Ed Miliband speaks at the Scottish Labour conference last Friday in Perth. Photograph: Getty Images.
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Miliband needs to renew his commitment to "people power"

The Budget has revealed how vulnerable Labour is to the charge that it doesn't really trust voters to manage their affairs.

The most potent line in last week’s Budget turns out to have been George Osborne’s assertion that "people who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances."

This projection of pension reforms as an exercise in handing control back to individuals – "trusting the people" – made it impossible for Labour to reject them. Osborne invited Ed Miliband and Ed Balls to declare that pensioners and people approaching retirement ought to stick with the despised annuities market on the grounds, presumably, that dozy oldsters might otherwise blow their savings on sweets.

The leader of the opposition and the shadow chancellor know a deadly dividing line when they see one (not in vain did they study politics at the feet of Gordon Brown). They chose, after a couple of days’ deliberation, not to wind up on the wrong side this time.

There are plenty of reasons to be suspicious of the new pension proposals. Will Hutton’s column in yesterday’s Observer has a good précis of them. But those are mostly technical and theoretical arguments about distributional impact (rich people using their pensions as investment vehicles that entrench generational inequality) and the implicit bargain between state and citizen written into a tax-friendly pension regime (government acting on behalf of society as a whole has helped grow this pot of money and is thus entitled to some kind of opinion on what happens to it).

That all falls under Ronald Reagan’s old maxim "if you’re explaining, you’re losing." The much simpler and politically irresistible riposte goes "it’s my money, let me spend it."

It has been a disorienting few days for the opposition. MPs and shadow ministers have tried to work out whether they have suffered a minor embarrassment or a significant setback. A couple of opinion polls out yesterday appeared to confirm that the gap is narrowing. Of course, one day’s polls don’t prove anything but taken in concert with Miliband’s pedestrian response to the Budget in parliament, they seem to tell a story of lost opposition momentum.

Advertising their frustration, a group of prominent figures from the self-styled "Progressive Community" (otherwise known as the left) have today published a letter in the Guardian calling on Miliband to adopt a more radical programme. The principles they espouse are again pretty abstract. They call for institutions to be more "accountable to stakeholders" and for more "co-production of public services" through which it is to be hoped will flow greater "empowerment" of citizens.

This is hardly the language of the barricades but that is partly the point. The authors of the letter have calibrated their plea in terms that cannot easily be portrayed as aggressively disloyal to the current Labour  leadership. This isn’t an attack. It is –  believe it or not – better understood as an offer of support by people who think Miliband is capable of being quite a radical figure, and is most successful when he takes risks, but fear his ambitions are being undermined by unnecessary caution. It is an effort to strengthen the hand of the "good" Miliband who is bold and visionary over the "bad" Miliband who is hesitant and indecisive.

What is notable about this intervention is that it probes the same weakness in Labour’s position that was exposed by Osborne’s pension gambit. Each in different ways challenges the opposition to grasp that the best response to failed markets is not necessarily a return to central state power and Whitehall regulation. Whether the cause is the annuities rip-off, synchronized price gouging by the Big Six energy companies, eye-watering train fares or any other of the many services and utilities in Britain that feel, from a consumer’s point of view, like a vast scam - public anger is everywhere. Yet that doesn’t mean enraged citizens have renewed confidence in politicians to fix their problems. Miliband scored a palpable hit last autumn with his promise to cap energy bills but that doesn’t appear to have turned into a sustained eagerness for a Labour government. The Tories say their polling shows many people don’t think Miliband would succeed in getting prices down.

There is a conceptual weakness in Labour’s current pitch to serve as the champion of oppressed consumers, which is that the party doesn’t yet have a clear  explanation for how it intends to exert leverage over private sector companies, many of which operate in global markets. Wholesale nationalization doesn’t appear to be on the menu. Price controls, as threatened against the energy companies, are acknowledged to be only a temporary measure, in place while broader market reforms are enacted. And there is limited mileage in the cap as a tool of opposition. Labour has to be careful not to sounds as if it is running from sector to sector in a disorderly game of price rise whack-a-mole.

The traditional method by which the left has fought back when economic power has been unjustly wielded is to organise labour against unruly capital. That isn’t a template that is easily applied to workers and consumers who aren’t members of a trade union and whose beef is with service providers, not employers. Customers who are angry with their rail, energy or phone companies need something like the collective bargaining power of unions when their individual market choices are constrained or don’t appear to make any difference.

There is an interesting experiment in consumer collectivism under way in the The Big Deal  – an organization that invites people to pool their custom in the hope of extracting bargain rates from energy suppliers. The theory is that switching between providers has a pitiful impact on the companies at an individual level, but when enough potential customers are aggregated together they become unignorable. The Big Deal and the concept of quasi-unionized consumers are in their infancy but they suggest there is political potential in refashioning the left’s traditional techniques of collective action in the context of a 21st Century market economy. (And if the left doesn’t get into that space, there is potential there also for an enlightened, moderate conservatism that is sensitive to public frustration with unaccountable corporate power. It is worth noting that one of the Big Deal’s co-founders is Henry de Zoete, a former advisor to Michael Gove.)

As I’ve written before, Labour’s ambitions to get into the politics of consumer power are also limited by reluctance to engage for any sustained period of time with the idea that citizens are also consumers of government. Miliband appeared to address the deficiency earlier this year in his Hugo Young lecture when he pledged to tackle the failings of an "unresponsive state" through reforms that would generate new "people-powered public services." He hasn’t subsequently returned to the theme. This naturally arouses the suspicion that the Labour leader’s engagement with the idea of devolving power and tackling "vested interests" in the public realm as well as the private sector was cosmetic.

Shadow cabinet ministers and Labour MPs who were excited by the direction indicated by the Hugo Young lecture admitted at the time that Miliband would need constant encouragement for any reforming zeal to be maintained. That pressure is now focused on making sure the manifesto includes strong and irreversible commitments to an agenda of devolving power both from central to local government and from state agencies that provide services to citizens that use them.

This is more than an institutional tussle over the content of the party’s pre-election programme. Although the debate is mostly conducted in abstractions and played out in think tank seminars, it describes a fundamental political and ideological choice for the party. Can Labour embrace the idea of trusting the people – not just the rhetoric, but the underlying concept?

Given the gruesome fiscal outlook for the next parliament, Miliband cannot go into the next election promising to line voters’ pockets with cash. It will be hard enough credibly promising to invest in the kind of services voters expect a Labour government to cherish. Meanwhile, the Tories will cast the opposition as a gang of bossy bureaucrats, hell-bent on confiscating as much of your money as they can because, deep down, they think they have a better idea of how it should be spent than you do. That is a dangerous proposition, especially when combined with the relentless attack on Labour’s pre-2010 spending record that has already proved so effective. 

One way for Miliband to avoid that trap is to revive and develop his pledge to make Labour the party of radical devolution and revived local democracy. He needs to keep talking about People Power. Money may be tight, but control is one thing the opposition can promise to give away if it gets into government. It can hardly afford not to.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR