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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What Jeremy Corbyn gets right about the single market

Technically, you can be outside the EU but inside the single market. Philosophically, you're still in the EU. 

I’ve been trying to work out what bothers me about the response to Jeremy Corbyn’s interview on the Andrew Marr programme.

What bothers me about Corbyn’s interview is obvious: the use of the phrase “wholesale importation” to describe people coming from Eastern Europe to the United Kingdom makes them sound like boxes of sugar rather than people. Adding to that, by suggesting that this “importation” had “destroy[ed] conditions”, rather than laying the blame on Britain’s under-enforced and under-regulated labour market, his words were more appropriate to a politician who believes that immigrants are objects to be scapegoated, not people to be served. (Though perhaps that is appropriate for the leader of the Labour Party if recent history is any guide.)

But I’m bothered, too, by the reaction to another part of his interview, in which the Labour leader said that Britain must leave the single market as it leaves the European Union. The response to this, which is technically correct, has been to attack Corbyn as Liechtenstein, Switzerland, Norway and Iceland are members of the single market but not the European Union.

In my view, leaving the single market will make Britain poorer in the short and long term, will immediately render much of Labour’s 2017 manifesto moot and will, in the long run, be a far bigger victory for right-wing politics than any mere election. Corbyn’s view, that the benefits of freeing a British government from the rules of the single market will outweigh the costs, doesn’t seem very likely to me. So why do I feel so uneasy about the claim that you can be a member of the single market and not the European Union?

I think it’s because the difficult truth is that these countries are, de facto, in the European Union in any meaningful sense. By any estimation, the three pillars of Britain’s “Out” vote were, firstly, control over Britain’s borders, aka the end of the free movement of people, secondly, more money for the public realm aka £350m a week for the NHS, and thirdly control over Britain’s own laws. It’s hard to see how, if the United Kingdom continues to be subject to the free movement of people, continues to pay large sums towards the European Union, and continues to have its laws set elsewhere, we have “honoured the referendum result”.

None of which changes my view that leaving the single market would be a catastrophe for the United Kingdom. But retaining Britain’s single market membership starts with making the argument for single market membership, not hiding behind rhetorical tricks about whether or not single market membership was on the ballot last June, when it quite clearly was. 

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.