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.

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Banishing safe seats, and other proposals to bridge the democratic divide

How to improve key areas of democracy.

Labour’s election train is finally pulling into the station, with its new leader announced in just over a fortnight. However, a summer absorbed in the party’s internal democracy has obscured a deeper truth confronting the country: the general election confirmed that unequal political participation rates in the UK – by age, class, ethnicity and region– have become increasingly hardwired into how our democracy operates.

IPPR’s new report underscores the scale of the democratic divide.  For example, less than half of 18-24 year olds voted, compared to nearly four-fifths of the over-65s, while three-quarters of "AB" individuals cast a ballot, against just over half of "DE" registered voters. Critically, this marks a sharp rise in turnout inequality over time. In 1987, for example, turnout rates by class were almost identical but have steadily diverged since.

Similarly, age-based differences have got significantly worse over time. In 1964 turnout for 18-24 year olds was 76.4 per cent, almost matching the 76.7 per cent turnout rate of those aged 65 or over. By 2005 only 38.2 per cent of 18-24 year olds voted against 74.3 per cent of 65+ year olds, with only a very slight improvement this year.

Underlying growing disparities of electoral voice are striking divergences in perceptions of the fairness and effectiveness of our democracy. For example, IPPR/YouGov polling suggests a striking 63 per cent of "DE" individuals think that our democratic system serves their interests badly, while "AB" voters are evenly split.

Given these signs of democratic distress, there remains a strong case for establishing a wide-ranging constitutional convention to reset how our democracy operates. Yet Westminster shows no appetite for such constitutional reformation, and there would only be so much a civil society-led convention could achieve in terms of practical change.

In our report we therefore propose a series of achievable reforms that could update the civic, institutional and technological architecture of our democracy in the here and now, with the explicit goal of ensuring that all voices are better heard in the political process.

On electoral reform, while we reiterate our support for proportional representation for national elections, we know this simply isn’t going to happen this Parliament. We had a referendum on change in 2011 and it was heavily lost. The energies of electoral reformers should therefore focus on extending PR in local government, where it is more obviously in the self-interest of the major parties, as a means of extending their geographical reach.

In addition, the reduction in the number of MPs provides an opportunity to chip away at the number of safe seats. More than half of seats are "safe", a number that has grown over time, even allowing for the electoral earthquake in Scotland. Safe seats typically have lower levels of participation, lower turnout rates, and less electorally powerful voters. While safe seats will always be with us in a first-past-the-post system, too many can be damaging to democracy.

Given this, we have recommended that the various Boundary Commissions of the UK be given a new duty to consider the electoral competitiveness of seats – ie. to tilt against the creation of safe seats – when boundaries are redrawn. The priority would be to meet their current duties of ensuring the geographic coherence of a seat and roughly equal electorates.

However, where these duties can be met we suggest that the Commissions should consider revising boundaries to reduce the number of safe seats, as a step to increasing participation and the voting power of the average elector. Of course, this will clearly not "abolish" all safe seats – nor should it  but it could help re-empower millions of voters currently with little meaningful say over the outcome of elections and force political parties to up their game in safe seats.

At the same time, the transition to the individual electoral registration process risks excluding millions from the franchise, people who are disproportionately younger, poorer or from an ethnic minority. For example, there are clear inequalities by age and ethnicity in terms of who is registered to vote: in the 2010 general election, for which figures are most accurate, 90 per cent of people aged 55-64 were registered, compared to 55 per cent of those aged 18-24, while nearly 20 per cent of BME individuals were not registered to vote, compared to only 7 per cent of the "white British" population.

There are simple steps the government could take to ensure all who are eligible are able to vote: extending the registration deadline to December 2016, and making support available to local authorities to assist registration efforts, weighted towards authorities with higher levels of under-registration, could help reduce inequalities.  In the longer term, electoral registration officers should be given new duties, and the Electoral Commission more powers, to drive up registration rates, with a particular focus on presently under-registered demographics. 

Finally, we recommend introducing a Democracy Commission. At present, the Electoral Commission effectively regulates elections and party funding. Democracy, however, is far richer and broader than electoral processes. It is about formal representation, but also about participation and deliberation, in what Marc Stears has called "everyday democracy".

A statutorily independent Democracy Commission could give institutional ballast to the latter and help reinvigorate democratic life by providing research, resources and capacity-building to facilitate local, civil society-led initiatives that aim to increase broad-based levels of powerful democratic participation or deliberation in collective decision-making processes.

For example, a Democracy Commission could work with the GLA to introduce participatory budgeting in London, assist the Greater Manchester Combined Authority in instituting a public deliberative body with real teeth over how to integrate health and social care in the area, help the Scottish government conduct citizens’ juries on the future constitutional shape of the country, or support civil-society experiments to bring people closer to collective political decision-making processes in their locality.

We are living in a paradoxical political era, where growing political inequality is accompanied by ongoing social and technological change that has the capacity to collapse unnecessary political and economic hierarchies and build a more inclusive, participatory and responsive democracy. However, there is no guarantee that the age of the network will necessarily lead to democratic revival. The institutions and technologies of our political system, products of the 19th century, are struggling in the fluidity and fracture of the 21st century, inhibiting democratic renewal.

With our economy post-industrial, our ways of communicating increasingly digital and more networked, our identities and relationships ever more variegated and complex, it is therefore critical public policy seeks to update the democratic infrastructure of the UK, and, in so doing, help reverse entrenched political inequality.

Such an agenda is vital. If we simply accept the current institutional arrangements of our political system as the limits of our ambition, we must also content ourselves to live in a divided – and therefore inherently partial – democracy. Yet our democracy is not immutable but malleable, and capable of being reformed for the better; reform today can make democratic life more equal. After all, the story of British democracy’s evolution is one of yesterday’s impossible becoming today’s ordinary.

Mathew Lawrence is a research fellow at IPPR and the co-author of "The Democracy Commission: Reforming democracy to combat political inequality". He tweets at @dantonshead.