How Labour can give real meaning to predistribution

If the party is to offer a positive account of how it would govern in tough times, it must rigorously define future spending priorities.

Whatever the modern obsession with personality and presentation, ideas still have the potential to make the weather in British politics. 'Predistribution' is hardly the punchiest term invented to describe a big concept. But it is the closest thing that Ed Miliband's Labour has to a coherent governing strategy.

The strength of the idea, coming hot on the heels of the Labour leader's landmark welfare speech last Thursday, is two-fold. Predistribution acknowledges what went wrong under the previous government, emphasising that Labour would be different next time, eschewing the Byzantine tax credit economy in favour of active measures to make the labour market fairer, while increasing the supply of secure high quality jobs. Secondly, predistribution points to how a Labour government would operate with less money around, using a richer set of levers to affect change from tougher regulation of labour and product markets, to legislation that transforms the culture of corporate governance and short-termism in British business. The agenda underlines the argument that higher public expenditure is not the only route to a fairer, more equal society.

However, even the most ardent Labour loyalist would concede the party has not made sufficient progress in fleshing out a substantive predistribution project. The policy review has sought to carve out fresh territory, stimulating much-needed debate about rebuilding solidarity and the 'limits to markets' (as espoused by Michael Sandel). But the clock is ticking; many in the party are beginning to ask: where is the substance underpinning Labour's programme?

Both the Balls and Miliband speeches have bought Labour desperately needed economic and political credibility. But they were essentially about dumping negatives: drawing a line under Labour's reputation for economic profligacy and a perceived failure to reform the welfare state in the Blair and Brown years. What the party urgently needs is a positive account of how it would govern in tough times. Labour cannot hope to secure a substantive majority in 2015 unless it sets out a credible, forward-looking programme. The predistribution idea has to make much greater impact with the public. 

The challenge for Labour is that while the concept of predistribution appears sufficiently nebulous to appeal to all sides of the political spectrum, this agenda, if it is to mean anything, necessitates facing up to hard choices. Substantive predistribution requires tough reforms that raise difficult questions for the party. Intriguingly, this is the case whether it is 'Blairite modernisers', or the more traditional elements of Labour's left. The challenge is to step beyond outdated ideological categories as Miliband embarks on the task of reshaping British social democracy for an era of post-crisis austerity.

For one, predistribution will not succeed unless the bargaining position of low-paid workers can be strengthened. This will require a very different balance to be struck between regulation and flexibility in the labour market, including a higher 'living' minimum wage with scope for sectoral pay bargaining to prevent under-cutting. It will require stronger collective organisation too, with scope for 'new unions' to organise the lowest paid workers. New Labour's claim that 'any job is a good job' is no longer tenable if the aim is to make the distribution of initial market outcomes fairer. 

Neither will predistribution be credible unless Labour can advance a bold education reform strategy for Britain. In the UK, raising the economy onto a high wage, high skill, high productivity trajectory entails sustained investment in training and human capital. The party has been undermined on education, allowing Michael Gove to acquire ownership of the academy schools programme popularised by Tony Blair. Free schools have serious limitations, creating an uncoordinated market and an admissions free for all, but Labour needs its own proposals to ratchet up performance in the lowest performing areas. Further education colleges need bold reform to raise quality; apprenticeships should be guaranteed for young people who achieve the requisite qualifications in English and Maths; access to university, regardless of social background, must be further expanded. 

Finally, an effective strategy of predistribution will require Labour to resolve major debates about the balance between targeting and universalism in the welfare state. The old model of redistributive welfare relied heavily on means-testing, underlined by the structure of tax credits in an effort to subsidise low pay at the lower end of the labour market. The contributory system which Labour favours would have real strengths in underpinning support for the welfare state, but the costs of transitioning to a new system would be significant. Many of the benefit cuts introduced by the coalition cannot be reversed by an incoming Labour government: the price of the contributory principle will be declining benefits for the workless poor.

As such, a credible predistribution agenda will require Labour to rigorously define future spending priorities. This is not simply a question of which departmental budget to trim, or which benefit cuts to reverse or accept. This is a bigger existential question about whether Labour's strategic purpose is to be a party of distribution or a party of production. To be a governing force committed to an underlying shift in the distribution of wealth and power in British society, Labour will need to prioritise social investment in the early years and childcare, family support, education, skills, knowledge, innovation, human capital, and industrial policy. These are the most viable policies for 'predistributing' market outcomes among those on lower and middle incomes, as north European countries such as Sweden, Denmark and the Netherlands demonstrate. But the party should be under no illusions: if such policies are to be advanced, a future Labour government will have to examine every line of spending on health, pensions, policing, criminal justice, and defence. 

There will inevitably be painful decisions for a party deeply committed to social justice and fairness. But they have to be addressed head on if Labour is to be a credible party of government in tough times. 

Patrick Diamond is a senior research fellow at Policy Network

Ed Miliband walks through Hyde Park after addressing TUC members at the end of a march in protest against the government's austerity measures on October 20, 2012. Photograph: Getty Images.
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.