Posts Tagged ‘Economy


The Living Wage needs to be a central plank of Labour’s economic narrative- Darrell Goodliffe


Labour needs a strong and coherent economic narrative which tells a story of a new economy, one built out of the ashes of austerity and the financial crash. Of course, it is not enough to string pretty words together, we must practically show how we will do this through eye-catching policies which encapsulate and embody the vision we want to put to the electorate. If you look at the French election, Francois Hollande did this well by pushing the 75% top-rate of tax on earnings over  1 million euros. This embodied his insistence that the rich shoulder the burden of rebuilding France’s shattered national economy.

Ed Miliband has already expressed the view that it is the toiling mass of people who are society’s real wealth creators and therefore they are the ones who should be most rewarded. Ed is correct in this point of view but he has yet to substantiate it with a policy that makes his point in a clear and unequivocal way. However, the living wage fits the bill perfectly, coupled with real controls on top incomes it would send a clear signal that Ed is prepared to back his fine words with equally as fine deeds.

We will be assailed with all the traditional arguments against, ‘it will lead to unemployment, it would be bad for business’, etc, etc. However, put lightly, these arguments are economic hokum. J K Galbraith deals with some of the arguments here in a US context:

Would prices go up? Some would. But rich people can afford it — and workers would have extra income to pay the higher prices, so most of them would come out ahead. Women in particular would benefit because they tend to work for lower wages. With more family income, some people would choose to retire, go back to school, or have children, making it easier for others who need jobs to find them. Working families would have more time for community life, including politics; Americans would start to reclaim the middle-class political organization that they once had. Because payroll- and income-tax revenues would rise, the federal deficit would come down. Social Security worries would fade.

Not only that, but households would be able to, slowly but surely be able to make headway into the personal debt mountain which blights our economy; here Ed will need to offer other support, like the extension of Debt Relief Orders and action against high prices (something he has already muted). However, a living wage would be a huge boost to struggling households and therefore to our flagging economy.

Up to this point, Ed has only mooted a ‘voluntary’ living wage (in return for which companies would receive tax incentives) however, this is pointless and misguided. If it is voluntary it would introduce two-tier wage system (with a clear division between companies that only offer minimum wage and those that offer a living wage)  which would run the risk of increasing rather than tackling social inequality. Also, the benefit to the state would be limited because it would be paying out money to the private sector in the form of tax breaks (as well as presumably footing the bill of increased public sector wages).

Simply raising the minimum wage to the level of the living wage, which is what Galbraith advocates, therefore is more economically sensible and beneficial all round as opposed to a half-baked voluntary scheme. Ed needs to be brave and not fight shy of the ideologically motivated but economically illiterate opponents of a living wage; he needs to take them head-on and make the living wage a central plank of Labour’s narrative which espouses a bold and radical vision of a new economy created out of the ashes of the old.

Darrell is an ex-intern and Labour activist and blogger and a candidate for NEC.


The Coalition’s False Economy

At  the recent launch of a Labour Society for Sheffield Hallam University there was much discussion on particular points. When discussing the experiences and conversations on the door step with the ordinary public, one area kept coming up as a place where the public is being worryingly misled by this tory-led Government. This area is obviously the economy and in particular the deficit.

Now I am not an economist by any stretch of the imagine but from what I have learned from the last few years of interest is that an recovered economy does not result from ideological cuts. There is an incredibly simple example with which we may show that our point is much more logical. Please stay with the analogies I use, I apologies if I decide to be confusing.

If a Government decides on massive cuts to public services, it is very hard to cut the budget without cutting those employed. Taking the example of a council such as Sheffield (it could be anywhere in the country), this council, being forced to cut say 1000 jobs in order to cut the budget to the extent demanded. Each person of this 1000 will then be forced to spend less while looking for another job. The crucial part of this is that these people will then be spending much less money in the local economy. This would then lead to less money in the retail sector of this area. Then of course there is the issue of Job-seekers’ allowance having to be paid to each of this 1000, taking more money out of the Government coffers.

What we must both understand and put across to the sensible person on the street is that there is an alternative. what has been shown to us by the US is the not entirely new but very practical idea of a Fiscal Stimulus. Now take our original example of Sheffield City council. If, in partnership with the government the council decides to lets say spend some money in order to make some by, lets say, building a school which is vitally needed. The injection of public money to do this would mean that in building the school you need builders. This would mean at least one company has a solid contract in a time when many private projects are folding, and of course these builders would spend there pay in Britain meaning and Increase in retail moneys.Employment would also  be boosted in there area, needing, teachers, teaching assistants, administrative staff, cooks, cleaners. Another very important part of this is that the builders, architects, and the shops where they spend their money should all pay tax, so hey money back to the Government as well, this would of course mean that we could start to pay of the deficit.

By simply laying out the case for a coherent growth strategy for our economy, leading to the deficit being naturally paid off without the need for extreme cuts. This is argument that Labour and the sensible left must win if we are ever to show people we are ready to lead. I would thoroughly recommend the False Economy Website

Incidentally, we had a MUCH larger deficit after the second world war and Labour did not cut like crazy, they founded the NHS…



Merv the uncaring Swerve

Mervyn King has always been something of an unsavoury figure- he gained his nickname of ‘swerve’ after constantly avoiding instances of accountability or responsibility, changing in a snap fashion his approach to situations and even ideology as soon as either became unpopular or seemingly ineffective. For an example of such inconsistency one need look no further than King’s decision to not fund Northern Rock Bank in 2007, utilising the argument that the Bank of England was the ‘lender of last resort’- upon the revelation that this was precipitating a run on multiple other banks, therefore the subsequent nationalisation of them, Mervyn in a complete U-Turn spurned his previous stance and began to support all newly nationalised banks- the damage to the taxpayer had already been done however. Taking into account his past criticising of EU and US policies of intervention in relation to this new strategy, Mr King appears quite the hypocrite.

When you combine this with the relatively recent disclosure via Wikileaks that the governor is overly politicised in a position that demands complete neutrality, King’s credibility seems even more diminished. Sure, he may have said some things to the US-UK ambassador about Cameron and Osborne that writers on this blog (including myself) may agree with, but that’s immaterial here. Ultimately, when it’s considered that under him, the value of sterling at one point declined against the US dollar and Euro by up to 30%, it can be concluded that the man simply hasn’t been great at his job.

Which is why it is doubly offensive to hear King tell a nation already feeling the slowly closing jaws of the coalition government’s cuts agenda, that a decrease in the general UK standard of living is an ‘inevitable’, ‘necessary’ price to pay to combat the ‘aftermath’ of the economic downturn. The notion, of course, that we have entered the ‘aftermath’ of the crisis or indeed have even exited recession at all has been rendered nonsense thanks to new knowledge on 2010’s last quarter. But that’s really just where the appalling nature of Mervyn’s recent Newcastle upon Tyne speech begins.

Telling workers that their income will be no greater at the end of the year than it was in 2005 is depressing news to deliver indeed, so King gave the announcement that coalition air of ‘it’s a sacrifice that we all must make’. The fact of the matter is that this fall in living standards- the most protracted for more than eighty years- will not cause any noticeable difference to the lives of the wealthy- to the life of Mervyn King- earning as much as in 2005 is no hardship to these people at all, so for the governor to dictate to the masses that having to accept these circumstances in terms of wage rise is ‘necessary’ can not in any way be construed as fair. The ‘we’re all in this together’ message is always unsurprisingly utilised by the powerful and wealthy in our society, and as a result always falls flat- the almost nonchalant manner in which King made the statement displays how out of touch an individual he is- the devastating effect of government cuts and inflation, combined with such small increases in real wages will hit the poorest in our society, and even the middle earners extremely hard. The apparent willingness of Mervyn to submit to this eventuality even makes him appear callous in relation to his connection to ordinary people, to an extent. As the man who controls the country’s interest rates and has so much influence, this is unacceptable.

Furthermore, to talk of the general public paying any kind of further ‘price’ for the greed of bankers is disgraceful- after the tax payer has already spent so much bailing out the banks, even if there is to be some detrimental effect to real wages, is it really feasible to be wording it in such a way that implies ordinary people still owe something? Especially when it is considered that in addition to what I’ve already discussed about King being an instigator for the banks initially collapsing, that his lack of advice to the Brown administration regarding bank regulation also contributed to the crash- does he really have the authority to lecture on what ‘price’ the people need to pay?

The unions have been in uproar ever since King made his speech, they will be for some time to come, and they have every right to be. The coalition claims its policies to be progressive- I fail to see how policies that help lower standard of living at rates like it’s the 1920s again can be defined as such in any way.


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