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Things Labour needs to do to beat UKIP #2: raise pay and cap the cost of living

a shopping cart is filled with coinsWhilst Ed Balls stuck stubbornly to accepting that the economy was now growing rather than “flatlining“, with his disastrous conclusion that you couldn’t fund spending by borrowing in the up-swing, Ed Miliband was absolutely right last year to focus on the cost of living. “The first and last test of economic policy is whether living standards for ordinary families are rising,he said. And they’re not. Instead we have payday lenders, low-skilled jobs and stagnating wages. Predatory capitalism. Ed Miliband recognised that “the average doesn’t tell you the whole story.”

In their book on the rise of UKIP Revolt on the Right, the new gurus of the topic, Robert Ford and Matthew Goodwin explain the rise during the Thatcher and Blair years of the “left behinders” – the crucial group of working class voters who fell behind the average, that once were loyal to Labour and are now moving in their droves to UKIP. Here Ford & Goodwin explain what happened at the hands of Blairite “reformers”:

The heavy focus on more socially mobile. aspirational and ideologically moderate voters steered Labour away from the left behind groups, who were once the party’s core electorate. The reformers’ goal was to escape from the ‘Old Labour’ associations with tax and spend’ profligacy and a ‘levelling down’ focus on the poor, which they believed would alienate electorally crucial middle-class voters. Symbolic and substantive commitments to helping poor and economically insecure workers were downplayed in favour of commitments to rough spending discipline and free market reform of ‘inefficient’ state services. The needs of traditional Labour voters for affordable housing, secure work, higher income and access to training – were marginalised in rhetoric, and often in policy too.” [p129]

 And so in the pursuit of aspirational “moderate” voters in the south-east, the Blairites progressively alienated their core voters whom they believed had nowhere else to go. Ford & Goodwin continue:

 New Labour economic policy was Thatcherism-lite: low taxation, low regulation and strict spending limits. Although unemployment fell steadily and incomes rose, the yawning inequalities between classes and regions which had opened up during the previous Thatcher and Major governments did not narrow; and large numbers of working-class families remained in poverty, untouched by the economic recovery that was benefiting the middle classes.

There was no large-scale policy effort directed at the millions of former manufacturing workers living i n economically depressed northern towns and cities, which had never recovered from deindustrialisation under the previous administration, and lacked the skills and experience necessary to prosper in the new services economy. Many of the former industrial workers in these regions now eked out a living on long-term disability benefits, whose claimant numbers rose remorselessly even as unemployment fell, a displaced army of unwanted workers who had withdrawn altogether from the labour market.” [p129/30]

Turnout proceeded to slump to the lowest level ever in a universal suffrage election as core voters stayed home, no longer seeing much difference between the parties, increasingly detached from politics and politicians. Until along came UKIP and Nigel Farage.

If Labour wants to restore its reputation, to renew its connection with the working class, it must do whatever it takes to raise the pay of the vast bulk of those who work for a living, to enable them to beat the rising cost of living and see their living standards and those of their children rising again. A central part of that effort must be to ensure that trade union membership rises again. Having halved over the last 30 years from a height of 13million, from 45% of the working population to under 25% now, it is no surprise that the share of wages fell in the UK from around 60% at the start of the Thatcher era to about 54% at the end of the New Labour era, enough in itself to slow growth and increase private debt as, in the words of Stewart Lansley and Howard Reed:

the shift from wages to profits sucked demand out of the economy fuelling an unprecedented hike in levels of personal debt to compensate for the collapse in consumer spending.

As set out in the ground-breaking book Wage-Led Growth: An Equitable Strategy for Economic Recovery, the rebalancing of the economy in favour of wages will be an essential element of equitable and sustainable growth. Britian needs a pay rise not only to beat the cost of living but to kickstart growth. The authors explain the economic crisis as a product of the shift in macoecenomic objectives since the 1980s from promoting full employment to targeting low inflation, whilst at the level of the firm we experienced “financialization” in which companies boost profits through cutting employment rather than through investment. Growth shifted internationally from being wage-led with wages rising with labour productivity driving consumption up to being debt-led (based on personal borrowing) and export-lead (based on low wages). And growing inequality also inhibited growth, a finding corroborated by Richard Wilkinson and Kate Pickett’s The Spirit Level which demonstrated a correlation between equality and innovation.

Why has Miliband’s Labour not considered wage-led growth? Unfortunately we know the answer.  Selina Todd writes in The People: The Rise and Fall of the Working Class, 1910-2010  of how workers’ interests have been regarded by those in power as a sectional interest opposed to the national interest. At first this may have been true primarily of Tory leaders, but it had certainly spread by the 1960s to Harold Wilson who regarded workers’ rights as being distinct from the ‘rights of the community‘, people’s welfare was subordinate to the national economy. And though he did still preserve a special relationship with the trade unions, Tony Blair promised union leaders “fairness not favours” – there would be no return to beer and sandwiches at No 10. Miliband (or is it Balls?) keeps Labour stuck in that mindset.

But we can reverse that trend, boosting growth by boosting ordinary people’s spending, beating the cost of living and stemming the tide to UKIP. Here’s how:

1  Raise the minimum wage to the level of the living wage immediately

Labour’s promised increase in the minimum wage, currently £6.50, to £8 by October 2019 is woefully inadequate. The minimum wage has fallen in real terms since October 2008,and to raise it only to where it would have been at that point in the absence of any slowdown would mean making it £10.73. It should be raised to the level of the Living wage now (including the higher London allowance) and we should commit to a minimum wage of £10 by 2020. Unpaid internships should be banned.

2. Adopt specific targets for reducing pay inequality

There should be specific targets for the reduction of the numbers of people in low pay (measured as earning below two-thirds of the median wage) nationally and regionally. There should be targets for reducing levels of top pay and for pay disparity within firms. And there should be worker representatives on all company remuneration committees.

3. Ed Miliband and shadow cabinet members should be seen on picket lines 

What could better illustrate the support of Labour leaders for workers working long hours on low pay than appearing on a picket line with such workers fighting for better pay, defending jobs & services. If Barak Obama can do it — as he did for example at the Congress Hotel in Chicago in 2007 as a senator campaigning for the presidency — so can Ed Miliband. On Friday, he met with striking workers from health privateer Care UK, many of whom live in his constituency. After hearing about their strike against cuts and for a living wage, and of their fears for the safety for the people they care for, their shop steward, Roger Hutt said:

He asked what we wanted. We asked him to publicly declare his support for us. We asked him to publicly oppose the selling-off of public health services to people driven by private profit. He said he was very sympathetic and that this needed to be resolved.”

Let’s see him on the Care UK picket line next week! And let’s see Labour MPs encouraged to do likewise, not discouraged from doing so, where there are disputes which they support.

4. Restore collective bargaining

A Ministry of Labour should be created to counteract the influence of corporate interests in government and to promote collective bargaining. It should establish sectoral bargaining arrangements to cover pay and conditions, training and productivity,and inclding dispute resolution, in which all relevant companies should be obliged to participate and be bound by the resulting agreements.

5. Boost trade union membership and members rights to be represented 

Trade unions are popular — around eight in ten (78%) Britons agree that trade unions are essential to protect workers’ interests while only 14% disagree, according to a poll by Ipsos-Mori. Labour should aim to double union membership density by end of the next parliament from a quarter to half those in work. Employers should be required to ensure that their workforce are aware of their right to join a union and give reasonable cooperation to trade unions seeking to recruit their staff.

Where a trade union has 10% of employees in membership and have majority backing by the whole workforce, employers should be obliged to recognise that union for bargaining purposes and cooperate with the collection of membership fees. In any oither circumstance, union members should always be able to represented by their union

6. Introduce rent and price controls

The other aspect of controlling the cost of living is about costs. As well as improving the supply of genuinely affordable housing, rent controls are vital. They are widely used in the US, Canada and Germany. They are supported by the British public by 56% to 33%. They should be reintroduced in Britain.

Price controls are also widely used in other countries. Ed Miliband, backed by 63% at the time, has said Labour would freeze gas and electricity bills for every home and business in the UK for 20 months if it wins the 2015 election. People say governments should be more willing to intervene in the market to control prices by 56% to 29%That doesn’t go far enough.

In all sectors of privatised industry — energy, water, telecoms, railways — prices should be tightly controlled until those sectors are renationalised – which the public also strongly supports. And Labour should commit to controlling other prices where the public interest demands it.

Image Copyright: gena96 / 123RF Stock Photo

9 Comments

  1. swatantra says:

    Or, they need to cap the pay of high earners, and cut inflation. Of course wages will rise as the economy grows anyway.

  2. John reid says:

    There were people left behind during new labour, mainly the working class in former industrial town, in England, where they didn’t gain as much as the rest, Scotland and Wales gaining from subsidised state jobs, but it’s not that those people see Ukip as an alternative to New labour ,in fact ukip are open about being ultra Thatcherite,in fact it’s something that new labour should have taken more serious, that they were ignoring the working class.

  3. Robert says:

    Totally agree no argument from me, Labour promise of giving people on the min wage after eight years of cuts a miserable £1.50 pay rise is beyond a joke it’s an insult and for labour to just drop and try to forget the promise of a living wage is insulting, and shows you cannot take his word on anything.

    The same with labour promise of building affordable homes because they are to ashamed to talk about social housing or worse Council houses .

    Not a lot really to stop people from voting Tory or UKIP really.

  4. P Spence says:

    I agree with everything here except with regard to trade unions. Labour should repeal all anti-TU laws that seek to restrain worker and union rights to freely associate and organise in the interests of their members. Free collective bargaining is determined by freedom and collective action, to state the obvious.

    1. Jon Lansman says:

      Whilst I agree with the principle of repealing “all anti-TU laws“, I think there is (i) an issue with definition – e.g. strike ballots are now accepted the question is how they should be done (it should not have to be postal) and how employers deliberate obstruction can be overcome and (ii) a good case for presenting a positive agenda rather than a reversal of what has been done.

      I was trying to do something slightly different here which was arguing for a social democratic state taking responsibility for positively promoting trade unionism as the best method of of combatting low pay and beating the cost of living.

  5. Julian Wells says:

    The point that needs to be made to UKIP-leaning voters is that restricting the free movement of workers is pointless unless one restricts the free movement of capital — but if one does the latter, the former is superfluous.

    1. Robert says:

      So why not vote UKIP it may help show labour sticking with the Tories is not going to get us voting for it.

      1. Julian Wells says:

        Because banker Farage is never going to campaign for controls on capital movements: it’s the latter that’s the real issue. As Jean-Claude Juncker told the BBC yesterday: “[if] we change rules on freedom of movement today, tomorrow others will try to change freedom of movement of capital” (see http://www.bbc.co.uk/news/uk-politics-29731120)

  6. swatantra says:

    Why not vote Labour for a better re-distribution of the wealth of this Nation.

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