Labour’s first post-election budget: how to avoid a Balls up

Britain needs a payrise. I would go further. The world needs a pay rise. The challenge is where to start. With less than 200 days to go to the next UK General Election, there is much to do. As set out the UK Labour Party’s economic policies do not add up. This is not because of profligate, irresponsible policy commitments. Labour as the only prospective party of government post-May 2015 can not afford that luxury.

Extravagant tax giveaways as proclaimed by outgoing Conservative Prime Minister David Cameron at his party Conference last month are just that, giveaways that you have no hope of delivering. His only hope and that of his flailing party is that enough of the electorate will believe him to reduce an inevitable loss of seats in just over six months’ time.

So the electorate needs help to refocus on jobs and growth. Ed Miliband made an interesting appointment last night bringing back Pat McFadden MP on to Labour’s frontbench to lead on Europe. Britain’s membership of the European Union is the bedrock of future jobs and growth. Miliband reminded people of that in his Conference speech, remembered sadly more for what he forgot to say than what he uttered.

Unless I’m mistaken, he did say:

David Cameron doesn’t lie awake at night thinking about the United Kingdom. He lies awake at night thinking about the United Kingdom Independence Party. UKIP. That is why he is doing it friends and I say pandering to them is just one more reason why he is not fit to be the Prime Minister of this great country.

Better together, across the United Kingdom. But also better together, true to our traditions of internationalism. And nowhere is that more true than when it comes to Europe and the European Union. Friends, let me say it plainly: our future lies inside not outside the European Union.

We need to reform Europe. We need to reform Europe on the economy, on immigration, on benefits, on all of these big issues. But here is the question for Britain. How do we reform Europe? Do we reform Europe by building alliances or by burning alliances?

Indeed. So Labour is up for a head-to-head on EU membership with UKIP and UKIP-lite (formerly the Conservative and Unionist Party). Cameron’s kami-kazi tactics over EU immigration levels are a big boost for Labour general election strategists. As suggested by Polly Toynbee in the Guardian newspaper this week,  Cameron has reached a point of no return:

David Cameron has crossed the Rubicon. There is no going back. By proposing to limit free movement of labour from the EU he has planted himself on the side of the outs, as José Manuel Barroso made crystal clear in his Chatham House speech on Monday. The other 27 nations will never agree: if limiting national insurance numbers for EU workers is Cameron’s new red line then he has joined the Ukip wing of his party, who won’t let him renege.

This is very unsettling for UK jobs and growth. But every cloud has a silver lining. Labour has an opportunity to be much clearer about its relationship with business, and the role of markets.

Miliband set out a theme in his 2011 Conference speech, a year after being elected Leader:

Let me tell you what the 21st century choice is:

 Are you on the side of the wealth creators or the asset strippers? The producers or the predators? Producers train, invest, invent, sell. Things Britain does brilliantly.

Predators are just interested in the fast buck, taking what they can out of the business.

This isn’t about one industry that’s good and another that isn’t. Or one firm always destined to be a predator and another to be a producer. It’s about different ways of doing business, ways that the rules of our economy can favour or discourage.

Now is the time to spell out more precisely what that means for UK-based businesses and what is in store in terms of an emergency budget next summer. Will it be austerity-lite or Growth4All?

Miliband has to create scope for liberating the UK economy, and local government in particular from the tyranny of Conservative and Liberal Democrat budget cuts. That in part depends on building alliances in the EU that encourage the SDP, Labour’s sister party in Germany, and part of a grand coalition led by Chancellor Angela Merkel to back growth measures to help the Eurozone avoid Japanese-style deflation.

Miliband’s uncompromising stance pro-EU membership is a start. This will be welcomed by British business. But as they would say: “There is no such thing as a free-lunch.” The relative “success” of the UK economy in terms of growth, compared to our EU-partners, masks a dirty little secret – a historic prolonged fall in real wages in the UK, which directly affects millions of UK voters.

There is an understanding to be reached with both business and voters. Labour will set out a strategy to ensure a payrise for Britain. In doing so it will help make the case for a payrise in Europe too. Business can not be expected to agree a living wage plan if government is not practising what it preaches. Ed Balls should be tasked with setting out a budgetary plan to enable all government departments and other levels of government to pay a living wage by 2020, or sooner should economic conditions permit. Firms willing to pay their staff a living wage should be offered a tax break for each financial year the government works towards its own implementation target. Firms that claim poverty beyond that date should be put on notice of the introduction of an Ecuadorian.

That’s the moment HMRC will be empowered to check the books of any business claiming poverty to see just where its money is going.

In the meantime, any business with staff obliged to claim working tax credits to make ends meet should expect to have the details of what the wage subsidy adds up to published annually in a report to the House of Commons Public Accounts Committee. That should keep journalists on the red-tops busy with business scrounger stories in the meantime.

Over to you, Ed.

PS. I leave you to draw your own conclusions about the role of collective bargaining and sectoral arrangements in helping people secure better terms and conditions to cope with cost of living increases.

Ditto: investment especially in housing.

This article orginally appeared on Peter Kenyon’s blog. Peter is a former member of the Labour NEC and is the Treasurer of CHARTIST’