Ed Balls can't ignore the growing ranks of people working for themselves. Photo: Getty
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Labour need to address the self-employment problem

Of all workers in the UK, over one in every seven is self-employed. Labour should account for this in its economic proposals.

In the early years of the coalition government, Labour had an easy argument to trot out. The route to economic recovery was painfully slow, and all the talk was of double dips and possible triple dips. When the recovery (and some happy revisions to the economic statistics) finally happened, Labour had to start talking about living standards instead. This was a risky strategy – there was a fair chance that the cost of living problem could have evaporated by now.

Unluckily for the rest for us, but luckily for Labour strategists, the argument still holds. The recovery hasn’t yet been strong enough to raise GDP per capita to what it was before the crisis. Wages grew by 0.7 per cent in the past year. Over the same period, prices rose by over double that – 1.6 per cent. Prices have been going up faster than regular wages in every quarter of every year since 2009. Around 1 in 5 working people are in low pay. Labour say we can’t carry on like this.

This has felt like safe territory for Labour – a policy without a big spending commitment price tag. Ed Balls has already talked about increasing the minimum wage, ending zero-hours contracts, and encouraging more firms to pay a Living Wage – a wage level that allows workers to meet basic living costs. The logical next step now, eight months before the election, is to set out some specifics. Ahead of the start of the Labour party conference this week, Ed Miliband has been busily doing interviews talking about a new pledge to raise the minimum wage to £8 per hour by 2020.

The lack of growth in wages is a real one, and needs to be addressed. But – should Labour find itself in government in 2015 – it will need to tackle the underlying cause, and not the superficial symptom. Getting strong, sustainable growth from businesses will mean that businesses will be able to afford to pay more. That will take investment in skills, infrastructure and innovation.

But there is an even bigger problem than this. The debate about policies like the minimum wage seem to take place in a nice neat world where most people neatly fit into a box labelled “employee”, and most firms are of a reasonable size. It’s neat, because it means that government can help workers by leaning on employers to improve conditions or raise wages – whether by regulation or through tax incentives. But it is becoming harder and harder to believe that this reflects the reality of the new world we are in.

Of all workers in the UK, over one in every seven is self-employed. Among men in work, the figure is even higher – almost one in five men in work are self-employed. In the last year, the numbers in self-employment grew around five times faster compared to the numbers working as employees.

These people will not be touched by increases in the minimum wage – the minimum wage does not apply to the self-employed. And if the minimum wage rises at a rate that businesses cannot afford, we may find that it isn’t the unemployment figures that go up: more people may effectively be pushed into working at what is effectively a lower hourly wage rate in self-employment instead. Almost a quarter of those living in in-work poverty are in households where at least one person is self-employed. To ignore these people would leave a gaping hole in any strategy for tackling low pay.

This is not to say that self-employment should be discouraged. Among the ranks of the self-employed are many success stories. For some, it may well be a route to greater freedom and higher income, and that is a good thing. More self-employment may well help create a more flexible, productive economy. But if Labour is serious about tackling low pay and increasing economic growth, it can’t carry on ignoring the growing ranks of people working for themselves. Politicians need to reflect the new reality of the working population. 

Nida Broughton is chief economist at the Social Market Foundation

Nida Broughton is Senior Economist at the Social Market Foundation.

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Tony Blair might be a toxic figure - but his influence endures

Politicians at home and abroad are borrowing from the former prime minister's playbook. 

On 24 May at Methodist Central Hall, Westminster, a short distance from where he once governed, Tony Blair resurfaced for a public discussion. Having arrived on an overnight flight, he looked drawn and puffy-eyed but soon warmed to his theme: a robust defence of liberal globalisation. He admitted, however, to bafflement at recent events in the world. "I thought I was pretty good at politics. But I look at politics today and I’m not sure I understand it."

Blair lost power in the summer of 2007. In the ensuing nine years, he lost reputation. His business ventures and alliances with autocrats have made him a pariah among both the public and his party. A YouGov poll published last year found that 61 per cent of voters regarded Blair as an electoral liability, while just 14 per cent viewed him as an asset. In contrast, John Major, whom he defeated by a landslide in 1997, had a neutral net rating of zero. It is ever harder to recall that Blair won not one general election (he is the only living Labour leader to have done so) but three.

His standing is likely to diminish further when the Iraq inquiry report is published on 6 July. Advance leaks to the Sunday Times suggest that he will be censured for allegedly guaranteeing British military support to the US a year before the invasion. Few minds on either side will be changed by the 2.6 million-word document. Yet its publication will help enshrine Iraq as the defining feature of a legacy that also includes the minimum wage, tax credits, Sure Start, devolution and civil partnerships.

Former leaders can ordinarily rely on their parties to act as a last line of defence. In Blair’s case, however, much of the greatest opprobrium comes from his own side. Jeremy Corbyn inclines to the view that Iraq was not merely a blunder but a crime. In last year’s Labour leadership election, Liz Kendall, the most Blair-esque candidate, was rewarded with 4.5 per cent of the vote. The former prime minister’s imprimatur has become the political equivalent of the black spot.

Yet outside of the Labour leadership, Blairism endures in notable and often surprising forms. Sadiq Khan won the party’s London mayoral selection by running to the left of Tessa Jowell, one of Tony Blair’s closest allies. But his successful campaign against Zac Goldsmith drew lessons from Blair’s election triumphs. Khan relentlessly presented himself as “pro-business” and reached out beyond Labour’s core vote. After his victory, he was liberated to use the B-word, contrasting what “Tony Blair did [in opposition]” with Corbyn’s approach.

In their defence of the UK’s EU membership, David Cameron and George Osborne have deployed arguments once advanced by New Labour. The strategically minded Chancellor has forged an unlikely friendship with his former nemesis Peter Mandelson. In the domestic sphere, through equal marriage, the National Living Wage and the 0.7 per cent overseas aid target, the Conservatives have built on, rather than dismantled, significant Labour achievements."They just swallowed the entire manual," Mandelson declared at a recent King’s College seminar. "They didn’t just read the executive summary, they are following the whole thing to the letter."

Among SNP supporters, "Blairite" is the pejorative of choice. But the parallels between their party and New Labour are more suggestive than they would wish. Like Blair, Alex Salmond and Nicola Sturgeon have avoided income tax rises in order to retain the support of middle-class Scottish conservatives. In a speech last August on education, Sturgeon echoed the Blairite mantra that "what matters is what works".

Beyond British shores, political leaders are similarly inspired by Blair – and less reticent about acknowledging as much. Matteo Renzi, the 41-year-old centre-left Italian prime minister, is a long-standing admirer. "I adore one of his sayings,” he remarked in 2013. “I love all the traditions of my party, except one: that of losing elections."

In France, the reform-minded prime minister, Manuel Valls, and the minister of economy, Emmanuel Macron, are also self-described Blairites. Macron, who in April launched his own political movement, En Marche!, will shortly decide whether to challenge for the presidency next year. When he was compared to Blair by the TV presenter Andrew Marr, his response reflected the former prime minister’s diminished domestic reputation: “I don’t know if, in your mouth, that is a promise or a threat.”

The continuing attraction of Blair’s “third way” to European politicians reflects the failure of the project’s social-democratic critics to construct an alternative. Those who have sought to do so have struggled both in office (François Hollande) and out of it (Ed Miliband). The left is increasingly polarised between reformers and radicals (Corbyn, Syriza, Podemos), with those in between straining for relevance.

Despite his long absences from Britain, Blair’s friends say that he remains immersed in the intricacies of Labour politics. He has privately warned MPs that any attempt to keep Corbyn off the ballot in the event of a leadership challenge would be overruled by the National Executive Committee. At Methodist Central Hall, he said of Corbyn’s supporters: “It’s clear they can take over a political party. What’s not clear to me is whether they can take over a country.”

It was Blair’s insufficient devotion to the former task that enabled the revival of the left. As Alastair Campbell recently acknowledged: “We failed to develop talent, failed to cement organisational and cultural change in the party and failed to secure our legacy.” Rather than effecting a permanent realignment, as the right of the party hoped and the left feared, New Labour failed to outlive its creators.

It instead endures in a fragmented form as politicians at home and abroad co-opt its defining features: its pro-business pragmatism, its big-tent electoralism, its presentational nous. Some of Corbyn’s ­allies privately fear that Labour will one day re-embrace Blairism. But its new adherents would never dare to use that name.

George Eaton is political editor of the New Statesman.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad