Mass unemployment and politics – what happened in the 80s and  what is likely to happen now

Britain then had a Conservative government with a good majority. Many seats in the north and midlands were Tory-held - part of what became the ‘red wall’ when Labour picked them up in 1992 and 1997.

Once a month for three years from November 1984, it was my job to draft a press release for the up and coming shadow cabinet member John Prescott. As shadow employment secretary, he commented with varying degrees of scorn and derision on the monthly unemployment figures. They always made the news. Unemployment was obstinately stuck at over three million.

Prescott’s monthly reaction reflected the outrage felt by the Labour party and the majority of its voters. And Tory MPs too, particularly those from northern constituencies, watched on nervously as various government initiatives failed to make inroads.

And yet – partly to Labour’s surprise - the Tories held on to seats such as Hyndburn, Rossendale and Batley and Spen which only turned into part of the red wall in the 1990s. The Tory majority in 1987 was barely dented. The reason, I would suggest, was the ideological coherence of the Tory argument.

Re-reading the memoirs of the then Chancellor, Nigel Lawson, the government’s message was tough but consistent. The government had no responsibility for job losses. Nor could they create jobs. The government’s sole objective was to ensure markets were working efficiently, particularly the labour market, and jobs would eventually be created. Lawson expresses exasperation when he is asked where future jobs would come from. Why would he know? Jobs would be created by innovative companies responding to effective monetary and macroeconomic policies.

Margaret Thatcher, Nigel Lawson, Geoffrey Howe, Norman Tebbit and even Michael Heseltine disagreed about many things but all broadly supported the central tenets of economic Thatcherism. The view that there was no alternative to the unpleasant medicine was one shared across the Conservative Party, even by MPs in the northern marginals.

The Tory election victories in 1983, 1987 and 1992 reflected the fact that voters gave the Tories the benefit of the doubt. They accepted that there probably was no sensible alternative. Labour’s focus on the unemployed 10% of the workforce didn’t speak sufficiently to the 90% who were in work. Labour was ridiculed for talking about the government role in creating jobs. Governments can’t create jobs, Tory ministers exclaimed. Only successful companies could do that. 

And this is the big difference between the 1980s and now. The economic liberalism which outlived the original Thatcherites by a couple of decades is now loudly rejected by most  of the principal characters around Boris Johnson. Their call for ‘levelling up’ suggest that it is the responsibility of government to bring the north and midlands heartlands, including the former red wall seats, up to the same levels of prosperity as the south. Unlike the 1980s, this Tory government will have an active, interventionist industrial policy which doesn’t mind ‘picking winners’, something Thatcherites scorned as beyond the competence of Whitehall.

Boris Johnson’s major economic speech last year was billed as ‘Rooseveltian’ in its economic ambition. He described the government’s economic plan being about ‘jobs, jobs, jobs’. Many commentators felt that the speech didn’t match the build-up but Johnson’s commitments were solid enough.

“…too many parts of this country have felt left behind. Neglected, unloved, as though someone had taken a strategic decision that their fate didn’t matter as much as the metropolis.

“So I want you to know that this government not only has a vision to change this country for the better, we have a mission to unite and level up….and we have a plan and in advancing that plan now I just serve notice that we will not be responding to this crisis with what people called austerity. We are not going to cheese-pare our way out of trouble…we will be doubling down on our strategy, we will double down on levelling up.”

And this is why this period of mass unemployment will be very different politically to the last. Boris Johnson has directly accepted responsibility on behalf of the Conservative Party for creating jobs and reviving parts of the country which have had high levels of unemployment for 50 years and more. Tory MPs in the 1980s could and did say, there is no alternative to the harsh economic medicine that saw millions in the dole queues. Boris Johnson has ensured that their successors in parliament today cannot adopt the same shoulder-shrug.

The job of my successor writing the monthly press release for the shadow employment spokesperson is for that reason much easier. The Tories have said they can sort unemployment and regional inequality and voters will be invited by Labour to judge them on that basis.

It’s a bold gamble and will play out in the debates on the three year spending review next year. Each region outside London and the south east will be calculating the spending gap and demanding it be rectified. The PM and Chancellor will not be able to get away with a few hundred million here and there on infrastructure schemes.

So billions of pounds additional spending is likely in the English regions and business will inevitably be drawn into the levelling up turmoil and there are three main implications.

1. Corporate messages to government and politicians need to reflect the levelling up agenda.

   Decisions by companies to invest outside of London and the south east will be looked on very favourably by ministers even if not a lot of jobs are being created. So even if you don’t manufacture, or employ people in the non-south east regions, look at broader indices such as supply chain employment.

2. Businesses need to be aware of what the industrial strategy is and how it impacts on their company and sector.

   This government isn’t shy about intervention. The governments of Harold Wilson, Ted Heath and Jim Callaghan gave intervention a bad name and Thatcher was determined to stamp it out. Her work was continued by Tony Blair and Gordon Brown who also rejected intervention and deliberately insulated some major economic and industrial issues from political interference including the setting of interest rates and decisions on allowing or stopping mergers and acquisitions. Now ministers say they will use public money to support the government’s industrial strategy. Because even if you don’t want taxpayers’ money to support investment, there is the danger that your competitors will. The Covid crisis and how it has hit particular companies and sectors means that some substantial government bail-outs are likely in the next 12-18 months.

3. Ministers will be looking to the private sector to partner on particular projects but also to play a full part themselves.

   There will be significant government funded projects in the regions. A lot will be infrastructure but it will necessarily go beyond this to mainstream spending departments. There will likely be more focus on the local enterprise partnerships (LEPs) and some of the other regional governance bodies such as Midlands Engine.

The Covid-19 crisis has already illustrated the growing power of the regional and city mayors. Expect that to continue with further devolution of spending and powers, in part because Number 10 will wish to spread the responsibility and in time the blame. They too will want to support their strongest businesses and sectors. 

Many companies will need to review how they interact with government and its agencies because it will affect market structures, competition and in some cases the ability of new tech based start-ups to disrupt existing models and enter local markets. So intelligence about where the government is moving and directing spending will be important. So too will be understanding how a company could benefit and how its competitors might take advantage of the new approach to business support.

The turmoil caused by Brexit and now Covid are major challenges to every business. Lexington is working with some of the world’s leading corporations and brands to help shape the economic and social factors which will determine who succeeds and who doesn’t. We can help you to do that too.