Labour policies are popular, but party must still win back confidence on economy

Labour policies are popular and Corbyn is no hindrance to that, but the party must still win back public confidence on the economy if it is to mount serious opposition, let alone return to government.

With the local elections coming up, the Labour Party has made use of the Easter break to make a series of policy announcements in an effort to take back control over its image. Under Jeremy Corbyn's leadership, a hostile relationship with the media has made it hard for the party to put across what it stands for to the public.

The way Corbyn has chosen to try and cut through to the public has been to roll out a few major promises. The party has pledged to deliver a £10 minimum wage, universal free school meals and raise standards for the £200 billion the government, central and local, spends on commissioning and procurement in the private sector (Eaton, 2017; Ashmore, 2017).

Yet, if Corbyn is going to breakthrough and recover public confidence in the Labour Party, damaged long before he became leader, he has one main task: he must win the argument on the economy. His problem is the party remain divided on whether that means regaining trust as the credible stewards of the neoliberal economy, or to change minds and develop something new.

The policies Labour proposed have been, on the whole, welcomed by the Centre-Left press (Eaton, 2017; Slawson, 2017; Lister, 2017) and a ComRes poll showed that Labour's Easter announcements were very popular - even when people knew they were Corbyn's policies (Cowburn, 2017). All around, two weeks used well by the party.

However, the poll also highlighted something important. When asked how they regarded the longer standing Labour plans for a National Investment Bank, funded to the tune of £350 billion by the treasury, the response was much more unsure. Herein lies a problem that speaks to the absolute crux of the dispute between the factions within the Labour Party.

The austerity narrative, sown deeply into the public consciousness by the Conservatives after they came to power in 2010, has firmly established the idea that money is short. Further, the Tories pushed hard to make a link between the shortage and Labour's spending in government.

That narrative created a presentation problem for Labour. Whenever Labour pitches a policy that involves spending, they play right into a Right-wing narrative of frivolous profligate - as seen by Theresa May responding to Corbyn's policy pitches with her standard line that Labour will 'bankrupt Britain' (Eaton, 2017).

To this point, Labour hasn't helped itself. In the past five years the party has veered between doubling down on meeting Tory policy pledges, point for point and pound for pound even when it comes to cuts, to promising big uncosted spending - or criticising the Tories for underspending without a costed alternative.

For instance, while the £10 minimum wage will only be a pound more what the Tories will be offering come 2020, there was no breakdown as to how the increased costs would be handled. There will be more pressure on the community & voluntary sector, on social care that is already stretched and on small businesses and low pay employers, to name but a few.

Will there be increased spending to further fund the social sector to cover the costs? Will there be tax cuts for business to protect low-paid work? Where will the money be found to fund these? From increased taxes on the rich that the party has been criticised for mentioning in connection with a whole range of spending proposals?

These questions need to be asked, because at present the collective public consciousness still appears to accept the core of the austerity narrative on economics: that government money is limited, that a government siphons from society when it spends, and that borrowing is a reckless alternative.

And yet, the argument for austerity is weakening. Every day some new story emerges that exposes a little more of its cruel impact - and that impact is starting to be felt by the middle class and not just the poorest. Ahead of the Labour Party is a choice and its different factions need to unite behind one or the other.

To remain hitched to neoliberalism as well-meaning and trusted stewards or to fight for a new narrative that isn't shaped by the Right-wing press. Either way, it is a fight it must win - because while the ComRes poll from the weekend suggests that Corbyn is not the problem he has been cast as, Labour still sit 21 points behind the Conservatives (The Independent, 2017).

There are people searching fora working opposition and, right now, Labour is the second largest party. A progressive movement cannot function without them. Labour doesn't have to do it alone, but as the loudest voice it must start making itself heard - and start setting the tone of economic debate.

To achieve its goals, the Living Wage must be part of a comprehensive policy of reform

The Living Wage Foundation has designated this week as Living Wage Week, with the aim of spreading a broader awareness of the measure and what it fights for: the right to a decent standard of living (Ainsley, 2016).

Its launch coincides with the announcements today of the recommended living wage, as part of the voluntary living wage scheme, being instituted by civil administrations in London, Scotland and Wales along with a number of major firms (Living Wage Foundation, 2016) - the actual Living Wage, higher than the government's 'National Living Wage'.

At a time of rising prices and economic uncertainty, an increase in pay will be a very welcome boost for many of the most vulnerable and those facing hard times. But the idea of minimum wages has been controversial in economics. There are sore divisions over the idea of an intervention through the law to 'artificially' raise wages.

For those on the neoliberal economic right, setting minimum wage thresholds are an artificial inflation of the costs of business, where costs are seen as the primary problem. From their view, the priority should be to reduce costs, so to increase competition, and through both together to reduce prices - allowing market-set wages to go further (The Economist, 2015).

On the interventionist economic left, there has been a delicate negotiated balance to strike. With trade unions for instance, there is a need achieve better returns for workers on the one hand, while also ensuring the long term affordability of pay so as to avoid future closures and lay offs.

What particularly concerns both Left and Right is that business, faced with wage inflation, may decide they have little choice but to begin to replace many basic low pay jobs with cheaper automation (The Economist, 2015{2}).

It is absolutely clear that it is just that people get proper returns for a their labour. And further, it makes sense. The OECD has stressed that economic inequality hurts economic growth and therefore the general prosperity (OECD, 2014). That makes measures of redistribution from shareholders to workers, and a fairer distribution of the 'rewards' between them, essential.

However. There can be no complacency. An economy is an intricate web and pulling at one string has knock on affects for the whole network - especially when progressive administrations are not the only ones pulling strings that have decisive results. To achieve the aim of a decent standard of living, just wages must be seen as an integral part of a broader policy of reform, which must look also to the other side of the equation: the cost of living.

In two key sectors, in housing and in energy, high costs have a devastating impact on the economy and the lives of all citizens, especially the most vulnerable. A secure wage goes hand in hand with secure housing and affordable energy - a Living Wage needs the companionship of a Living Rent.

The third aspect of any broad progressive economic policy has to be tackling the thoroughly unequal distribution of power over economic decision-making. Too much decision-making power is concentrated in the hands of too few, creating vested interests inclined to behave like cartels.

Only with all three together - giving citizens the guarantee of a reasonable reward for work, the security of basic housing and energy, and enfranchisement in the making of economic decisions - can the economy serve the needs and wishes of citizens rather than just those of narrow and self-serving interest groups.

And, as a final note, the fear of automation must at some point be addressed. With it, there will also need to be an assessment of our attitudes to welfare, to how work is rewarded, and even our definition of work itself. Above all pursuing one goal: that progress should serve citizens, not disinherit them.

Ed Miliband failed in efforts to put the cost of living at the centre of the political debate, but it remains the big picture

Photograph: Ed Miliband gives his first keynote speech to Labour Party conference as leader, in September 2010. At Labour Party Conference, Manchester (License) (Cropped)

At a time when compassion for the suffering of others is at a high, even forcing Prime Minister David Cameron into accepting more refugees from Syria (BBC, 2015), it is worth remembering that compassion is needed domestically as well. Homelessness has increased even as housing costs have continued to soar (White, 2015). The rising cost of welfare has led to questionable actions to reduce the bill (Stone, 2015) and the proliferation food banks (Wintour & Butler, 2014).

These are all expressions of an underlying theme: the cost of living is too high. Before he became mired in the catastrophic miscalculations that were the Ed Stone and the mugs that boasted of closing borders to foreigners, Ed Miliband tried and failed to make the cost of living the centrepiece of his leadership of the Labour Party (Miliband, 2014).

Overcome by the media pressure to deal with the big issues facing Britain with stern and direct action, as well as party insider insistence on pursuing obsessively conservative methods (Glasman, 2011), Miliband's attempt to take the lead on the big issues of the day dissolved into populist political stunts. For just a moment the Labour leadership had grasped a single coherent theme that might have helped the party to form a distinctive position.

These two, big, long term problems facing the UK - that housing is too expensive and that welfare costs too much - have often been reduced to the result of 'migration problem' which, it is commonly believed, increases the burdens on both of the first two, so making them all the more expensive. Yet migration is little more than a scapegoat, or an exacerbation that exposes fears, and only distracts from the real issues moving beneath the surface. The fact is that the cost of living is too high - there is some dispute, however, as to why.

In the struggle to tackle the exorbitant cost of living, there are two schools. On the Right, the focus is upon so-called distortions of the market - instead of relying on market competition to set prices so that efficient marginal wages will go further, the Right sees government as interfering and managing in a manner that leads to distortions and corporate oligarchies. On the Left, the answers lie with income inequality - provoking a need for intervention to introduce regulation, maximum wages, redistributive taxation, all to ensure that workers earn a better share.

Cost of Living and the Right

On the Right, one of the big criticisms of Left-wing economics is its failure to keep minimum wages, and other measures that inflate costs for business, under control. From the pro-market perspective, a rise in wages increases prices. That wage inflation drives price inflation, which gives rise to wage inflation, in a vicious cycle.

The argument goes that minimum wages hurt employment - they increase labour costs artificially and put basic low paid work at risk of replacement by more economically efficient automation (The Economist, 2015). More complex assessments argue that tax credits are a superior welfare alternative, encouraging people to work by offering subsidy without driving up business costs. Employers can respond by paying more, as they might say, 'competitive' wages - low enough that they can have more staff and more staff of greater skill - with incomes of low paid workers being effectively 'topped up' by tax credits, with the government taking on the cost.

However, with the age of austerity in full swing and public debt being used as the rallying banner for cutting back state taxation and spending, governments have wanted to cut their own budgets (Money Talks, 2015). Tax credits, as a sizeable public expenditure, has become a target, with its cost being passed on to businesses in the form of increases in the minimum wage. That, of course, needs to be paid for out of business profits and so is passed on to customers in higher prices - resulting in higher wages not necessarily meaning relatively higher incomes, as the cost of living also goes up.

For the economic Right, the focus is on trying to find ways to reduce the cost of living without tampering with the delicate functioning of the market (The Economist, 2015{2}). That has led to calls for planning regulation reform to ease way to profits in the house building sector (BBC, 105{2}).

However, the cost of living presents huge challenges, such as the gigantic housing costs, that have no easy or cheap fix. Building houses to address housing shortages is necessary. Yet it is also expensive and the profits that can be derived from a project are as much a part of the problem as the shortage itself. Nor does building them alone tackle the other issues like the unfairness of ownership and the need for economies of scale in the rental sector. Previous attempts in the UK to thrust this task upon the private sector, under Thatcher, only helped propel the country into the present crisis (Gulliver, 2013).

Cost of Living and the Left

For the Left, the pro-market analysis is taken as tantamount to an attack on the life security of the poorest. Moving away from minimum wages is seen as a dangerous step further along the road towards the precarious lives filled with constant stress of zero-hours contracts (Fleming, 2015).

They would seem to have good reason to be guarded. There is evidence that suggests in-work poverty is climbing and the gap between the poorest and prosperity is widening (Pradella, 2015). The relative wage, the value retained by workers from the value they produced, is under increasing pressure.

The response of the Left, historically, has been to try and ameliorate these conditions through welfare. The most obvious and blunt force approach has been deficit spending on public sector projects, a Keynesian option to create more and better paid work - allowing workers to afford a more stable life. This is an idea that, with a new twist, is being considered again by Jeremy Corbyn (Peston, 2015).

For the broader economy, the benefits are proposed to lie in the Keynesian priority of propping up demand. The struggle has become finding a way of doing so within the dominant capitalist market system, without upsetting its balance. The Left's main tools for the task have been tax credits and minimum wages.

Corbyn, in particular, appears to want to turn back - for the duration of the crisis at least - to the more blunt approach with his people's quantitative easing. To make up for lack of income distribution into the pockets of consumers, which suppresses demand, Corbyn suggests turning to credit - much as Reagan and Thatcher did after the suppression of workers' bargaining power in the 1980s (Harvey, 2010). But in true democratic fashion, the burden of that debt falls of the state on behalf of all of the people, rather than on the head of any particular debtor.

So while the pro-market Right is interested in seeking ways to make it possible to do more with less, the Left's focus on giving people more to spend.

Cost of Living: The Bigger Picture

However, because Corbyn's QE for the People is just a correction for a crisis, sooner of later the Left will have to come back around to Ed Miliband's aborted project to tackle the cost of living head on, which, under pressure from the clamour to tackle public debts, shows significant crossover with the Right. Miliband's strategy included promises to tackle energy costs, to increase the housing supply, to tackle renting costs, to cut tax for poorest, to cut small business rates, to increase wages and clamp down on the illegal - and migrant-exploiting - practice of undercutting wages.

The pro-market groups on the Right also have to confront big questions. When the early free traders, like Richard Cobden and John Bright, wanted to extend free trade in the interests of peace, breaking the power of corporations and land owners, and making food cheaper for the people. Modern free traders are battling against the land oligarchies of their own times, but the power and influence of rentiers over the high cost of dwellings will not be shaken off by a laissez-faire cull of regulations. Rentiers own the playing field as well as the pieces.

If the high price of housing and energy could be tackled, then a debate over minimum wages or marginal wages would be held on a much clearer, unfogged, field. The discussion of the impact of wage levels - and how they set the 'purchase power' of the poorest, with their higher pay coming at the cost of higher business prices, potentially meaning higher prices and lower employment - would be substantially more straightforward.

Yet it is hard to shake the feeling that the wages debate would still mean buying into an economic rhetoric based on manipulation and coercion of people into certain kinds of 'productive' behaviours, and which ignores key ideas. Particularly, who benefits, how and how equally from the profits/net gains of an enterprise? There were elements of that idea in the debate that Ed Miliband tried to open up on the cost of living, in taking elements from both camps.

But it didn't go far enough, going only so far as to make a pitch to the middle class within present structures (Grice, 2014) - and was soon drowned out by populist support for closed borders and austerity toward welfare. Surely, the really progressive approach is to ask whether we can reconstruct the economy so that people can get a better relative share of the product of their work, see their relative share go further, and have greater social security?

The only way to achieve that is to tackle the cost of living holistically. Such an alternative approach to solving the cost of living crisis would need to be coherent, with a core idea and theme that would bind the various parts together.

It would need co-operation and mutuality in all sectors, to give people the power to ensure they receive a proper relative share. It would need guarantees of basic economic securities that would have a minimal distorting affect upon the costs of business, such as a citizen's income. And, it would need to tackle the oligarchic rentier control over the basic fundamental resources such as energy and housing that siphon off so much of a wage - particularly in the housing sector where, both in ownership and rental, costs have spiralled up beyond any semblance of reality under the inefficient system of private landlords that blocks the positive affects of economies of scale.

While presenting a progressive alternative would be a gigantic challenge, it also presents a clear and distinct path forwards. In a mainstream assembled around frustratingly similar politicians offering bafflingly similar ideas, a distinct and coherent economic alternative could be electorally popular as well as economically necessary.