Indiscreet comments from warring cabinet ministers have dominated our political debate for the last week. But buried under the unseemly row between Michael Gove and Theresa May was another cabinet-level disclosure which was just as significant.
The previous Conservative chancellor Ken Clarke’s public admission that most people have “not yet felt any sense of recovery” blew apart the complacent claims of the current Chancellor that the economy is fixed and there’s no cost-of-living crisis. As the election results last month showed, Ken was right. Growing numbers of people do not think the economy or mainstream politics is working for them right now. In the face of stagnating living standards and growing insecurity, they want real but credible change, not more of the same.
This is a challenge for all mainstream parties. And unlike the Tories, it is a challenge that Labour is determined to rise to. Because, despite Ken Clarke’s candour, it’s clear that David Cameron and George Osborne still don’t think there is a problem to solve. The Conservatives seem to believe that simply repeating the line that their policies are working, because GDP growth has finally returned, will see them home and dry.
Put aside the fact their plan has so far totally failed to deliver what it promised – the books balanced by 2015, sustained rises in living standards, the AAA credit rating maintained, a re-balanced economy, and all being in this together. Looking forward, the challenge for all mainstream parties is that working people just don’t believe they will share in rising prosperity, whether that is affording a home, securing a better paid job or saving for a decent pension.
And they have good reason to be sceptical. The stagnation in real wage growth is not just a problem of the last few years. It started in Britain over a decade ago as rapid technological change and global trade pressures put the squeeze on middle and lower income households. And the UK is not alone – real living standards for middle and low income households have stagnated across the developed world.
While low-wage and unskilled employment has grown, research shows that traditionally middle-income jobs, in manufacturing and services, have fallen as a share of total employment across all OECD countries. And as the recent publicity around Google’s driverless car shows, labour-substituting technological change is, if anything, set to accelerate further.
The hard truth is that there is no quick fix – we have to earn our way to rising living standards for all. And we can’t turn our face against change and the world. Britain has always succeeded, and can only succeed in the future, as an open and internationalist and outward-facing trading nation, with enterprise, risk and innovation valued and rewarded.
But nor can we succeed through a race to the bottom – with British companies simply trying to compete on cost as people see their job security eroded and living standards decline. We can only succeed through a race to the top – backing British innovation and investing in the skills of all as we make our economy more dynamic and competitive, and earn our way to higher living standards for everyone.
That is why we need a real long-term economic plan to make the reforms needed now to ensure we have a strong and sustained recovery that is built to last and which delivers rising living standards for the many, not just a few at the top. First, on housing, we need to match rising demand for housing with rising supply. The next Labour government will get at least 200,000 new homes built a year by the end of the Parliament.
We need to commit to a new generation of new towns and give real Treasury guarantees to get them off the ground. We should be giving towns a right to grow and ensuring land with planning permission is built on quickly. We need to match a reformed Help to Buy scheme with a Help to Build scheme for small and medium-sized builders. And Sir Michael Lyons’ review for Labour will soon set out more of the reforms that need to be made.
If we fail to act now, not only will the aspirational majority who want to own their own homes find it ever harder to get on the ladder, but an imbalanced housing market also poses risks to the wider economy. A premature rise in interest rates to rein in the housing market in some parts of the country will have an impact on millions of families and businesses across the UK.
After warnings from the Bank of England and the IMF, the Chancellor will belatedly claim today that the government is acting. But when housebuilding under this government has reached the lowest peacetime levels since the 1920s, we need bold action now, not tinkering that is too little too late.
Second, we need more good jobs and to make work pay. That is why we will introduce a new gold standard vocational qualification for 18-year-olds and give control over apprenticeship spending to business to ensure every young person gets the skills they need. We will repeat the tax on bank bonuses to ensure every young person out of work for more than a year has a paid starter-job. And we will task the Low Pay Commission with ensuring we restore the lost value of the minimum wage, introduce incentives for employers to pay the non-statutory living wage and expand free childcare for working parents.
Third, we need to end the dither and delay not just on housing but our wider infrastructure. Sir John Armitt has set out a clear blueprint plan for an independent infrastructure commission which will make it harder for future governments to kick vital decisions, like the need to expand aviation capacity, into the long grass.
Fourth, we need to reform uncompetitive markets that are not working for consumers or businesses alike. In energy we have seen again this week why we need Ed Miliband’s reforms when falling wholesale costs have not been passed on to customers. In banking, net lending to businesses is down by £122bn under this Chancellor. Labour will ask the Competition and Markets Authority to report on how we can increase competition with new challenger banks, establish a proper Business Investment Bank and cut business rates for 1.5 million business properties.
Finally, we need reforms in Europe – not an arbitrary referendum for reasons of internal Tory party management which is creating huge business uncertainty – and to make sure immigration is fair and managed with strong borders and tough controls. That means being properly engaged in Europe, not with one foot in the exit door. And it means reforms to ensure that EU citizens seeking work here contribute to our economy and society.
As I argued four years ago, we should extend the period of time that people from new member states have to wait before being able to come to the United Kingdom to look for work. We will work to stop the payment of child benefits to those not resident in this country, consult on changing the rules on deporting someone who receives a custodial sentence shortly after arriving in the UK, and have called on the government to double the time that an EU migrant has to wait before being able to claim the basic jobseeker’s allowance.
This is Labour’s agenda for economic change. It stands in marked contrast to Tory ministers burying their heads in the sand, repeating a hollow mantra and hoping that more of the same will restore public trust. We will only sustain support for an open and dynamic market economy if we show that it can work for all, and not just some. That is the long-term economic plan Britain needs.
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