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Ed’s speech and the elephant in the audience

Ed Miliband’s speech today is absolutely right to place the emphasis on living standards. The economy is central both to Britain’s recovery and Labour’s political strategy, and it is in their living standards that our people are feeling the impact of the failures of neoliberalism and austerity. The restoration of the 10p tax rate and imposition of a mansion tax represent a commitment to tax fairness and redistrubution which we need. The fact that it pays for a tax cut the Lib Dems oppose with a tax the Tories oppose is smart tactics. So far so good.

It is also right to focus on the cost of living. A cap on payday loans and bank charges are welcome as is the prevention of rail fare rip offs, but effective regulation of energy prices and public transport fares requires far wider controls, not to mention a return to public ownership (and what on earth is meant by “break the stranglehold of the big six energy suppliers“? Competition has shown itself to increase prices, not reduce them). But the biggest missing cost is housing — what about rent controls?

Ed is undoubtedly sincere and consistent too in his backing for a living wage. Which is why he should have gone further than his commitment today to “work with companies and workers to encourage a living wage across our country“. We need a statutory living wage, no ifs or buts. We believe in a state that steps in to protect people’s welfare, but we don’t need or want a state that subsidises poverty pay.

But the remaining elephant in the room is public spending and the deficit, on this we agree (up to a point) with Labour Uncut. The public does still think the deficit is somehow Labour’s fault, the result of Labour profligacy. That’s a lie but the reason we haven’t nailed it is because too many shadow cabinet members believe it too. I don’t think Ed Miliband believes it; and I don’t think Ed Balls did either when he made his Bloomberg speech. But it is a lie we need to nail if we are going to do the right thing for the British economy.

Public Sector debt is not the problem. It isn’t even a problem. It wasn’t under Gordon Brown, nor under Tony Blair. What was a problem is private sector debt. It is very clear in this graph, for which we are indebted to McKinseys.

Private sector debt, especially in the financial sector, did explode on Labour’s watch (though not only in Britain). New Labour did fail to recognise the problem and deal with it. The Tories and Lib Dems, the bankers and the regulators, the Germans and the Americans, they failed to recognise the problem and deal with it too. But in our own case, Gordon preferred to ride the bubble and pretend that rising living standards on the back of it was the result of “prudence”. To be fair to him, he did eventually realise the problem before most others did and rediscovered Keynes.

It was too late for Gordon, and Gideon is way behind. The two Eds may, however, get their chance. But it isn’t possible to solve the real (private) debt problem without economic devastation for Britain without incurring greater public sector debt in the short to medium term. The deficit can only be eliminated through growth. And the sooner we start saying that, the better.

5 Comments

  1. It is an appalling proposal to tax people on what, unless it happens to be for sale, is the purely notional value of an asset which they might not necessarily own anyway, and which in any case they could not possibly sell unless they were expected to go and live up a tree or something. But we sold the pass on this one more than 20 years ago, when we effectively restored the hated rates, and with them all their impeccably middle and upper-middle-class exemptions for students, clergy, second homes, and so on. Paid for by a hike in VAT, hardly the obvious way to help the poor.

    We need a fair, efficient, comprehensible and accountable system of funding. That needs to be an annual flat fee, fixed by the council in question, strictly voluntary, entitling the payer to vote and stand in elections to the council, and payable through the benefits system on behalf of the very poor. Central government would continue to meet much or all of the cost of statutory services to statutory standards. With its fees, the council could do pretty much whatever it liked on top, directly accountable to the people paying the bills. Everyone uses lots of local services.

    Unless they send their children to commercial schools, as hardly anyone does, then most people make as much such use as each other, regardless of class or income; indeed, such things as street lighting are often significantly better in more affluent areas. Yet hardly anyone votes in local elections, because local government is emasculated yet expensive, and notoriously unaccountable. It has not always been any of those things.

    There must also be a tax on the productive value of land per acre, other than that occupied by the homes of the less well off, perhaps making possible the abolition of stamp duty, and in any event establishing and enforcing the principle that no one should own land other than in order to make use of it; this was proposed by Andy Burnham when he was a candidate for Leader of the Labour Party. There must also be a statutory requirement of planning permission for change of use if it is proposed to turn a primary dwelling into a secondary dwelling, a working family home into a weekend or holiday home.

    1. Jon Lansman says:

      David Lindsay: You’re entitled to your view but I strongly disagree with it. I see nothing wrong with the principle of a tax on wealth which this is in a sense – being on one particular type of asset which comprises a large slice of wealth. The rate of tax proposed here would enable most ‘mansion’-owners to pay it out of income. If they are unable to do so, if for example they are retired, it is always possible for wealthy people to borrow modestly against their assets.

  2. John Reid says:

    Well said David, it’s interesting labourlist has a headline white elephant but for totally different reasons

  3. treborc says:

    Band wagons he is now saying he agrees with sending Immigrants out of this country if they break the law, because he thinks the public will vote for him, no matter how long they have been here.

    Band wagons of course once the wheels come off you spend a long period repairing them.
    It’s time for Miliband to come out for something for the futuire

  4. David Ellis says:

    `The deficit can only be eliminated through growth. And the sooner we start saying that, the better.’

    Oh yeah and of course the capitalists are anti-growth aren’t they? You do write a load of rubbish. By the way the 10p tax rate will put 67p a week in the pockets of the poorest workers.

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