Labour's Capitulation

Ross McKibbin

Ed Miliband’s latest speech on welfare pretty much capitulates to the Tories, just as Ed Balls has capitulated on the economy. Both have willy-nilly accepted a Tory ‘interpretation’ of the financial crisis, even though that ‘interpretation’ has been relentlessly political. How little austerity actually has to do with the economy or those on welfare was demonstrated by the hooting and hollering of the Tory front bench when Miliband was seen to give in; and by Iain Duncan Smith’s casual description of Labour as the ‘party of welfare’ as though that were self-evidently a bad thing. It is clear what Tory priorities are, and they are not the well-being of the people. Labour’s capitulation was both unnecessary and unwise.

Why Miliband should have accepted in fact, if not wholly in principle, the rightness of the government’s welfare policies we can only guess. There are the usual opinion polls showing that the majority of the electorate are more inclined to trust the Conservatives in the management of the economy, and that they are almost wholly ignorant about the pattern of welfare expenditure. It is also probable that the Blairites in the party and their allies in the press have got at Miliband, whose confidence in his own judgment has become increasingly shaky. That many people, not unreasonably given what happened in 2008, distrust Labour’s financial competence is a genuine problem for the party. But it is not new and not as straightforward as it sounds. It is something around which they should have navigated. Instead they hit the problem head-on and legitimated the government’s policies. That has left Labour with no rhetorical base from which to present alternative policies and has given the electorate even fewer reasons to vote for them. Even if the party maintains some sort of lead in the polls, which is now doubtful, that lead is likely to be fragile.

Given the extent to which Miliband and Ball have boxed Labour in, what might they do? They were right to oppose means-tested cuts in child benefit but also right to accept that those cuts cannot now be restored. Means-testing the winter fuel allowance would seem to follow from this, even if it is merely cosmetic. The trouble with all this is that it presupposes cutting is the only available policy. All parties are, in any case, nervous of the pensioner vote, which further cuts might alienate. But cutting is not the only policy. Labour still has a few cards to pay.

The first is ‘fairness’. An open declaration that they would do nothing that would in practice increase poverty is something the government might find difficult to handle; and though the Lib Dems are a broken reed, it could encourage a few of their MPs to look to their consciences. An open admission that Labour would also expect the well-to-do, and their companies, to contribute more to the welfare budget via taxation is a perfectly reasonable policy. In some circumstances this can be risky; but not at the moment. Miliband has been surprisingly unwilling to exploit popular dislike of the ‘rich’ or the banks. But nothing would now be lost by doing so. Marginal rates of taxation at the top level are plainly too low and avoidance and evasion huge. Council tax could be made much more remunerative by adding a couple of bands. The country’s housing stock, furthermore, should be revalued, though I imagine Miliband’s advisers would give him a thousand reasons why that is impossible. Which brings us to housing.

Housing is central to the welfare debate, as it is to the problems of the British economy. The huge increase in housing benefit has been a consequence of the long-term effects of Thatcher-Blair’s ruinous housing policies. The scarcity of public housing for rent lies behind everything. If as a matter of policy you restrict the supply of public housing, the sum for housing benefit must rise, even if you cap it. In any case capping causes poverty, and though that doesn’t worry Cameron or Osborne, it should worry Labour. Miliband accepts this and has proposed a new public housing programme. Balls, however, appears to have said he would not borrow to finance it. Labour therefore is boxed in once more since the minimal programme Miliband has proposed is hardly a solution. But a larger, loan-financed housing programme would in the longer term significantly cut housing benefit – though also private landlords' income. House building is an excellent way to reflate an economy, and if the rights of local authorities over housing were returned that would do something to restore the integrity of local government, however much Whitehall might hate that.

There is one final card. The next time Miliband feels impelled to say he will stick to Tory spending policies for the first three years of a Labour government, he should do it with his fingers crossed.


  • 10 June 2013 at 3:05pm
    streetsj says:
    All sorts of McNonsense going on here.

    "It is clear what Tory priorities are, and they are not the well-being of the people." ??? This follows from nothing. And is also obvious nonsense. There surely is a different emphasis on how to improve the well being of th epeople and, because this aint Utopia, how to spread limited resources.

    "Marginal rates of taxation at the top level are plainly too low". The Laffer curve theory is attractive becasue it is so obviously right. We don't know at what rate the total tax take will decline but if McK is after raising signficantly more revenue he is not going to find it here, however tempting it is to squeeze the "rich".

    Adding some new bands to council tax might raise some additional revenue but outside London SW/W will make no difference to anyone it is supposed to benefit. And what difference revaluing the housing stock makes I have no idea.

    "The scarcity of public housing for rent lies behind everything". Is almost true, it just doesn't need "public". The problem is simply the plannign rules which are way too tight. We need more housing and the main issue is the restrictions on obtaining planning permission.

    "The next time Miliband feels impelled to say he will stick to Tory spending policies for the first three years of a Labour government, he should do it with his fingers crossed." Surely the electorate, by now, believes that every party's policies are published with their fingers crossed.

    • 13 June 2013 at 3:18pm
      John Cowan says: @ streetsj
      All very well to say the Laughable curve is obviously right, but it's only obviously right at the extrema. Nobody knows where the inflection point is; indeed, nobody knows how many inflection points there may be. There's every reason to think the curve is not the smooth thing drawn in books but a very complex wiggle.

    • 15 June 2013 at 9:38pm
      streetsj says: @ John Cowan
      Agreed. But the point still holds that raising tax rates does not necessarily mean increased tax revenues.

  • 14 June 2013 at 7:36am
    Anaximander says:
    Not so much McNonsense, more McTrying hard to rescue the only party capable of changing Britain's direction.
    Housing ought to have been the key for decades, ignored by Blair's election-winning machine. Results of mass building plan would be depressed prices in the private market, slightly higher Gilts interest rates, and lower private rents, as well as Ross's falling benefit bill. Will be interesting to see what effect Coalition's planning regs relaxation has; better to involve local authorities still, though. And Tories' core vote doesn't necessarily want more housing except for their own well-heeled offspring.
    Labour's problem would be that too many of those who find this "fairer" don't vote. One way round this is to hand cash to all registered voters, as Simon Jenkins suggested a few years ago in The Guardian (was £500). Instant slight inflation, surge in the economy, confidence etc. Possible charge of "vote-buying", but would probably slightly reduce electoral abstention -- a defensible position?