Bagging mansion tax and the 10p rate for Labour was good politics, but the scale of his economic ambition was better still
With a double-barrelled blast, Ed Miliband shot two foxes on Thursday – one Tory, one Lib Dem. He bagged Vince Cable’s £2m mansion tax and, if George Osborne was planning to revive the 10p tax band, Miliband has just shot it dead. At the same time, by promising to “put right a mistake made by Gordon Brown and the last Labour government”, he took the sting out of Tory swipes at the two Eds as Brown acolytes. Apology is surprisingly easy, as he found when he rejected the Iraq war on his first day.
In his Bedford speech, the Labour leader calmed the grumble of voices demanding policies and he heartened would-be Labour supporters. These totemic tax gestures show where Labour’s heart lies, a Robin Hood snatch from the very rich to give to low earners. No one knows how many of these (mainly London) mansions there are. Until counted, we can’t know how big a tax cut would go into a 10p band. But Lib Dems suggest a mansion tax brings in some £2bn, so enough to give low earners another £100 a year, almost identical to using the money to raise the personal tax allowance. In other words, this is more big symbolism than big potatoes. Miliband’s fox-shooting is clever One Nation politics, but not an economic policy.
It was in the rest of his important speech that we saw a more radical direction of travel than he has expressed so far. Joining up threads he has been knitting from the start, he wove a rich economic fabric. Remember when he first raised the “squeezed middle”? He was mocked by John Humphrys, and the idea was dismissed as a crude grab for the votes of “middle Britain”, wherever that might be. Labour supporters were sceptical of this New Labourish pitch: why bother with the middle when the people at the bottom are in greater need? Since then, mainly thanks to research by the Resolution Foundation, the seriousness of the crisis for the bottom half has proved to be not just a social and political problem, but an economic calamity.
Now even the OECD and the IMF join a chorus of U-turning economists warning that demand is dead because too many ordinary incomes fell for a decade, with at least another decade of sliding to come. Lower pay means falling demand in a downward spiral. Miliband used Bedford’s history of brick-making as a classic example: in the Macmillan building boom years, the makers of bricks were well enough paid to buy the houses their bricks built. Now pay is so low for middle earners that it takes 22 years just to save the deposit for a starter home. Since the 1980s, the neo-liberals have openly regarded inequality as useful, driving pay and costs down, but Miliband spelled out its economic dysfunction.
To challenge the rich used to be dismissed as “the politics of envy”. In the more equal 1970s, sharing out their wealth wouldn’t yield significant sums for everyone else. But since then the top 1% has seized 24% of all growth, leaving the entire bottom half to gain just 15%, making a strong economic case for fairer distribution. He says, with honesty, “Labour helped families with the minimum wage and tax credits. It made a difference. But it wasn’t enough,” and things are getting worse. Half the population sees less chance of promotion or pay rises, as prices rise fast while housing and childcare soar out of reach.
None of this ignores the poor: on the contrary, it binds together the interests of more than half the population, all stagnating together. Eager measuring of the nation’s GDP growth has become meaningless for most, when all the growth is sucked up by a few at the top. Miliband has plans to raise pay by putting employees on company remuneration committees, but his team talks enthusiastically of going further towards German-style worker representation. Fair wages for undervalued jobs is a theme Labour will develop, as each person raised to the living wage saves the state £1,000 in tax credits. He wants transparency, with companies publishing their pay rates to expose those paying below the rest of their sector. The TUC presses for wages councils to be brought back, setting a fair rate for each sector, according to what they can afford. Miliband is expansive in advocating affordable childcare and social care, freeing more women to work. When he adds pledges to stop rail ticket and energy company ripoffs, or ease petrol and housing prices, these sound like concrete pledges. Plans are being laid, but he will need to say more about how all this is to be done.
Two years ago his bold speech on “responsible capitalism” was much derided, but he was ahead of the herd. Since then, the scandals of company tax avoidance and the fines for law-breaking banks, while CEO pay rises another 12%, show that he hit the mark. Five years after the crash, the need for better capitalism is slowly entering the political bloodstream. This week Osborne was obliged to follow Margaret Hodge’s call to deny public contracts to tax-dodging firms. Miliband now calls for a stop to hostile takeovers, so hedge funds and traders holding shares for micro-seconds get less of a vote than long-term shareholders. If banks don’t reform, their everyday functions must be split from their casinos. Business needs better infrastructure with roads and rail and housing at the heart of future growth.
How is all this to be done? Answers will take longer: remember it wasn’t until January 1997 that New Labour announced its detailed economic plans.
Here was a radical framework for reforming the City, for investment in growth and for the incomes of those whose livelihoods are shrinking around them. For the first time pollsters find most people expecting their children to be worse off than themselves, a pessimism justified by the forecasts. Can that grim future be avoided? Only if inequality itself is sent into reverse.
Miliband etches out a monumental route march, that will take a bravery and political skill closer to Lloyd George in his People’s Budget than anything Labour did last time in office. What heavy lifting it would take to divert wealth back downwards. Has he the machinery, the political nerve and the power to persuade the country that everyone’s growth depends on it? A leader’s mettle is only proved in power: Gordon Brown had talents, but lacked the one essential – the courage he so admired in others. Ed Miliband has not been afraid, on Murdoch, on dysfunctional capitalism, on unjust rewards. He is beginning to look like a man with the strength of purpose and the bottle to match this eloquent evocation of a better future.
The Guardian, Polly Toynbee