Predistribution offers Labour a new and radical way forward

The fast track to jobs and growth is by boosting incomes through higher wages.

Ed Miliband may have at last found his intellectual mojo in the American "predistribution theory", which talks about fair wages, trade unions and the power balance at the workplace.  Whilist it might be hard to imagine Labour supporters chanting  ….."what do we want – more predistribution! And, when do we want it? – well, preferably a decade ago when real wages started to fall", the speech Miliband gave to the Policy Network conference could mark the start of something new and radical.  At the very least, a speech by a Labour leader about social justice at the workplace and the need to address in-work poverty through wage bargaining, rather than relying on hand-outs from the state, brings joy to those think-tankers on the centre-left who have been pointing out for sometime that the way forward must be to put more money in people’s pockets. 

The fast track to jobs and growth is by boosting real incomes through higher wages, with wealth distribution recalibrated away from the top 1% who have secured more than their fair share of productivity gains.  The Smith Institute’s evaluation of anti-poverty policies shows that efforts by all governments since 1980 (including New Labour) to reduce poverty and inequality were undermined by deregulation of the labour market.

Successive Conservative governments transformed the world of work through the erosion of employment protection rights, tight restrictions on trade unions, the abolition of wage floors (like the Fair Wages Resolution and wages councils), lower taxes for the better off, a deliberate effort to shift the balance of power at work in favour of employers and abandoning the commitment to full employment.  All of which had a disastrous impact on those on low and middle incomes.

Apart from the significant achievement of the National Minimum Wage, New Labour left much of the post-Thatcher settlement on the workplace intact. Miliband is right to say that there was too much reliance on tax credits to tackle inequality.  The history of New Labour’s efforts to reduce poverty and increase pay show that wages stagnated for the "squeezed middle" even at a time of economic growth, rising tax credits and near full employment.

Whilst all the talk has been about falling real wages and outrageous executive pay, little attention has been given to what we are going to do about it. Beecroft and ever more deregulation is the Tory response. Labour has opposed this, but without really setting out its own prescription. Part of the solution has to be reconnecting social and labour market policies. What we know is that policies that ensure a more equal distribution of rewards are most effective when they work in parallel with labour market institutions (notably, trade unions) that achieve a fairer distribution of incomes before the intervention of the tax and benefit system.

There’s unlikely to be a sudden increase in welfare payments, even under Labour. All political parties agree that the resources available for redistribution will be limited in the immediate future in order to tackle the deficit.  Redistribution remains essential if we are to narrow the wealth divide, but it is only possible now with a shift towards a fairer wage distribution -  and that entails a new contract between employees, unions and employers. Predistribution is about pay, but it is also about Miliband's concept of responsible capitalism.

The solutions are in, many ways, not new but need to be recast for today’s economy. There has to be more transparency in executive pay with an explicit obligation to publish the details of all directors pay packages in the annual reports of listed companies. Listed companies should also record the ratio of high pay to low pay, the distribution of pay across different levels of earnings and the number of workers in receipt of the minimum wage.

Whilst the minimum wage has made a difference for millions, unscrupulous employers continue to short change their staff. Ensuring that the minimum wage is effectively enforced and is fixed at the highest possible level before any negative employment effects appear should also be part of the solution.

Any future Labour government should also seek to reintroduce labour clauses in public contracts. This will not only increase the pay of those working in the public sector (or "para-state") but also set a benchmark for pay in the private sector.  There may also be role for wages councils, which set wage floors, and place peer pressure on employers to act fairly. The development, in partnership with employers, of programmes focused on raising skill levels, boosting productivity and improving the overall quality of employment at the bottom of the labour market will also help those on lower income.

And last (and not least) as we approach the TUC’s conference, any programme to ensure fair initial distribution of rewards most seriously look at collective bargaining and how workers can have greater power at the workplace. For too long there has been an imbalance of power in favour of owners over workers. This is not a small challenge given low levels of union membership density in the private sector, but there are other models including European Works Councils which can act as bulwark against excessive executive pay.

The challenge for Miliband and the Labour movement must be to turn predistribution theory into predistribution practice, which will inevitably mean new popular workplace policies and facing down the vested interests of big business, the right-wing media, and the Tory neo-liberals.  There are obvious political risks with this sort agenda, but the prize of a more equal society is never going to handed to Labour on a plate. 

Ed Miliband delivered a speech on predistribution at today's Policy Network conference. Photograph: Getty Images.

Paul Hackett is the director of The Smith Institute.

Getty
Show Hide image

Don't bet on James Brokenshire saving devolution in Northern Ireland

The Northern Ireland secretary's decision to extend talks makes a settlement less, not more, likely. 

The deadline for the parties at Stormont to form a new executive has passed without an agreement. Northern Ireland secretary James Brokenshire has – as was inevitable – taken the least difficult option and opened a “short window of opportunity to resolve outstanding issues”.

Talks have been extended for a “short few weeks” – Brokenshire’s interpretation of the “reasonable period” allowed after the initial three weeks after the election elapsed. Despite his earlier warnings, there will be no snap election (for which he conceded there was “no appetite”).

Unhelpful though the tortured semantics of “a short few weeks” are, we can assume that new negotiations may well as last as long as the impending Commons recess, which begins on Thursday and ends on April 11th – after which, Brokenshire said, he will bring forward legislation to set regional rates in the absence of an executive. This, though not quite direct rule, would be the first step in that direction.  

So what changes now? Politically speaking and in the immediate term, not a great deal. For all the excited and frankly wishful chatter about the two parties approaching the final talks afresh after Martin McGuinness’ funeral last week, Sinn Fein and the DUP remain poles apart.  

The former declared talks to have failed a full day before the deadline, and Sinn Fein president Gerry Adams has since said there has been “no substantive progress” on the key issues at hand – particularly the DUP’s “minimalist” approach on the Irish language and marriage equality. Seemingly unassailable differences remain on a new Bill of Rights and measures to deal with the legacy of the Troubles. As such, both Adams and Sinn Fein's new leader Michelle O’Neill continue to stress their election lines: equality, respect, integrity, and, perhaps most tellingly, “no return to the status quo”.

Brokenshire clearly recognises that there will be no new executive without some movement on these issues: yesterday he referred to the talks to come as an “opportunity to resolve outstanding issues”. He is right to do so: Sinn Fein’s demands are, for the most part, as yet unimplemented provisions from the Stormont House and Fresh Start Agreements of 2014 and 2015. 

But will the DUP budge? It appears unlikely at first glance. Sinn Fein’s approach to negotiations has only heightened tensions between the would-be coalition partners, whose relationship has regressed to the openly adversarial (DUP leader Arlene Foster yesterday expressly blamed Sinn Fein for the collapse in talks).

There looks to be little appetite for compromise on Sinn Fein’s headline demands. The DUP’s opposition to historical prosecutions of Troubles veterans is well-publicised, and appears to be aligned with UK government thinking.

Nor does there appear to have been any real shift in the party’s position on legal recognition for the Irish language. Speaking on the BBC’s World at One yesterday afternoon, Ian Paisley Jr stressed in pretty woolly terms to the DUP’s commitment to “promoting minority languages”, which, however true, is not the commitment to an Irish language act that Sinn Fein are asking for. That the spirit of Paisley’s remarks was essentially the same as his leader’s contrarian take on the issue – she said, provocatively, that there was much a need for a Polish language act as an Irish language act – is not a promising sign.

The continuing fallout from the Renewable Heat Incentive scandal that triggered last month’s election also complicates matters. Though the London press have already relegated this public spending scandal to the footnotes, the full ramifications are yet to be seen. A full list of claimants was last week published by the Belfast News Letter, and the longer the process of negotiation and renegotiation drags on, the clearer the answer to the question of who exactly benefited from the scheme’s mismanagement becomes. Though, Foster's penance in the wake of the DUP’s calamitous election performance has gone some way to rehabilitating her public image, the taint of corruption could retoxify the brand. It isn’t difficult to see why veteran Stormont horse-traders like Reg Empey, the former leader of the UUP, believe an executive may well be unachievable until the inquiry into "cash for ash" delivers its ruling – a process which could take a year.

The political impasse, then, looks as insoluble as ever. Leaders of smaller parties such as the non-sectarian Alliance have blamed Brokenshire for the startling fact that there were no roundtable talks at any point during the past three weeks. The Northern Ireland secretary’s decision to extend talks for another fortnight could bury power-sharing as we know it for good. From Wednesday, the civil service will take control of the province’s budget, as per Section 59 of the Northern Ireland Act. The permanent secretary of the Department for Finance will immediately have access to just 75 per cent of available funds, and, if the situation persists, 95 per cent.

In the worst case scenario, this means cuts could well come hard and fast. All the better for Sinn Fein - as I wrote earlier this month, the imposition of austerity and Brexit from London offers an opportunity to parlay short-term pain into long-term political gain. Meanwhile, Brexit secretary David Davis has admitted that Northern Ireland would automatically rejoin the EU in the event of a border poll. The path to a united Ireland via direct rule looks clearer than ever before.

Unionists are not blind to this existential risk – and here Brokenshire’s bizarre insistence that he was ready to call Northern Ireland’s third election in twelve months exposes his political naivety. He maintains there is “little public appetite” for a new poll. He might be right here, but that doesn’t mean a revanchist DUP would refuse the opportunity, if it arose, to go back to a unionist electorate it believes have taken frit at Sinn Fein’s post-election manoeuvring. Some in the party are keen to do so, if only to put to bed what they deem to be premature and melodramatic talk of imminent Irish unity.

Another election would suit Sinn Fein’s long game. The more dysfunctional and unworkable devolved politics in the North, the stronger the logic for a quick transition to a united Ireland in the EU. Much of the Northern Irish political establishment deem Brokenshire a lightweight - as do many in his own party. That he seems not to have realised that threatening a new election wasn’t much of a threat at all – or foreseen this avoidable mess - does nothing to dispel that notion. 

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.