Ed Miliband returns to Manchester, the scene of his victory in the Labour leadership election two years ago, in a stronger position than many of
his detractors and even his supporters expected. After the bitterness and factionalism of the New Labour years, he has succeeded in uniting the party and faces no threats to his leadership. Having received just 29 per cent of the vote in the 2010 general election, its second-worst result since 1918, Labour now regularly polls between 40 and 45 per cent, with a double-digit lead over the Conservatives (it needs a lead of just 1 per cent on a uniform swing to win a majority in 2015). Mr Miliband’s personal ratings remain below those of David Cameron, but at a time when the haughty disregard for the police by the Tory Chief Whip, Andrew Mitchell, has confirmed voters’ worst suspicions about the snobberies of Mr Cameron’s inner circle, his essential decency and integrity are likely to earn him the growing respect of the public.
The Labour leader’s stated ambition is not just to return his party to power but to remake capitalism in an age of austerity. The financial crisis and years of declining living standards (11 million people have had no rise in their real incomes since 2003) are, for him, symptoms of an economic model that is not merely defective but broken. In his essay on page 38, Jon Cruddas, the MP leading Labour’s policy review, offers an intellectual route map for a new era.
There is much to commend in his analysis. He is right to argue that, in view of the fiscal constraints a Labour government will face (based on the most recent forecasts, it will inherit a deficit of £96bn), it will not be able to rely on redistributive tax credits to narrow inequality. The old days of tax and spend are over. Instead, Labour must place a greater emphasis on that vexed word, “predistribution”, and, through policies such as a living wage, seek to ensure fairer outcomes before the state intervenes. Although casually dismissed by sections of both left and right, this approach has succeeded in other developed countries, notably Japan, where inequality has fallen as pre-tax incomes have risen. Similarly promising is Mr Cruddas’s patriotic call to “rebuild Britain”: Labour should be a party of change but also of preservation; of radicalism and conservatism. It should defend and harness support for existing national institutions such as the NHS and the BBC while building support for new ones such as a British Investment Bank, which would have powers to borrow and spend.
Mr Cruddas calls for “a national system of high-quality childcare”, “new institutions of social care” and “access to vocational education and skills training”, all of which will need to be paid for. But he does not mention the urgent need for tax reform. Labour should follow the lead of the Liberal Democrats and explore ways of increasing taxes on unearned wealth, such as land and property, and at the same time, where possible, reducing those on earned income and consumption (VAT, at 20 per cent, remains too high in a recession). Wealth taxes are harder to avoid than those on income, and benefit the economy by shifting investment away from unproductive assets and towards wealth-generating industries. With tax-avoidance schemes under ever greater scrutiny, Labour should also capture the popular mood and call for all tax returns to be made public, as in Norway, Finland and Sweden. A culture of greater transparency can “nudge” people into changing their behaviour and attitudes.
In a series of speeches, Mr Miliband has outlined the concepts – “the squeezed middle”, “responsible capitalism”, “predistribution” – that will shape policy formation in the years ahead, but he has yet to define these themes in terms accessible to the voters. Party activists complain that they are being sent “naked on to the doorstep”.
Margaret Thatcher, whose rise to power Mr Miliband’s team has studied closely, built popular support for her programme of bold reform through emblematic policies such as the right to buy council houses and confronting the power of the trade unions. At the Labour party conference in Manchester, Mr Miliband must begin the process of outlining his own, equivalent policies in ways that voters can understand. As Vernon Bogdanor writes on page 44, south of the Severn-Wash line, outside London, Labour holds just ten of 197 seats. How does the party propose to win back some of these as well as appeal to the aspirational voters who supported Tony Blair but abandoned the party in 2010?
Through effective opposition, Mr Miliband has convinced voters of the flaws of the government. He must now convince them that it is right to support Labour.