning the country around. They would give Reform a go without much confidence.
To win the support of this large demographic, Labour needs to develop a political economy that will shift the economic balance from wealth extraction to creation and from asset wealth to production, increasing working people's share of national income. It means focusing a new industrial strategy around their economic interests, as well as intervening on their side against those who threaten their economic interests.
National economic reconstruction needs to build up the necessary productive power for place-based reindustrialisation, utilising new technologies and AI, investing in our armament production, national defences and so raising per capita GDP across the regions. Regional, social and economic development should prioritise work, skills, and the local places people live. The crucial factors for a thriving national economy are strong local economies and communities. When community subsides, so too does the economy.
Government needs to recover its unfinished work in opposition to develop a new approach to political economy. The only viable programme for national reconstruction is a levelling up to radically reduce regional inequality on a similar scale to Germany's rebuilding of East Germany. It will require a radical reform of statecraft asserting national sovereignty, backing our AI and technological innovation, establishing the political primacy of No.10 over the Treasury, and institutionalising a national developmental approach to economic policy under the authority of the PM, and restoring parliamentary democratic power over unaccountable quangos.
A Left infrastructure needs rebuilding to provide intellectual thinking, analysis and critical support to help reconnect the governing class to the people, and win the commanding heights of national intellectual life.
A Labour narrative about the country must be hopeful and patriotic. It must be covenantal in its political economy, and it must be authentic and heartfelt. The current system is condemning Labour to political failure. The task of political leadership requires an insurgent, radical politics that integrates the theoretical, political and organisational, using concentrated state power to drive forward a national popular politics toward a new political settlement, in a way quite foreign to Labour's recent history. Is it possible? Without it the future will be dark.
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