After his recent bravura performance at IPPR, Thomas Piketty, the intellectual of the moment, appeared at parliament today in conversation with Ed Miliband’s senior strategist Stewart Wood. The Labour peer and shadow cabinet office minister was one of the first in Westminster to recognise the significance of Piketty’s Capital in the Twenty-First Century, tweeting before its British release: “Thomas Piketty’s book predicting ever-growing inequality is making waves. We need to start debating how to respond.” Today, in the cavernous surroundings of The Gladstone Room (where the PLP and the 1922 Committee hold their weekly meetings), they did just that.
The most politically notable moment of the event, hosted by Class, came when Piketty warned Labour that its planned top tax rate of 50 per cent was “too low” to significantly reduce inequality (caused, as he meticulously documents, by the tendency of the rate of return on capital to outstrip the average growth rate of the economy). The Frenchman rightly noted the absence of evidence to suggest that higher tax rates than this on “very high incomes” (defined as £1m+) will “damage the economy”. Although polls show that most voters support a 60p rate, it is a reminder of Labour’s self-imposed political limits that there is no prospect of Miliband supporting it (even the 50p rate has been cautiously defended as a temporary deficit reduction measure).
Piketty was warmer about the party’s backing for a mansion tax on properties worth more than £2m, but urged it to go much further in taxing wealth in general. One of the justifications he offered was that this would enable governments to reduce taxes on the poor and allow them to begin accumulating capital.
He emphasised, however, that redistribution was a necessary but insufficient solution to inequality. As well as taxing the wealthy more and the poorest less, the state must also engage in “predistribution”: stopping inequality before it starts. On the day that the Lib Dems pledged to ring-fence the education budget in future coalitions, he championed investment in education and skills, and a higher minimum wage as the key to a more equal society.
While Piketty is often assumed to be a revolutionary socialist (partly owing to his book’s conscious allusion to Marx), his comments today were a reminder that he is actually a mainstream social democrat. He noted several times that he has “no problem with inequality per se” and argued that “up to a certain point, it can be useful for innovation and for growth”. It was “extreme inequality” that was indefensible, he said.
Challenged by my former NS colleague Mehdi Hasan on whether Labour’s programme was truly bold enough to respond to Piketty’s diagnosis, Wood emphasised the party’s commitment to both redistribution and predistribution and said he was keen to encourage “debate” among all parts of the political spectrum on how to do more.
Among the wonkish discussion, some light relief was supplied by Len McCluskey. In his question to Wood, the Unite general secretary mistakenly referred to him as an Arsenal fan. The lifelong Liverpool supporter, whose official title is Lord Wood of Anfield and whose Twitter avatar is the club’s badge, looked appropriately mortified.
P.S. I interviewed Wood earlier today on Piketty’s work and will be posting the conversation on The Staggers later this week.