Ed Miliband’s social security speech – what about costs of living?

Summary

Is Ed Miliband making the same mistake as his shadow chancellor in missing out on the bigger picture?

First of all, ignore the spin and the press reports: read the transcript for yourself and draw your own conclusions.

My take? As with Ed Balls’ speech, he’s missed addressing the big picture first. This is one of the reasons why those on the left of the Labour party and of politics in general reacted with some dismay at what they see are ‘Tory-lite’ policies of restricting benefits.

The speech itself was high on emotive words, inevitably light/lite on policy, tactically smart from a Westminster-media perspective but strategically weak on the big picture. One of the reasons for that is that there’s an even bigger challenge we face than trying to get down a social security bill – one that’s inevitably difficult because of the automatic stabilisers built in. That challenge? The cost of living. These are rising at a higher rate than wages and salaries for the majority of people – particularly in the South. Things like

  • House prices and rents
  • Food prices
  • Fuel prices
  • Public transport prices

One of the first mistakes Miliband made was in sequencing. This should have been addressed before scoping out content of any of the speeches. What are the core drivers that are creating the problems that we as individuals and as a society face? One of the big ones at present is that it is becoming increasingly hard to get by whether in work or on benefits in the face of price rises on the costs of the essentials. One of the ways Labour dealt with this – in particular when trying to tackle child poverty – was to use the levers of tax credits and the benefits system. This had a significant impact – as the Institute for Fiscal Studies shows. The reason why the IFS describes the achievements as fragile is that both those levers are vulnerable to cuts in public spending and on rises in costs of living.

How do you embed the benefits of poverty reduction?

It’s not just a case of throwing money at things. Getting people into meaningful stable employment is one action – easier said than done. Stability is essential because amongst other things it allows people to plan ahead for the future. In a world where adults are expected to take out loans and/or self-fund learning to make them more employable, having the expectation of a stable income to repay those loans. It has impacts on housing too – why would you take out a mortgage (and why would anyone give you one) if you had little expectation of a stable income? Frances Coppola explains more as to why instability screws up the macroeconomic big picture.

Areas where the IFS mentioned non-financial handouts made impacts included the national minimum wage (albeit it’s poorly enforced) and Sure Start centres. Yet as the IFS points out, the sustainable and more robust policies that are more likely to make a longer term impact are ones that take time to bed in. These don’t align easily with electoral cycles, nor do they align with regularly reshuffled ministers who want to see results quickly – in particular while they are in post. It takes a brave minister to step forward with a policy that, at the time they take a lot of flak for, knowing that people will only feel the benefits long after they’ve left office. Which politician would take that gig?

Vested interests

In areas of food policy, fuel policy and housing policy there are a number of massive vested interests.

Food policy

With food policy, you only have to look at the power of the food and beverage multinationals. Just ask Dr Sarah Wollaston MP on the impact of the alcohol lobby on health policy that’s linked to it. Here are just a few. Also click through to get a feel for the number of brands they control. Here’s Nestle for example. Kraft foods is another.

Fuel policy

You’ve got your traditional big oil companies that Robert Halfon and friends have been investigating regarding high fuel prices. You’ve also got this sudden push for shale gas too – something the Coalition favours with increasing enthusiasm. In terms of lobbying, there are two ‘All Party Parliamentary Groups’ that are subsidised by big industry – the Extractive Industry Group and the Offshore Oil and Gas Group.

Housing

I used to be a policy adviser in housing so have seen this close up. As far as new homes are concerned, the state is dependent on house builders – in particular the larger ones – to get the new homes built. But those homes won’t get built if those firms don’t make a profit. Both Ed Balls and Jack Dromey (shadow housing minister) have written about how housebuilding is essential for the economic recovery. With the sums and the scale being talked of brings the interest of big business.

Public transport

The issue here for those in work that use it is that it is essential for them. When prices go up, there is no alternative other than to stomach the increases and forgo expenditure elsewhere. The problem Labour had in government was that they accepted the privatisations of the Thatcher & Major eras – despite John Prescott’s comments here. Indeed, the figures from a recently-published study by the Trade Unions Congress make for astonishing reading about how the railways, passengers and the taxpayer have been bled dry by privatisation. But the owners of the rolling stock, as well as the train operating companies are huge vested interests, and renationalisation won’t be cheap.

On inequalities of income

The How Unequal is Britain? report from 2010 makes for interesting reading. My take is that the growing polarisation between the super-wealthy and the rest of us is simply unsustainable. It’s not just about the amount of money that the super-wealthy have, and trying to tax them of it – which was the model the previous Labour administration worked with. (ie ‘it doesn’t matter how rich they get, so long as they pay their taxes’, as Peter Mandelson pointed out at the time). But what if people getting extremely wealthy is at the expense of others? For example the chief executive of a large corporation that employs lots of people on very low wages – ones that are topped up by tax credits and other state benefits? Would the burden on the taxpayer not be lower all round if such executives accepted/were forced to accept lower salaries and compensate their lowest paid staff?

The international dimension

This is one thing that is often missed from the political debate too. Europe is rarely discussed in the mainstream media except in a UKIP context. Would it not be better for politicians to make the case for improving European institutions to help tackle the big problems that are on a multinational scale? Because we cannot do it alone.

Why the focus on the benefits bill and benefit capping?

As veteran Tory James Elles MEP said in Cambridge recently, politics is the art of what is possible, not necessarily what is desirable. Chances are both Miliband and Balls are looking at policy and politics through the prism of the levers they believe they have – which are financial and legislative. Throw money A, you get B; take away money C and you get D. Pull legislative lever E you get F etc.

But public policy is much more complex than that. Talk of benefits caps are straight-forward to communicate. You set an artificial financial limit and say ‘thus far and no further.’ On compelling people into work, again it’s pulling a legislative lever. But which employer would want to take on a new member of staff that had been compelled into work? Given that a number of people on the Coalition’s ‘welfare to work’ programme are in retail/customer-facing environments, is it really any good to have resentful staff facing your customers? Or are there far better incentives that firms can use? Like…employing them on a decent wage and/or paying for meaningful training and qualifications in the process?

Given the pressure to reduce both deficit and debt, it’s understandable that political attention will shift to the highest spending departments and policy areas. Yet I can’t help but feel the Labour leadership risks boxing itself into a little corner by not looking at the wider picture and not unpicking some of the assumptions that politics has taken for granted over the past couple of decades.

Food for thought?

Updated to add: Ed Miliband spoke about the costs of living here, but with no specific policies to address the problem. Too early in the policy cycle to expect such things or too many platitudes about needing things that no one really opposes? Via @Cobm123

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