John Humphrys asks: will Ed Miliband and Ed Balls succeed in getting voters to trust Labour on the economy once again?
One of the things that has most alarmed the Labour leadership in the last couple of years has been the party’s failure to take advantage of the government’s economic woes. Despite the fact that the chancellor, George Osborne, has failed to deliver the economic growth and the cuts to borrowing that he forecast in 2010, Labour has lagged the Tories in the polls on the issue of economic competence. The public still trusts the ‘failed’ coalition more. So this week the two Eds, Milband and Balls, have sought to do something about it. Will they succeed in getting voters to trust Labour on the economy once again? And do their ideas spell a fundamental long-term change in the very nature of the welfare state?
In the first three years of the coalition’s period in office Labour’s basic charge was that the government was trying to cut its deficit too fast and too far. The result, they said, would be an even longer and deeper recession. Their solution was to stimulate demand in the economy by making, among other things, an emergency cut in VAT to get people spending. They said they recognised that the deficit would have to be tackled in the long run but they opposed pretty much every spending cut the government proposed.
What has frustrated the Labour leadership is that the recession has indeed been much longer than the government forecast but few people seem to share Labour’s view that the government’s tough austerity policies were the chief cause. This may explain Labour’s apparent lack of credibility on the economy. So now, when there are signs that the economy is beginning to pick up, Labour is changing its tack.
Its focus now is not so much on what the government may or may not be doing wrong but on the situation Labour will inherit if it wins the next election in 2015. Ed Balls, the shadow chancellor, has said it would be very different from the situation Labour faced when it came into power in 1997. Then the prospect was that spending in government departments would rise; in 2015 it will be due to fall. He said the new Labour government would have to show “iron discipline” and, as proof of it, he committed the party to stick to whatever overall spending plans for 2015/2016 the government comes up with when Mr Osborne announces them later this month.
Ed Miliband has repeated the message. He said his government would be “laser-focused on how we spend every single pound.”
The biggest single bill in government, by a very long way, is the social security budget. Mr Miliband was explicit in saying this budget could not be immune to the new discipline. He said: “Social security spending, vital as it is, cannot be exempt from that discipline.”
Much social security spending is related to unemployment and, in very broad-brush terms, he outlined his approach. He wants to promote jobs so that there will be fewer people needing unemployment benefits and “encourage” employers to pay higher wages so that the government bill for supplementing low wages through tax credits can be cut.
He also focused on housing benefit, pointing out that thirty years ago 80% of government spending on housing went into building new houses and only 20% on subsidising rents through housing benefit. The figures now are 5% and 95% respectively. He wants to give local authorities new powers to negotiate lower rents with private landlords, so saving money on the housing benefit bill and releasing funds for more building.
These are indeed broad-brush ideas and it is easy for Labour’s critics to scoff at them, as they are indeed doing. All governments want to create jobs but it’s quite another thing to do so in a cost-effective way. “Encouraging” employers to raise wages is not the same thing as getting them to do it. And if landlords are to be pressured to lower rents, won’t people be deterred from going into the rental business?
Labour is also concerned about something else: the image of itself as a party that supports benefit claimants who expect “something for nothing”. Public opinion has recently turned much tougher in relation to welfare, something the government has spotted and believes it can turn to its electoral advantage.
So on Thursday Mr Miliband acknowledged that faith in the system had been “shaken” with “a minority getting something for nothing and other people getting nothing for something”. In other words, he wants to change what’s seen as Labour’s underlying attitude from one in which anyone who thinks they have needs can expect help, to one in which they have to pay in if they want to take out. So he floated the idea that in order to qualify for Job Seeker’s Allowance, people would have had to contribute to the system through national insurance contributions for longer than the current two years. And he also mused about whether the rate of that benefit, now £71 a week, could be raised for those who have contributed over many years.
But perhaps the biggest shift in Labour’s thinking is what one senior Labour figure described as an “attack” on the principle of universalism – the idea that some welfare benefits should be available to everyone who qualifies irrespective of their income.
Mr Balls led the way in shifting Labour away from adherence to this principle when he said that the winter fuel payment to pensioners, currently given to everyone over the age of 61, should be stopped for the 600,000 richer pensioners on high and top rate income tax. Although this would save only £100m a year, the symbolic importance of Labour’s proposing ending the universal nature of this particular benefit was what made the headlines.
The shadow work and pensions minister, Liam Byrne, made more news on another universal benefit – even dearer to many people’s hearts – child benefits. Labour had opposed the government’s plan to axe child benefit for families where there was a breadwinner earning more than £50,000. Mr Byrne admitted that Labour would not reverse the policy.
This double attack on the principle of universalism has caused some alarm within the Labour Party. Peter Hain, a former cabinet minister, said: “The problem with Labour cutting winter fuel for the rich is where does the attack on universalism stop?”
Defenders of universal benefits have always made two points. The first is that there is a big administrative cost in sorting out those who qualify from those who don’t and that it’s better to spend the money on the benefit itself even if it goes to people who don’t really need it. The other, and politically much more important point, is that universalism means everyone has a stake in the benefit. If that principle is broken, the worry is that the rich and powerful come to feel they no longer have a stake in defending them. In short, universalism is what marks the difference between a welfare system aimed at making the whole society communal and more equal and one that merely provides a safety net for those unable to fend for themselves.
Many Tories have long believed that is exactly what the welfare state should be: a more minimal system. Does Labour’s retreat from universalism mean that’s the way the welfare state will now go?
What’s your view? And do you think Labour’s new approach to the economy will lead the public to trust it once again more than they trust the coalition?
