Labour has realised it needs to eschew radical policies if it is to avoid losing again

Big economic shocks tend to do for prime ministers. Jim Callaghan was finished after the winter of discontent, and the writing was on the wall for John Major once the Bank of England lost its fight with George Soros and his fellow speculators on Black Wednesday. Gordon Brown would have had a decent chance of beating David Cameron had it not been for the financial crash.

Brown’s defeat in 2010 was the start of a run of four election defeats for Labour, something that last happened between 1979 and 1992. Since it became a party of government in the 1920s it has never lost five in a row.

A year ago, in the immediate aftermath of its worst showing since the 1930s, that looked highly likely. Even now, the chances of Sir Keir Starmer becoming prime minister are probably no better than 50-50. That, though, is progress.

The pandemic has clearly helped, even though the hit to the Conservative party’s support has been far less severe than in the aftermath of Black Wednesday.

That might have something to do with voters being reluctant to blame Boris Johnson for a crisis that was not of his own making, or it may be that the public cuts the Conservative party more slack than it does Labour. Brown handled the financial crisis far more assuredly than Johnson has dealt with Covid-19.

There may be a bit more to it than that. Broadly, voters appear to approve of the general thrust of government economic policy over the past year: they like the furlough, the VAT holiday, the grants to businesses and all the other stimulus measures, even though the result will be a record peacetime deficit this year. If anything – witness the U-turns Johnson has been forced into by Marcus Rashford’s school meals campaign – they would be happy to see the Treasury fork out still more.

Not all Tories are comfortable with this approach. Rishi Sunak, it is said, wants to start repairing the hole in the public finances in his budget on 3 March, not just because he is worried by the risk that the financial markets will turn nasty but because he wants to build up a war chest for tax cuts ahead of a 2024 election.

If the chancellor really thinks this is a good idea he is not nearly as clever as people give him credit for, because the prime minister is now strongly hinting that tough social distancing restrictions will last into the late spring – and perhaps longer. That means continued generous financial support. Otherwise, firms that have been kept open for the past year will go bust and the people who have been spared the dole queue will lose their jobs. That is the road to a weaker recovery and slower progress in reducing the deficit.

What’s more, Sunak should not assume that just because voters thought Labour’s spending proposals in the 2019 election were too good to be true they will necessarily be up for a bit of belt tightening now. More likely, they will think it only fair that people who work in theatres and nightclubs should continue to have their wages paid all the time their workplaces are closed. For similar reasons, Sunak will be taking a big risk if he ends the £20-a-week top-up to universal credit.

Labour smells an opportunity here, as was obvious from the Mais lecture delivered this month by the shadow chancellor, Anneliese Dodds. This was an important speech, interesting both for what it said and for what it didn’t say.

What Dodds said was that the Tories had made a pig’s ear of the Covid-19 crisis by delaying action and that the economic damage would have been less had the government followed Labour’s recommendations to respond more speedily to the scientific advice. Starmer wants Labour to be seen as a competent party rather than an ideological party.

To ram home that message, Dodds made clear that there was no question of a Labour government giving orders to the Bank of England, which would remain fully independent. She clearly has no time for modern monetary theory, the idea that central banks can be ordered to finance government spending and that the only constraint on them doing so is rising inflation.

As far as the Treasury is concerned, Dodds said she wanted management of the public finances to be governed by pragmatism not dogmatism, and by a “relentless focus” on value for money. Nothing to frighten the horses there, either.

Two things were left unspoken. First, while there was criticism of the government’s brinkmanship in the pre-Christmas Brexit trade talks, there was an acceptance that Brexit has now happened and Labour needs to move on. Starmer is not thinking about taking Britain back into the EU; instead he is working on plans for how Labour should respond to the new opportunities and challenges that Brexit presents.

Second, there was no mention of nationalisation – a big part of Jeremy Corbyn’s platform at both the 2017 and 2019 elections. A Starmer government would toughen up competition policy and bring in anti-trust rules before it would take industries under state control.

Starmer and Dodds appear to have come to the same conclusion that Tony Blair and Brown came to in the 1990s: Labour needs to eschew radical policies if it is to avoid losing again.

Andrew Scattergood, co-chair of the pressure group Momentum, said after the Mais lecture that it was not enough for Labour to be more competent managers of the same rigged system, but Starmer and Dodds probably won’t lose too much sleep about being taken to task for not offering something bigger and bolder. They want to be seen as competent managers. That’s the point.