Steve Richards: Labour must win the battle to restore public confidence in the role of the state

The Tories see the state as a wrecker of innovation in the past and an obstacle in the future
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Here is a prediction. The main dividing line at the next election will be about the role of the state. I do not mean by this that earnest intellectuals will shove the politicians to the side in order to exchange ideas about the purpose of government in a global economy. The debate will be less elevated.

The Conservatives will promise a smaller state, while Labour will offer a subtler alternative of an enabling state. For Labour in particular the stakes could not be higher. When this complicated subject is simplified for the purposes of a highly charged campaign, the Conservatives usually win.

The last time was in 1979 when Margaret Thatcher promised to get the state off our backs and set us free. Such distorting populism normally does the trick. Who would vote for the implied opposite, a bleak form of incarceration?

New Labour has rarely challenged overtly the false dividing line that suggests an active state is bad and a smaller state is good. Although the Government has bucket loads of evidence to show that its own activity has improved public services and helped poorer families, it feels safer proclaiming the virtues of the markets and the private sector. Recently, leading figures have started to highlight tentatively a new role for the state, but they have not done so with sweeping confidence as if the political terrain was already theirs.

In contrast, New Labour neutered brilliantly the issue that lost them the three elections that followed the 1979 defeat. Those messily innumerate campaigns focused on "tax and spend". The Tories promised to cut our taxes, warned that Labour would put them up, and that was more or less the end of the matter.

During this bleak period, a Labour figure could not finish the sentence "Our hospitals need more investment" without these blameless words being translated into "You will pay £1,000 more in tax each year if you elect this lot."

The current fashion is to dismiss the present Government on every front so the extraordinary reversal of this argument goes largely unnoticed. Now it is the Conservatives who are compelled to acknowledge the obvious, that public services require certain levels of investment in order to function. They are the ones agonising over whether to promise tax cuts when voters regard further improvements in public services as their main priority.

But now some of Labour's younger figures seek to deal with the role of the state, that other taboo from Labour's past. This week, the Cabinet minister David Miliband made a speech about the need to empower people and local communities. It is one of several recent attempts by New Labourites to explain what they mean by an enabling state, one that is seen to have a liberating and benevolent role rather than an oppressive one.

Miliband is supposedly part of the Primrose Hill set of younger New Labourites, a group that is supposedly planning for the future. I can exclusively reveal that it has no future, as the Primrose Hill set does not exist. At least those I have asked about it tell me that if there is a set they have not been invited.

Perhaps it is no more than a metaphor to convey the sense that quite a lot of thinking is going on about how Labour renews itself in power, much more than was the case when the Conservatives were in their third term, an era when forward-thinking stretched no further than how the heck to deal with the consequences of the poll tax.

In his speech, Miliband made a pivotal point that was ignored in subsequent reports. He stressed the voluntary sector tended to flourish at a local level in partnership with an active state: "Nations with more generous state support, such as in Scandinavia, have higher levels of social capital and trust than those with smaller states. Meanwhile, in the US, states with a more activist governmental tradition, such as in Minnesota, have more vibrant voluntary sectors than those with the small-state tradition.

In the 19th century in Britain, it was the inadequacy and, in some cases, decline of friendly societies that resulted in the expansion of the state, not the state which squeezed out the cooperative movement. It was the growing problems of bankruptcy, inefficiency and patchy provision within the third sector that necessitated the emergence of a "welfare state".

Here is the dividing line with the Conservatives, who tend to portray the state as a wrecker of innovation in the past and an obstacle in the future. Miliband argues that the opposite is the case. In doing so, he starts out on the long journey towards proving that a modern state can be enabling and liberating rather than a threat. This is an argument that must be had and can be won.

The great gaping gap in Miliband's vision as expressed so far is the need for revived local government. He envisages central government devolving power to councils which will hand it over to communities, and gives some precise examples as to how this might work. But Miliband knows that the astonishing rise of Britain's cities in the 19th century was largely the result of a vibrant municipal culture.

I know he knows this because he wrote as such when he was still functioning behind the scene in Downing Street. In an essay in the autumn of 2000, Miliband hailed a book by the historian Asa Briggs, Victorian Cities, and noted the productive virtues of what he called the great municipal powerhouses. As Miliband appreciates, one of the reasons why England has only one world-class city now is the powerhouses lack much power.

One of the reasons for the powerlessness also prevents the greater empowerment of individuals that Miliband seeks. The messy, rushed, municipal privatisations of the 1980s mean that a newly elected council cannot remove a poorly performing private company. There is no way a group of supposedly empowered citizens could do so.

This is one of the understated scandals of modern times and a reason why voters feel disengaged. They can scream about the state of their virtually non- existent and rural bus services, and yet are powerless. The services were privatised long ago and the companies negotiated long-term contracts that extend well beyond the time local elections are held. Councils can change, but the contracts still apply.

The same applies to the collection of street litter. This is a huge issue in some areas, but nothing can be done about it. The generous contracts are in place, and even if power is transferred to another party the rubbish remains on the streets. In Spanish towns, if the litter accumulates a council is punished at an election and a newly elected authority is obliged to act. In Britain, nothing can be done.

Miliband is on to something important, but no one will feel empowered when they wait helplessly for a bus that never arrives and can do nothing about the litter on the streets.