My Manifesto for Labour – Part One, the Economy

In this series of posts, I will lay out the headline vision I think Labour should adopt as its manifesto going forward. It is not a line by line spending strategy (which would be impossible to create from a home office in Wiltshire) but it will explain some fundamental themes the party should adopt to regain support, differentiate itself and gradually become a government in waiting. It is not intended to cover every aspect of every policy area, but instead to give some vital focus to the Labour approach.

Part One – The Economy, Business and Growth

The coalition plan isn’t working. The only rebalancing going on in the economy is the transfer of debt from the public sector into the private. Personal debt is predicted to rise by £566bn over the life of the parliament as the public deficit falls. This transfer will simply squeeze household spending and cause the economy to grind to a halt. Growth is flatlining, making it much harder to bring down the deficit, youth employment is running at 20% (again adding millions to government spending) and inflation is taking chunks out of the monthly income of workers whose pay is frozen. All this why executive pay rose 45% last year. Whatever the coalition may claim, we are clearly not “all in this together”.

Labour must address this. First, the reduction of the deficit must not come at the expense of jobs and personal debt. Growing our way out of the deficit is preferable to attempting to cut our way out of it. It’s a tested, logical and positive way to tackle our budget situation. To this end, Labour should support major infrastructure projects which will help bring us up to the levels of Europe and the US in terms of rail, road and broadband. It should also champion a huge housebuilding drive (more of which in a later post). In addition, the government should be investing in the development and implementation of green energy technologies. This spending, shared with private sector investors (not on a PFI basis), will help create jobs, apprenticeships and skills. These skills will then reside within the economy and can be exported – a genuine rebalancing can begin to take place. Without government support, the only shift towards manufacturing will be dependent on a weak pound and will be not driven by world-class skills and technology we need. The coalition plans for growth are feeble – expecting a corporation tax cut to filter down to more jobs and investment and hoping that low interest rates will encourage lending and investment, while in reality, none of this is happening.

In return for this government investment, industry must accept some fundamental changes to the way it supports its workers. A living wage should be introduced. Instead of providing tax cuts to large corporations, as the government is now doing, these will only be offered to organisations which accept the living wage strategy. The policy will then be rolled out on a mandatory basis. This allows Labour to support the enterprise culture the country needs while protecting workers from an increasingly insecure “flexible labour market”. The living wage will have additional benefits in reducing the need for tax credits, housing benefit and other “top-ups” to subsidise the poor salary levels offered by many employers, thus reducing the benefit bill and helping lower government spending. It is time that businesses took more responsibility for their workforce and relied less on government to keep them properly remunerated.

To better reflect workers contributions to businesses, every public company will be required to have worker representation on its remuneration committee and to adopt pay structures which ensure that if the CEO receives huge pay rises and bonuses, these are mirrored in the pay and bonuses of everyone throughout the business, at the appropriate level, of course. So board executives will only be able to grant themselves huge rises if they also allocate a similar proportion of profits to the people actually bringing in the revenue.

On tax, the burden needs to be shifted away from the poorest, but this means across the board, not simply through income tax. VAT is a regressive tax which hits the poor hardest. The balance of the coalition’s tax plans does not spread the burden equitably – despite its plans on raising income tax thresholds, the overall impact of tax credit and benefit cuts, plus VAT, leaves most families at the lower end worse off. The 50% rate should remain and serious investigation into the best way of implementing a wealth tax should be undertaken. It should be Labour’s stated aim to tax wealth while increasing the incentives for those at the bottom and the middle of society to improve their financial position. It is here that tax cuts should be targeted, instead of at the top 1% of earners. Rather than cutting HMRC staff, Labour should propose significant investment in tackling tax evasion (theft) and implement a thorough review into tax avoidance. These two areas cost the country a huge amount each year, vastly in excess of benefit fraud and should be prioritised as such.

Labour’s message should be clear – Keep the economy moving, keep people in jobs, ensure people are fairly rewarded for the work they do, make the fundamental changes to business practice we need and invest to transform our economy. It is a hopeful message which will restore shattered consumer confidence, motivate businesses to invest, create jobs and bring down the deficit. It will also demonstrate that while Labour supports enterprise and hard work (in fact more emphatically than the coalition), it also recognises that we cannot continue to exacerbate the dividing lines between workers and executives, which drives social disharmony and creates huge resentment.

I will deal more specifically with public sector spending cuts and reform in an upcoming post, as well as housing and education which I touch on here. In the meantime, your comments on this are very welcome.

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8 Comments

Filed under Coalition, Economy, Labour Party

8 responses to “My Manifesto for Labour – Part One, the Economy

  1. claire stanbridge

    Thank you for sharing your most sensible and practical thoughts with us. If the Labour party was to follow the guidelines you have so eloquently expressed
    and shared them in clear and plain English with the public , I feel sure that their membership numbers would soar!

  2. Jamie

    Greg, well written thought provoking piece. How do you account for the double standards in pay and tax. You suggest all bonuses are paid at the same % but then we tax the higher earners at a higher % on that same bonus.

    Before the government goes out looking for more money through tax please please please get their own house in order and stop wasting money. Out of the 14 people I have on benefits 12 of those are benefit professionals who have never had a job and just play the system (legally). It disgusts me. So if those are the stats on a small sample i have access to then god knows the state of the rest of the system.
    We are also one of the only countries that gives aid to other nations for infrastructure projects but then does not stipulate that UK businesses get the contracts. Outcome of this, we are giving business and jobs to American, German, Chinese companies. Hardly promoting business in the UK and keeping money in the system that could be used to take people off of benefits or wages that could be taxed and then net income that is then taxed again for VAT.

    It’s not all negative I like some of your ideas. I just refuse to listen to anything that asks me for more money as a tax payer or as an owner of several businesses when the business of government is just wasting it. Prove to me the business of government is being run tightly then I wi happily invest in it via tax.

    • Hi Jamie

      I agree with you here. Benefit fraud and government inefficiency hit the poorest hardest, in my view, because they become demonised regardless of their honesty & are also proportionately the heaviest users if state services. Labour must be ruthless in driving for efficiencies, I just don’t think this necessarily needs to come from the private sector (see the railways for a good reason why not).

      As for aid spending, I am not familiar with the point you make, but it seems wrong.

  3. Jamie

    Forgot to say I agree on boosting numbers in HMRC (and other government departments). But we need to look at why tax is evaded, mainly because the system does not work, look at other countries where it is working and copy them.

  4. Sean O'Hare

    I don’t understand what you mean by coalition policy transferring debt from the public sector to the private sector. If you had written “transferred into personal debt” that would make more sense; but there really isn’t any difference is there? What governments borrow they borrow in our name. It was if I and other taxpayers had signed all the cheques in our cheque books and handed them to Gordon Brown to do with as he wished.

    What is all this crap about the workers? Most of the population are workers, even executives are workers. Sure some get paid more than others, but that reflects their worth to the company they work for. Union leaders, bless their cotton socks, are executives and they earn a darn site more than anyone they purport to represent, and who’s hard earned money do they leach on to support their luxurious lifestyle? Yes, that’s right – the workers.

    It amazes me that you can still believe that if the few taxpayers this country still retain contribute even more to the public sector to support diversity outreach and other non-jobs by the million that will somehow enable us to grow and pay off our debt. That, you must surely realize, is absolute bollocks. The only way to grow this country out of debt is to expand the private sector to export more. That has become a very difficult thing for us to achieve as our labour rates make us too uncompetitive to derive income from manufacturing and we have somehow managed to lower education standards to a level where we have little chance of competing with high-tech innovators. If the previous government had deliberately set out to ruin this country they couldn’t have done more!

    Then you go on about “government investment”. There’s no such thing! It’s our money. We worked hard for it so we earned it. The government haven’t earned and they don’t have the right to spend it on things that taxpayers don’t approve of. If they do then it’s theft, pure an simple.

    Why do you assume that coalition policy is to provide tax cuts to large corporations rather than SMEs? Not saying your wrong mind, but it is only your assumption.

    As for forcing firms to pay a “living wage”. Have you actually thought that through? If you make it more expensive for companies to operate in one country than another where do you think they will invest? In this “global economy”, to use Brown’s terminology, we have priced ourselves out of the global market. It was politicians that pushed for globalisation and it will be their fault when the truth dawns on the UK worker that their labour is worth no more than that of a Chinese coolie. That is why Blair was right in saying education was the priority. It is a pity that he didn’t make good even on that promise.

    Actually the more I read of this post the more outrageous it seems. It goes far beyond anything I have read from other Labour bloggers. Was Arthur Scargill a hero of yours? It is far more left-wing than anything you came out with as PPC. Were you having people on then or are you now?

    • Sean, even for you, this reply is very very unconvincing. I’ll deal with your points, but frankly you seem to be wilfully missing the point.

      1) The transfer of debt to individuals. This is hugely important. The government borrows at about 3.5% on 13 year terms. Tried to get that on a credit card? No luck? Thought not. The government can manage debt in a way that individuals can only dream of. Do you understand how completely and utterly different this is from your crass “cheque” analogy. To be honest, this kind of economically ridiculous statement really rather destroys any credibility you may have to make further comment. But we’ll give it a go anyway.

      2) The workers are the people who work, Sean. They get up and get paid minimum wage to do crap. Your argument would lead to a race to the bottom on wages. Is that how you think the country should operate? People getting paid less than they need to survive because their employers can get away with it? It’s a callous argument that will catapult families into destitution. Or do you think we should let immigrants come in and take the low paid work and let British workers sit on benefits (or, as you would have it, rot in poverty)? The fact that four or five union leaders get paid to represent them is a ridiculous argument which ignores the millions of people that this situation affects.

      3) So there’s no investment, as you admit. Where is the investment going to come from? Why on earth would private industry invest with no support from the government? Look to history, Sean. Look to Germany. Countries that support their industries succeed. Low tax and “get on with it” is no kind of plan for growth. You are in cloud cuckoo land on this one. I am not talking about these mythical non-jobs you are fixated with, I am talking about government-backed programmes to improve our infrastructure which will be fulfilled by private sector companies, employing people who will then be contributing back to the economy. If you think this is some kind of Stalinist work programme, I suggest you read it again.

      4) The government’s cuts to corporation tax apply to large corporations only because SMEs are charged a separate rate.

      5) Sorry you feel that paying people enough to live is a bad thing. And I thought you might have liked th thought that the “market” would pick up the cost of paying people enough to feed themselves rather than relying on the state to top up. Are you suggesting that low wages and therefore “competitive” business should continue to be subsidised by the state? Surely not? Businesses live in a false paradise – paying the workers nothing, taking huge pay rises and bonuses for executives and relying on the government to top up the income of the poorest. If you like a market economy, then you have to take both sides, I’m afraid.

      6) How are we going to pay for this education you demand? Tax, I suppose. But you don’t want people to pay tax, so that can’t be right. We need a highly skilled workforce, but you don’t think we should pay for it.

      7) This is not a particularly left wing argument. I want tax cuts for businesses that pay people properly. I want the low and middle earners to take home more money and pay less tax. I want the market to accept more responsibility so the government pays out less in benefits. I want the government to ensure we have something we can export. None of this is particularly left wing. In fact, this seems to me to be a much better approach to a market economy than the ridiculous situation we have now where a few people do well and the rest are marginalised, demotivated and isolated from a constructive society.

      Sorry Sean, you really need go back and think again about this.

  5. Sean O'Hare

    Sean, even for you, this reply is very very unconvincing
    I’ll take that as a compliment shall I?

    The government can manage debt in a way that individuals can only dream of
    If we go on overspending this will not remain the case, witness the junk bond status of the PIIGS.
    The workers are the people who work, Sean

    Thanks for that pearl of wisdom! I have been employed as a software engineer most of my adult life. Do I count as a worker?

    Your argument would lead to a race to the bottom on wages.

    If that came across as my argument then it was my bad phraseology. It was meant to be my take on where we are and where we are heading. In the globalised world, brought about by politicians and corporatists, it is inevitable that wages are eventually going to even out. The level that wages end up at will likely be far below British workers current expectations. Huge and improbable rates of growth in the global economy are the only hope.
    Or do you think we should let immigrants come in and take the low paid work

    No I don’t, but that is exactly what has been and still is happening. As we no longer control our borders things can only get worse. Don’t get me wrong, under the right conditions I’m all for the free movement of labour, but those conditions include the absence of any form of benefit or permanent settlement rights for incomers, which probably makes the UK far less an attractive proposition.

    The government’s cuts to corporation tax apply to large corporations only because SMEs are charged a separate rate

    I take your point. I ran my own little consultancy company for a few years. It’s a lower rate as I recall?

    So there’s no investment, as you admit.

    Correct!

    Where is the investment going to come from? Why on earth would private industry invest with no support from the government

    My point was that until the global market stabilises and tariffs removed, corporations are going to invest where their costs are lowest, i.e. in countries where corporation tax, wages and government interference are minimal. The UK just doesn’t fit that bill, hence the lack of investment here. If conditions for investment are right private enterprise will invest. After all, every business wants to grow; taxpayers money is not required. Unfortunately we are now in the position where interference in the market come not from our own government, but from the EU.

    Sorry you feel that paying people enough to live is a bad thing

    I didn’t suggest that.

    I thought you might have liked th thought that the “market” would pick up the cost of paying people enough to feed themselves rather than relying on the state to top up

    I do, but nothing you wrote remotely suggested that was your thinking.

    Businesses live in a false paradise – paying the workers nothing, taking huge pay rises and bonuses for executives and relying on the government to top up the income of the poorest

    Some businesses maybe (mainly banks I guess), but far from a majority. Many are struggling to survive in the present economic climate. I would hate to be in the position of being a middle aged executive faced with the threat of redundancy and little prospect of finding another job.

    Who do you think it was that got us to this state of affairs anyway? In almost every speech Gordon Brown made he repeated the word “global” so many times he was parodied on YouTube. Sucking up to bankers and international corporations at every opportunity.

    How are we going to pay for this education you demand?

    We are paying for it – we just aren’t bloody getting it. When I compare the (comprehensive) school education I got with what kids get taught nowadays it makes my blood (being polite!) boil. If you presented ‘A’ level students nowadays with the ‘A’ level exam papers I sat in 1963 they wouldn’t have a clue. Come to that nor would I, but that’s beside the point.

    There are other ways (bursaries, scholarships etc) for paying for education in addition to taxation. But, of course that requires a healthy economy.

    Finally, I agee with everything you say you want at your point 7) apart from:

    I want the government to ensure we have something we can export

    The government is not best placed to ensure anything of the kind, businesses are! I want the government to virtually disappear and leave us all the hell alone to get on with our lives.

    I guess we just have to accept that we want the same things, but have vastly different ideas on how to get there. Enjoyed arguing the points though. Cheers Greg!

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