Originally published October 2013.
The conference season is over and it has turned out much better for Labour than I had expected - I am keenly awaiting the latest polling but expect it to show Labour back with a 5 - 10 percent lead, having had the best conference amongst the 3 main parties.
The conference season is over and it has turned out much better for Labour than I had expected - I am keenly awaiting the latest polling but expect it to show Labour back with a 5 - 10 percent lead, having had the best conference amongst the 3 main parties.
Labour succeeded in nailing down the cost of living crisis and policies to deal with it as the current differentiator between the two major parties, forcing the Tories to respond, though lamely, to Labour's agenda. The LibDems had a good conference also, though Nick Clegg's statement that he could not go into coalition with Ed Miliband could cost him his job in the long run, barring a humiliating climbdown. The Conservatives' conference was pretty lacklustre in general, though managing to avoid the temptation to indulge in triumphalism over an economy that is just managing to crawl into positive growth territory. The Daily Mail did them no favours by obscuring most of the conference with its asinine attack on Ed Miliband's father, an error which they then compounded by the crass invasion of privacy at Ed's uncle's memorial service. A new low, even for The Daily Mail. The episode only succeeded in giving Ed an opportunity to demonstrate again that he is prepared to stand up to the bullies in the media, and also humanised him in the public's eyes - ironic, as the objective was to demonise him.
The LibDems opened up some areas of common ground for a future Labour/LibDem coalition - their adoption of a policy of shifting taxation from income to assets and to green taxes is exactly in line with what I believe should be Labour's direction of travel. There has been a massive transfer of wealth from the poor to the rich since the 1980s, with 10% of the population of the UK now owning 50% of the wealth (not yet as bad as the USA though, where the richest 400 people have greater combined financial wealth than have the bottom 50% of the population combined). For too long the wealthy have been paying lower marginal rates of tax than that paid by the standard rate tax payer - a move towards higher wealth and assets taxes will redress this imbalance and make room for income tax reductions, which would have the additional advantage of reducing the in-work benefits bill. The major advantage of asset and wealth taxes is that they encourage investment in more productive assets as investors look to maintain returns to overcome the costs of taxation - so, for example, the government could combine it with tax breaks for investments in desirable industries (manufacturing, green technologies, etc) thereby focussing investment on areas where it is needed.
Further, wealth taxes encourage existing assets to be put to more productive economic use so, for example, idle development land or land which has the potential to gain planning permission would be encouraged into use by an annual cost to the owner. This was a policy actually espoused by Winston Churchill, which would present an interesting dilemma for the Tories - do they condemn it as left-wing, Stalinist lunacy or do they attempt to show it would not be economically successful - they would lose on either count. I prefer this approach to that offered at Labour's conference ('use it or lose it') as the latter can be painted as more statist, requiring the involvement of councils and/or government, whereas achieving the same effect through taxation would encourage unilateral action by owners and hence would therefore be faster and more efficient. That said, if is Labour's intention to compulsarily-purchase land for councils to build more social housing to replace that lost since the 1980s then I am all in favour.
Finally, such a policy will also help to bring down house prices as it makes buy-to-let investment, the main driver of house price inflation since the mid-nineties, less attractive. But bringing down house prices is fraught with economic and political danger - if handled badly it will weaken the balance sheets of banks again, and it reduces the population's perceived financial wealth, therefore depressing spending. And which politician wants to be remembered for reducing the value of his or her electors' greatest financial asset? It would plainly take very careful management and a lot of political courage - I think of the three party leaders, only Ed Miliband would have the Balls to do it, but it is the right thing to do for the longer term, to eliminate speculation in the housing market and also to bring down rents, which helps to reduce the housing benefit bill.
In combination with reducing speculation in the housing market, it needs to be recognised that the major problem is on the supply side - there is no substitute for building more houses. Therefore Labour's pledge to build a million homes over 5 years is welcome and presents a clear difference with Osborne's demand-focused Help-To-Buy scheme (which should be renamed 'Lending For Landlords'). Osborne's policy will only increase house prices further and is purely designed to generate a feel-good factor before the election, hence its time-limited nature; it is the wrong thing to do for the long term health of the housing market and does nothing to help the next generation of first time buyers who will find house prices being pushed ever further out of their reach. Labour's pledge to build 1 million homes is still not enough but it is a step in the right direction.
The LibDems also pledged to increase income tax thresholds further with the aim of taking those on the minimum wage out of tax altogether. I support this but I would like it to go much further. Firstly, I would like to see the minimum wage replaced with a regional living wage - at present the UK taxpayer is subsidising unscrupulous employers who pay wages too low for anyone to live on. The market forces wages down and is able to do this due to what Marx called 'the reserve army of the unemployed'. The market is the Tories' god so they will do nothing to intervene - indeed they vehemently opposed the original introduction of the minimum wage. Wages have become so low that they have to be topped up by government through in-work benefits. This amounts to a subsidy of exploitative employers by Government - a direct transfer from the pockets of taxpayers to the pockets of these firms' owners. It needs to be stopped. By imposing a regionally set living wage, these employers would be forced to become responsible members of society again. "Oh, but they can't afford to pay wages that high - they would go out of business!" I hear you cry; well in that case they are not solvent businesses - they maintain their existence only by pocketing a taxpayer subsidy, so they should be allowed to go to the wall. This would have the beneficial effect of making it more attractive for companies to setup in areas of the country with a lower living wage - typically areas desperately in need of new investment; the result would be fewer opportunities in the South East but more in other regions. Secondly, I would like to see the tax threshold raised so that those on the living wage pay no tax - this would enable it to be set a lower level then if they were paying income tax, thereby reducing the overall impact on unemployment levels. This is in line with wanting a general shift away from work-deterring income taxes to wealth taxes.
As a supporter of universal benefits, for the common bonds they highlight between people from all walks of life, I welcome Nick Clegg's plan to introduce free school meals for the first 3 years of primary school, though I can't see any reason for not extending it all the way up to year 6 pupils other than cost. Money should be found to commit to this in Labour's manifesto for the next election. On a similar theme, child benefit should be reinstated as a universal benefit to demonstrate the importance we as a society place on raising the next generation. This can be looked on as a way for the baby-boomer generation to hand back to the next generation some of the financial wealth they have accumulated in the last 3 or 4 decades; it will help the next generation to bring up the children on whom we will all ultimately depend in our old age (read 'The Pinch' by David Willets for some terrific insights in this area).
On the EU referendum issue, Labour should not make the mistake of matching Cameron's pledge of an in/out referendum. Labour is a pro-European party and should not put itself in the situation of being the party that may end up taking Britain out of Europe. Vote Labour and you know what you get - a party that is committed to the European project; vote Tory and you have no idea what you might get - we may remain in Europe or we may pull out. We don't even know which way the Prime Minister will swing on this issue - a ridiculous situation which will cause uncertainty up to the next election and then beyond if the Tories win. I hope Ed has the courage to make the pro-European case and fight for it in the General Election.
The LibDems opened up some areas of common ground for a future Labour/LibDem coalition - their adoption of a policy of shifting taxation from income to assets and to green taxes is exactly in line with what I believe should be Labour's direction of travel. There has been a massive transfer of wealth from the poor to the rich since the 1980s, with 10% of the population of the UK now owning 50% of the wealth (not yet as bad as the USA though, where the richest 400 people have greater combined financial wealth than have the bottom 50% of the population combined). For too long the wealthy have been paying lower marginal rates of tax than that paid by the standard rate tax payer - a move towards higher wealth and assets taxes will redress this imbalance and make room for income tax reductions, which would have the additional advantage of reducing the in-work benefits bill. The major advantage of asset and wealth taxes is that they encourage investment in more productive assets as investors look to maintain returns to overcome the costs of taxation - so, for example, the government could combine it with tax breaks for investments in desirable industries (manufacturing, green technologies, etc) thereby focussing investment on areas where it is needed.
Further, wealth taxes encourage existing assets to be put to more productive economic use so, for example, idle development land or land which has the potential to gain planning permission would be encouraged into use by an annual cost to the owner. This was a policy actually espoused by Winston Churchill, which would present an interesting dilemma for the Tories - do they condemn it as left-wing, Stalinist lunacy or do they attempt to show it would not be economically successful - they would lose on either count. I prefer this approach to that offered at Labour's conference ('use it or lose it') as the latter can be painted as more statist, requiring the involvement of councils and/or government, whereas achieving the same effect through taxation would encourage unilateral action by owners and hence would therefore be faster and more efficient. That said, if is Labour's intention to compulsarily-purchase land for councils to build more social housing to replace that lost since the 1980s then I am all in favour.
Finally, such a policy will also help to bring down house prices as it makes buy-to-let investment, the main driver of house price inflation since the mid-nineties, less attractive. But bringing down house prices is fraught with economic and political danger - if handled badly it will weaken the balance sheets of banks again, and it reduces the population's perceived financial wealth, therefore depressing spending. And which politician wants to be remembered for reducing the value of his or her electors' greatest financial asset? It would plainly take very careful management and a lot of political courage - I think of the three party leaders, only Ed Miliband would have the Balls to do it, but it is the right thing to do for the longer term, to eliminate speculation in the housing market and also to bring down rents, which helps to reduce the housing benefit bill.
In combination with reducing speculation in the housing market, it needs to be recognised that the major problem is on the supply side - there is no substitute for building more houses. Therefore Labour's pledge to build a million homes over 5 years is welcome and presents a clear difference with Osborne's demand-focused Help-To-Buy scheme (which should be renamed 'Lending For Landlords'). Osborne's policy will only increase house prices further and is purely designed to generate a feel-good factor before the election, hence its time-limited nature; it is the wrong thing to do for the long term health of the housing market and does nothing to help the next generation of first time buyers who will find house prices being pushed ever further out of their reach. Labour's pledge to build 1 million homes is still not enough but it is a step in the right direction.
The LibDems also pledged to increase income tax thresholds further with the aim of taking those on the minimum wage out of tax altogether. I support this but I would like it to go much further. Firstly, I would like to see the minimum wage replaced with a regional living wage - at present the UK taxpayer is subsidising unscrupulous employers who pay wages too low for anyone to live on. The market forces wages down and is able to do this due to what Marx called 'the reserve army of the unemployed'. The market is the Tories' god so they will do nothing to intervene - indeed they vehemently opposed the original introduction of the minimum wage. Wages have become so low that they have to be topped up by government through in-work benefits. This amounts to a subsidy of exploitative employers by Government - a direct transfer from the pockets of taxpayers to the pockets of these firms' owners. It needs to be stopped. By imposing a regionally set living wage, these employers would be forced to become responsible members of society again. "Oh, but they can't afford to pay wages that high - they would go out of business!" I hear you cry; well in that case they are not solvent businesses - they maintain their existence only by pocketing a taxpayer subsidy, so they should be allowed to go to the wall. This would have the beneficial effect of making it more attractive for companies to setup in areas of the country with a lower living wage - typically areas desperately in need of new investment; the result would be fewer opportunities in the South East but more in other regions. Secondly, I would like to see the tax threshold raised so that those on the living wage pay no tax - this would enable it to be set a lower level then if they were paying income tax, thereby reducing the overall impact on unemployment levels. This is in line with wanting a general shift away from work-deterring income taxes to wealth taxes.
As a supporter of universal benefits, for the common bonds they highlight between people from all walks of life, I welcome Nick Clegg's plan to introduce free school meals for the first 3 years of primary school, though I can't see any reason for not extending it all the way up to year 6 pupils other than cost. Money should be found to commit to this in Labour's manifesto for the next election. On a similar theme, child benefit should be reinstated as a universal benefit to demonstrate the importance we as a society place on raising the next generation. This can be looked on as a way for the baby-boomer generation to hand back to the next generation some of the financial wealth they have accumulated in the last 3 or 4 decades; it will help the next generation to bring up the children on whom we will all ultimately depend in our old age (read 'The Pinch' by David Willets for some terrific insights in this area).
On the EU referendum issue, Labour should not make the mistake of matching Cameron's pledge of an in/out referendum. Labour is a pro-European party and should not put itself in the situation of being the party that may end up taking Britain out of Europe. Vote Labour and you know what you get - a party that is committed to the European project; vote Tory and you have no idea what you might get - we may remain in Europe or we may pull out. We don't even know which way the Prime Minister will swing on this issue - a ridiculous situation which will cause uncertainty up to the next election and then beyond if the Tories win. I hope Ed has the courage to make the pro-European case and fight for it in the General Election.
And finally there is one policy I would like to see Labour steal from UKIP, it is relatively trivial but it is one of those bug-bears that just annoys people - I would like to see National Insurance abolished and have it combined with income tax. It is a tax already in all but name, so let's just get on with it - abolish NI and re-introduce a top rate of tax of 50%, to bring some clarity to the taxes we are asked to pay.