What does a left-wing 'rebalancing' look like?

To stand apart from Cameron and Clegg, Miliband needs a radical agenda for the bottom half of the labour market.

With a little over two years until the next general election, Labour's objectives for economic reform feel ambitious yet vague. We can all sign up to the UK being a bit less reliant on the financial sector, but then what? When people on the left talk about rebalancing the economy we need to understand what it is we are trying to rebalance and how - and say loud and clear why the right's version of rebalancing will fail. This weekend Ed Miliband needs to respond to this challenge, when he addresses the Fabian New Year Conference on his plans for 'one nation' Britain.

In his recent speeches, Miliband has used words like "responsibility" and "rebalancing" a lot, but they raise as many questions as they answer. Economic rebalancing can’t be achieved by a few eye-catching attacks on gas companies or millionaires’ pension funds. Reforming capitalism so that it works in everyone’s interests, which is what ‘one nation’ must mean, implies the UK turning its back on its 30-year mid-Atlantic experiment and transforming itself into a mainstream north European economy.

The coalition loves to talk about our unbalanced public finances but every pound borrowed is a pound lent, so Miliband must retort that excessive saving by companies is the flip-side of excessive public borrowing. Labour should promise to unwind the economic forces which have led companies to accumulate and lend so much cash, by creating the conditions in which firms want to investment for the long-term. This will mean sweeping reforms to the financial system whose short-termism has incentivised corporate executives to deliver fast profits not long-term value.

Labour also needs to expose the coalition’s ill-disguised plot to turn temporary deficit reduction into a permanent contraction of the state. Rather than aiming for public spending to return to the long-term average of 42 to 43 per cent of GDP, the chancellor plans a retreat from the crisis peak of 47 per cent all the way down to 39 per cent. Miliband has little choice but to argue for a different path because he believes that public spending matters for economic growth as well as social justice. For George Osborne’s cuts make it almost impossible to spend decent amounts on infrastructure, housing, science or skills.

The coalition has set the terms of the debate so well that retaining public spending at more than 40 pence in the pound has become a controversial proposition. But with Obama-style tax rises for the rich, Labour can set out an alternative route to sound public finances that avoids ’overshooting’ Britain’s historic levels of spending.

This is not to say that Miliband should defend every corner of public spending. This week’s debate on benefit uprating focused on how many working families receive tax credits, but it dwelt little on why so much money needs to be spent topping up low pay in the first place. The truth is that Britain has the highest share of low paid workers in any EU country outside eastern Europe. The Treasury would save huge sums on in-work benefits if rather than having 21 per cent of workers on low pay we could match Finland’s eight per cent.

So Labour’s next priority for a rebalanced economy must be a radical agenda for the bottom half of the labour market. Jobs need to be designed and people trained so work is more productive and secure, which in turn can bring about better pay and progression. This is about culture not just economics, because there are huge disparities in the pay, status and value of low earning  ’women’s work’ across Europe.

Labour must accept that transforming the bottom of the labour market will take change within companies, including laws to require greater worker representation and ownership. And Miliband should say that if industrial sectors and supply-chains do not work together to improve conditions he will impose new public solutions like wage councils or training levies.

But he also needs to promise a decent floor on low pay for everyone. Miliband has talked a lot about the ‘living wage’ but has never quite embraced it as a national policy.  This week he should promise an ‘escalator’ to take the minimum wage, in small increments over five years, to the level of the living wage, which is £7.45 per hour today. Even for the worst hit sector, hospitality, this would mean an increase in payroll costs of a little more than one per cent per year.

If Labour’s ‘one nation’ version of economic rebalancing is to mean anything, it must be about reducing the entrenched inequality of the British labour market and making it harder for employers to make a profit through public subsidies on poverty pay. To stand apart from Cameron and Clegg, this should be Miliband’s first step in a concrete plan to change the character of British capitalism and take the country towards the mainstream of northern European economies.

Andrew Harrop is general secretary of the Fabian Society and editor of the Fabians’ new pamphlet The Great Rebalancing: how to fix the broken economy

"We can all sign up to the UK being a bit less reliant on the financial sector, but then what?" Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

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Theresa May's offer to EU citizens leaves the 3 million with unanswered questions

So many EU citizens, so little time.

Ahead of the Brexit negotiations with the 27 remaining EU countries, the UK government has just published its pledges to EU citizens living in the UK, listing the rights it will guarantee them after Brexit and how it will guarantee them. The headline: all 3 million of the country’s EU citizens will have to apply to a special “settled status” ID card to remain in the UK after it exist the European Union.

After having spent a year in limbo, and in various occasions having been treated by the same UK government as bargaining chips, this offer will leave many EU citizens living in the UK (this journalist included) with more questions than answers.

Indisputably, this is a step forward. But in June 2017 – more than a year since the EU referendum – it is all too little, too late. 

“EU citizens are valued members of their communities here, and we know that UK nationals abroad are viewed in the same way by their host countries.”

These are words the UK’s EU citizens needed to hear a year ago, when they woke up in a country that had just voted Leave, after a referendum campaign that every week felt more focused on immigration.

“EU citizens who came to the UK before the EU Referendum, and before the formal Article 50 process for exiting the EU was triggered, came on the basis that they would be able to settle permanently, if they were able to build a life here. We recognise the need to honour that expectation.”

A year later, after the UK’s Europeans have experienced rising abuse and hate crime, many have left as a result and the ones who chose to stay and apply for permanent residency have seen their applications returned with a letter asking them to “prepare to leave the country”, these words seem dubious at best.

To any EU citizen whose life has been suspended for the past year, this is the very least the British government could offer. It would have sounded a much more sincere offer a year ago.

And it almost happened then: an editorial in the Evening Standard reported last week that Theresa May, then David Cameron’s home secretary, was the reason it didn’t. “Last June, in the days immediately after the referendum, David Cameron wanted to reassure EU citizens they would be allowed to stay,” the editorial reads. “All his Cabinet agreed with that unilateral offer, except his Home Secretary, Mrs May, who insisted on blocking it.” 

"They will need to apply to the Home Office for permission to stay, which will be evidenced through a residence document. This will be a legal requirement but there is also an important practical reason for this. The residence document will enable EU citizens (and their families) living in the UK to demonstrate to third parties (such as employers or providers of public services) that they have permission to continue to live and work legally in the UK."

The government’s offer lacks details in the measures it introduces – namely, how it will implement the registration and allocation of a special ID card for 3 million individuals. This “residence document” will be “a legal requirement” and will “demonstrate to third parties” that EU citizens have “permission to continue to live and work legally in the UK.” It will grant individuals ““settled status” in UK law (indefinite leave to remain pursuant to the Immigration Act 1971)”.

The government has no reliable figure for the EU citizens living in the UK (3 million is an estimation). Even “modernised and kept as smooth as possible”, the administrative procedure may take a while. The Migration Observatory puts the figure at 140 years assuming current procedures are followed; let’s be optimistic and divide by 10, thanks to modernisation. That’s still 14 years, which is an awful lot.

To qualify to receive the settled status, an individual must have been resident in the UK for five years before a specified (although unspecified by the government at this time) date. Those who have not been a continuous UK resident for that long will have to apply for temporary status until they have reached the five years figure, to become eligible to apply for settled status.

That’s an application to be temporarily eligible to apply to be allowed to stay in the UK. Both applications for which the lengths of procedure remain unknown.

Will EU citizens awaiting for their temporary status be able to leave the country before they are registered? Before they have been here five years? How individuals will prove their continuous employment or housing is undisclosed – what about people working freelance? Lodgers? Will proof of housing or employment be enough, or will both be needed?

Among the many other practicalities the government’s offer does not detail is the cost of such a scheme, although it promises to “set fees at a reasonable level” – which means it will definitely not be free to be an EU citizen in the UK (before Brexit, it definitely was.)

And the new ID will replace any previous status held by EU citizens, which means even holders of permanent citizenship will have to reapply.

Remember that 140 years figure? Doesn’t sound so crazy now, does it?

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