Ed Miliband speaks to supporters at Redbridge on May 1, 2014. Photograph: Getty Images.
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Miliband reimagines welfare for an era of austerity

With the old tax and spend model broken, Labour has been forced to be radical.

What's the point of Labour when there's less money around? It is the question that has stalked the party throughout this parliament. In his speech tomorrow to mark the publication of IPPR's Condition of Britain report, Ed Miliband will attempt to provide the answer. The 280-page report, which features 30 policy recommendations, covers ever aspect of social policy from the cradle to the grave, but Miliband's address will focus on the implications for the benefits system.

In an age of fiscal famine, the tax and spend policies of the New Labour era are no longer an option. To achieve progressive outcomes, the party will need to rewire the state without spending more money. In framing this choice, Labour's policy review head Jon Cruddas cites the “Burning Platform” email sent to Nokia staff by the company’s then chief executive Stephen Elop in 2011. Elop wrote of a man who woke to find the oil platform he was sleeping on engulfed in flames. In desperation, he jumped 30 metres into the freezing waters below. After his rescue, he reflected how the fire caused him to act in a radically different way. Faced with the “burning platform” of a £107bn budget deficit, Labour, too, is changing how it behaves.

Even were this a time of plenty, a trajectory of ever-higher welfare expenditure would not be possible. Public hostility to the social security system has risen inexorably in recent decades and shows little sign of receding. No party in the business of politics can afford to deny this reality.

The three principles around which Miliband will seek to remodel the welfare state are supporting work, not worklessness; rewarding contribution; and shifting spending from benefits to services. A series of emblematic policies will be announced tomorrow to flesh out this vision.

The first is the abolition of out-of-work benefits, most notably Jobseeker's Allowance (JSA), for 18-21-year-olds without Level 3 qualifications (such as A-levels) and its replacement by a new means-tested youth allowance (based on parental income) conditional on them being in training. For too long, as Labour has recognised, the system has created perverse incentives for the young to subsist on welfare, rather than seek to better themselves. Those who shun work automatically receive benefits but those who spend more than 16 hours a week in training or further education are denied any support. Along the way, tens of thousands cycle between poor work or no work without ever acquiring the skills they need for a fulfilling career. In an age of constraint, it is no longer acceptable for the taxpayer to pick up the tab.

As one Labour strategist told me: "The 1945 welfare state was built around certain features of Britain, which are no longer there ... The problem of the quality of jobs wasn’t there in the same way, the premium on skills wasn’t there in the same way and public attitudes towards welfare were totally different. We’ve got to adjust to all of those things, it’s not moving to the right, or the left, or any of those things. It's making the welfare state legitimate again."

The new youth allowance would end the injustice of the "16 hour rule" and offer those in further education (part of what Miliband calls the "forgotten 50 per cent") the same support provided to those in higher education. Those who refuse to take up the offer of training would lose their benefits; IPPR estimates that the policy would result in a net saving of £65m.

Some on the left will bridle at the conditionality, but Labour sources emphasise that exemptions would be made. Those who already have the qualifications needed to secure adequate work, those with children under one, those from troubled family backgrounds and those with severe disabilities would all be protected.

The second signature policy is to reward contribution by introducing a higher rate of JSA for those who have paid in the most. Policymakers have devoted much attention to ending the "something-for-nothing" problem - that too many who get out don't pay in - but they have had less to say about the "nothing-for-something" problem: that too many who pay in don't get out. Those who have contributed taxes for decades find that they are left with the paltry sum of £72.40 a week to soften the hammer blow of unemployment. That they are offered no more than someone who has worked for just two years is one of the causes of the profound public disillusionment with the system.

In recognition of this unfairness, Miliband will pledge to reaffirm the original Beveridgean contributory principle by introducing a higher JSA rate of up to £100. Again, this would not involve spending more money. The policy would be funded by extending the qualifying period for contributory JSA from two years to five. Aside from the moral justification for the policy, Labour strategists view a strengthened contributory principle as a powerful shield against those who want to take a scythe to the welfare state.

The third and final policy change concerns housing benefit. Since the 1980s, the payment has grown to become one of the biggest components of the welfare budget as extortionate rents and inadequate wages have forced ever more to rely on state support to remain in their homes. Labour would seek to reverse this trend by expanding housing supply (to at least 200,000 new homes a year by 2020) and would empower local councils to shift funding from benefits to bricks and mortar. Local authorities including Lewisham, Liverpool, Leeds, Manchester, Sheffield and Birmingham have told the party that they could negotiate lower rents with landlords through measures such as bulk purchasing. At present, any savings would go straight to Whitehall, but Labour would allow local authorities to keep the proceeds and invest them in affordable homes - the only long-term solution to the bloated housing benefit bill.

In recent months, many have written of the divide betwen those in Labour who want a "radical" offer, and those more concerned with a "credible" one. But the fiscal crisis means that the most credible policies are also the most radical ones. The route to social democracy now lies through big reforms, not big spending. There is much further for Labour to go, but Miliband's speech is an important nudge in this direction.

George Eaton is political editor of the New Statesman.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.