BLAIR’S BRITAIN, 1997–2007
Page 47
Table 13.5 also displays the rate of growth of output per hour worked
in the market economy and this is a good starting point for this closer
look at productivity growth. Here it is noticeable that in the post-1995
period the UK has clearly outperformed France and Germany as productivity growth in those countries has dipped markedly, but there has
also been an acceleration in the United States which has outperformed
the UK.
Turning to the sources of UK output growth in the 1995 to 2004
period, several features are noteworthy. First, a strong contribution from
improvements in labour quality is confirmed. Second, there was also relatively rapid growth in ICT capital inputs (computers, software, telecoms). Third, TFP growth decreased compared with the previous period
and was well below the rate achieved by the United States, although
exceeding French and German rates.
The context for productivity growth since the mid-1990s has been the
advent of ICT as a new general-purpose technology with the potential for
substantial productivity advance in services. This was the mainspring of
the revival of productivity growth in the United States, and service
sectors which use ICT intensively, such as retail distribution and financial
services, account for faster productivity growth in the United States than
in the large European economies post-1995.19
Compared with many European countries, the UK has been well
placed to take advantage of the opportunities of the ICT era. This was a
legacy of the Conservative years rather than a creation of New Labour.
The rapid expansion in the number of college graduates matches the
requirements of the new technology, while it is also apparent that ICTusing services have contributed most to productivity growth in countries
with low product-market regulation.20 Moreover, empirical investigation
has found that ICT investment is discouraged by strong employment
protection because this makes the reorganisation of work, which is
central to realising the productivity potential of ICT, very expensive.21
Indeed, Jean-Philippe Cotis, OECD Chief Economist, sees a UK productivity paradox: ‘Why on earth isn’t UK productivity catching up faster,
given economic theory, good UK policies and comparatively low productivity levels to start with?’22
The solution to this paradox may be as follows. First, UK productivity
performance has been stronger than Cotis allows once it is recognised
that scope for catch-up is less than would be suggested by the raw data on
the productivity gap (once labour-market distortions are taken into
account) and that productivity growth in the market economy has been
considerably faster than in the economy overall. Second, the relatively
large difference between rates of labour productivity growth in the
19 Robert Inklaar, Mary O’Mahony and Marcel Timmer, ‘ICT and Europe’s Productivity
Performance: Industry-level Growth Account Comparisons with the United States’,
Review of Income and Wealth, 51, 2005: 505–36.
20 On the value of human capital in exploiting ICT, see Timothy Bresnahan, Erik
Brynjolfsson and Lorin Hitt, ‘Information Technology, Workplace Organization and the
Demand for Skilled Labor: Firm-level Evidence’, Quarterly Journal of Economics, 117, 2002:
339–76; on the relationship between regulation and productivity growth from ICT-using
services, see Giuseppe Nicoletti and Stefano Scarpetta, ‘Regulation and Economic
Performance: Product Market Reforms and Productivity in the OECD’, OECD Economics
Department Working Paper no. 460 (2005).
21 C. Gust and J. Marquez, ‘International Comparisons of Productivity Growth: The Role of
Information Technology and Regulatory Practices’, Labour Economics, 11, 2004: 33–58.
22 Jean-Philippe Cotis, ‘Economic Growth and Productivity’, paper delivered to Annual
Conference of the Government Economic Service (2006).
marketed sector and the whole economy reflects the rapid expansion of
public sector employment under New Labour. Third, OECD measures
of product market regulation may underestimate barriers to entry in
the UK because they do not reflect the strictness of the planning laws. A
sector in which this has had a big effect is retailing, where it has been estimated that a ban on out-of-town developments imposed in 1996 reduced
TFP growth in the sector by 0.4% per year or about an eighth of the whole
post-1995 slowdown in TFP growth reported in table 13.5.23
All this indicates that the government’s pursuit of productivity
improvement has been less single-minded than a reader of Treasury publications on the topic might suppose. This seems to be the perception of
the business community as reflected in competitiveness surveys. Between
1997 and 2007 the UK fell from eleventh to twentieth in the rankings of
the World Competitiveness Yearbook while the UK score for ‘the ease of
doing business fell from 79% of the best in the world to 45% of the best in
the world over the same period.24 Relaxing planning laws was a key recommendation of the high-profile 1998 McKinsey report on how to
improve productivity performance, which was quietly buried. Similarly,
the expansion of public sector employment has been controlled much
less rigorously than it might have been. So perhaps the final explanation
of the Cotis Paradox is that while productivity policy has been good it has
not been that good.
Conclusions
Industrial policy and its metamorphosis into productivity policy is an area
that has been controlled by Gordon Brown since the early 1990s. By the time
Tony Blair became leader it was already clear that 1970s-style industrial
policy or a British MITI were off the menu. Brown’s reaction to Thatcherite
reforms was quietly to accept them and seek to build from there.
The subsequent evolution of policy has been informed by mainstream
academic economics. The most significant new development in the
approach to productivity policy has been the recognition of the importance of competition. This has been reflected in major legislation in the
form of the 1998 Competition Act and the 2003 Enterprise Act. It is,
however, too soon to say what will be the impact of these reforms.
23 Jonathan Haskel and Raffaella Sadun, ‘Entry Regulation and Productivity: Evidence from
the UK Retail Sector’, Ceriba Working Paper (2007) at www.ceriba.org.uk.
24 IMD, World Competitiveness Yearbook, 2007 (Lausanne: IMD, 2007).
UK productivity performance since 1997 has been good but not really
outstanding by international standards. Growth of real GDP per person
has been a bit higher and growth of real GDP per hour worked a bit lower
than under the Conservatives. Labour productivity growth has been
underpinned by the adoption of the new technology of the ICT age, and
this has been facilitated by the expansion in numbers of graduates and a
largely conducive regulatory environment. These conditions were part of
Labour’s inheritance from the previous government and it is unlikely tha
t
productivity performance would have been very much different under
the Conservatives. Market services rather than manufacturing have been
central to productivity outcomes and this has meant that, in contrast to
conventional wisdom in the late 1980s, the United States has seemed a
more relevant model than Japan.
PA RT I I I
Policy studies
14
Law and the judiciary
Blair and the law
Tony Blair was by profession a barrister, but his early entry to parliament
prevented him, as it prevented Margaret Thatcher, from leaving more
than modest footprints in the law, or emulating Asquith, the only other
twentieth-century Prime Minister with a background in the Inns of
Court. He specialised in employment litigation, and between 1977 and
1983, his years of practice, ten of the cases in which he appeared were of
sufficient importance to be published in a series of law reports.1 His brief
life in Chambers left him with two significant legacies, one professional,
one personal. He found in the Temple both his first Lord Chancellor
Derry Irvine and his wife Cherie (Booth). Blair, with his average secondclass degree from Oxford obtained a tenancy at the expense of Cherie
with her brilliant first from LSE.2 This episode, reflective of the male
public school ethos of the Bar at the time, did not impede her (she was
elevated to Silk in the last year of the Major government) from enjoying a
highly successful career at the Bar, but instilled in him no long-term
ambition to achieve the same.
His labour law experience was responsible for his first major frontbench appointment under Neil Kinnock, shadowing Michael Howard, the
11 Thomas Marshall (Exports) Ltd v. Guinle [Chancery Division] [1979] Ch. 227; The Royal
Naval School v. Hughes [Employment Appeal Tribunal] [1979] IRLR 383; Methven v. Cow
Industrial Polymers Ltd [Court of Appeal] [1980] ICR 463; International Sports Co. Ltd v.
Thomson [Employment Appeal Tribunal] [1980] IRLR 340; Brooker v. Charrington Fuel
Oils Ltd [County Court] [1981] IRLR 147; Marley Homecare Ltd v. Dutton [Employment
Appeal Tribunal] [1981] IRLR 380; Abbotts and Standley (appellants) v. Wesson-Glynwed
Steels Ltd [Employment Appeal Tribunal] [1982] IRLR 51; United City Merchants
(Investments) Ltd v. Royal Bank of Canada [Court of Appeal] [1982] QB 208; Nethermere
(St Neots) Ltd v. Gardiner [Employment Appeal Tribunal] [1983] ICR 319; BL Cars Ltd v.
Lewis [Employment Appeal Tribunal] [1983] IRLR 58.
12 Initially at Crown Office Row, then in 1981 at Harcourt Buildings when Irvine set up his
own set. Anthony Seldon, Blair (London: The Free Press 2004), pp. 48–9, 63–5.
Secretary of State: but later he displayed no particular appetite for engaging
with legal issues, apart from voicing populist philosophy – ‘the rules of the
game have changed’ – in the area of crime and punishment (in which he had
no professional background) which appeared from time to time at odds
with the public statements of his wife.3 When Sullivan J. quashed a refusal of
leave to remain in the United Kingdom of an Afghan acquitted of charges of
hijacking aircraft,4 the Prime Minister commented ‘It’s not an abuse of
justice for us to order their deportation, it’s an abuse of commonsense
frankly to be in a position where we can’t do this.’ (The Court of Appeal
subsequently commended the judge for ‘an impeccable judgment’.5)
In his valedictory PLP Brief dated May 2007, compiled to celebrate ten
years of a Labour government, law is only mentioned in conjunction with
order. The summary under the rubric of the Constitution lists the enactment of the Human Rights Act 1988 (HRA) but otherwise makes no reference at all to the significant changes to the judiciary and civil legal
system of the same decade.
Blair and the lawyers
If Blair had no particular affection for the law, he had no inbuilt animosity towards lawyers; and the legal culture of the Blair era was dominated
by a web of relationships reminiscent of those charted in the late Anthony
Sampson’s Anatomy of Britain in which everyone who counted seemed to
be connected to everyone else.
Lord Irvine had been his and Cherie’s pupil master. Philip Sales, who
served from 1997 as Junior Counsel to the Crown (Common Law) (or
Treasury Devil), came from Irvine’s old set at 11 King’s Bench Walk
(KBW), as did three High Court Judges, Patrick Elias, Richard Field and
Brian Keith. Irvine appointed (without advertisement) as his special
adviser Gary Hart, a former partner of the prestigious city firm Herbert
Smith, and godfather to the Blairs’ daughter, prompting an unsuccessful
tribunal claim of sex discrimination from Jane Cohen, a legal aid lawyer.6
Lord Irvine’s successor was, if anything, an even closer ally, as he was a
former flatmate of the Prime Minister. Lord Falconer, who started in
13 Michael Beloff QC, ‘The Concept of Deference in Public Law’, Judicial Review, 2006: 213,
paras. 1 and 2.
14 R (on the application of S) v . Secretary of State for the Home Department (2006) EWHC 111
(Admin.).
15 2006 EWCA Civ 1157 para. 50. Cf. Tony Blair, ‘Shackled in the War on Terror’, Sunday
Times, 27 May 2007.
6 Lord Chancellor v . Coker, The Times, 3 December 2001 (CA).
government service as Solicitor-General (and survived responsibility for
the Millennium Dome), emerged as the country’s senior legal figure,
when in 2003 Lord Irvine was dismissed in a manner as peremptory as
that with which Harold Macmillan disposed of Lord Kilmuir forty years
before during the Night of the Long Knives. He came from the blue-chip
chambers at Fountain Court, as did the Attorney-General Lord (Peter)
Goldsmith QC. Lord Irvine appointed another Fountain Court alumnus
Lord (Tom) Bingham, as Senior Law Lord, and Lord Falconer appointed
his own former pupil master Lord Justice (Mark) Potter, a commercial
lawyer, as president of the Family Division. Shortly after Cherie Booth
became a founding member of Matrix Chambers in 2000, another
member, Ken Macdonald QC, became Director of Public Prosecutions.
There were further filaments of friendship in the legal web. Henry
Hodge, a former solicitor, husband of Minister of State Margaret Hodge,
was made chairman of the Immigration Appeals Tribunal and a High
Court Judge. The Blairs holidayed at the French chateau belonging to
David Keene, who was promoted to the Court of Appeal. New Labour life
peers included a trio of QCs: Baroness (Helena) Kennedy,7 Lord (Tony)
Grabiner (chairman of the Board of Governors of LSE) and Lord (Dan)
Brennan (a member of Matrix).
In no instance could even the most acerbic critic complain that the
appointees lacked qualifications for their office, and in several instances
the post-holder was outstandingly eligible, but there was substance to the
impression that New Labour’s legal establishment was an extended
f
amily.
The fulcrum of change: the Constitutional Reform Act 2005 (CRA)
Pivotal to the Blair administration’s reform of the legal system was the
replacement of Lord Irvine by Lord Falconer on the Woolsack. The precise
reasons for this wholly unanticipated reshuffle have not yet been revealed.
Lord Irvine was, for all the faux pas over Wolsey and wallpaper, still in his
formidable Lord Chancellarial prime, and could reasonably have expected
to remain in office until the end of Blair’s second term, if not beyond. The
best guess is that David Blunkett, then an influential Home Secretary and
an unrestrained critic of judges over their over-liberal (as he saw them)
attitudes to crime and immigration – perennially sensitive issues for the
17 However, she became a fierce critic of the Blairite approach to civil liberties and the justice
system: see Helena Kennedy, Just Law (London: Chatto and Windus, 2004).
Home Department8 – resented the Lord Chancellor’s constitutionally
proper defence of judicial independence, and confronted the Prime
Minister with an unenviable choice of which to retain in his cabinet. The
changes later embedded in the CRA were a camouflage for, or at any rate a
consequence of, not a cause, of Lord Irvine’s demise and there is little evidence that there had been any advance thought about them.
The fact that the office of the Lord Chancellor was purportedly abolished by press release (unavailingly, given its various roots in statute)
speaks volumes for the administration’s assessment that (as Stalin said of
the Pope) the judges’ moral authority was not supported by any divisions.
In looking-glass mode, consultation took place after, not before, the event.
The CRA itself commenced (unusually) with a Statement of Values.
Section 1 provided that the CRA does not adversely affect ‘the existing
constitutional principle of the rule of law’ or ‘the Lord Chancellor’s existing constitutional role in relation to that principle’. The dimensions of
that duty were not defined; nor was the content of the values to be protected9 – although during the debate between the judiciary and the executive over the establishment of a Ministry of Justice in the last weeks of
the Blair regime, it was suggested that allegations of its breach might be