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The hole at the heart of the Labour Party

Ed Miliband’s sortie against Stephen Hester and City bonuses is a sign of life in Labour. But Labour’s position on the benefit cap reveals a deep-seated weakness.

Stuart Weir
1 February 2012

By taking the lead in rejecting the government’s “benefit cap” in the Lords, the bishops exposed a gaping vacuum in our politics. The Church of England, long derided for the wishy-washy character of its religious faith, turns out to possess a creed of compassion that is of sterner stuff when it comes to the politics of poverty and social justice than either the Social Liberal tendency among the Liberal Democrats and whatever remnants of Social Democracy remain in the Labour party.

By the same token, their action also shows how perilously narrow the current political system is, with the parties jockeying around the findings of focus groups to found and modulate policy on issues that are significant for economic or social well-being, but are pursued and exploited in terms of political advantage over their party rivals. The Labour Party has been drawn so close in this process to the coalition parties that it has vacated much of the political and social territory that used to give it meaning.

The benefit cap debate is a very good example of this form of politics at work. It is a largely symbolic issue for the coalition and it saves only a modest sum. But it is stand-out political ploy. As press reports have made clear, Cameron was gloating over Labour’s difficulties in framing a response; the policy is a spit on which to roast a Labour party that is torn between an anxious appreciation of public hostility towards welfare benefits and its own sense of responsibility towards people in need. The impression given is of a party that not only lost the last election spectacularly, but has also lost its core values and sense of direction.

The electoral defeat in 2010 was devastating - Labour's loss of 91 seats was worse than their previous greatest loss of seats, when they lost 77 seats in 1970 – and the last years of office under Brown were a humiliating disaster which still give coalition ministers ample opportunities to embarrass the Labour opposition, However, Cameron’s failure to gain an overall majority softened the blow; and thus Brownites and Blairites in Parliament, who broadly share the same ideas of how the party should campaign, have not felt the need to re-examine old truisms and political strategies, let alone to re-think the party’s relationship with the state, its public and society. It’s back to the “one more heave mentality”; playing it safe; and resorting to all manner of devices to achieve “credibility”. The trouble for them is that it is neo-liberal ideas, Conservative and Lib Dem ministers, a hostile press and the likes of John Humphrys who define “credibility”.

Miliband has signalled the end of Labour’s essential strategy since the 1950s, a very much diminished version of Anthony Crosland’s The Future of Socialism. For Crosland, who was arguing against the statist instincts of the Labour left, the defining goal of the left should be more social equality. He argued that,

'In Britain, equality of opportunity and social mobility... are not enough. They need to be combined with measures... to equalise the distribution of rewards and privileges so as to diminish the degree of class stratification, the injustices of large inequalities and the collective discontents.'

But the strategy which actually took root broadly adopted the position that a more equal society can be more or less painlessly achieved through spending some of the proceeds of growth on public services. The troika who took control of Labour in the 1990s came to power in a period of growth that allowed them to take this easy way out of real change and avoid hard choices. Spend on the NHS and schools, yes, these are services that the middle class value. But accept the destructive force of Thatcher’s “right to buy” social housing and don’t even seek to make up for the losses by building houses to rent in the public or semi-public sector; leave housing to a get-rich-quick market. There was even money for a degree of palliative social justice through Brown’s tax credits and other mechanisms, but that had to be concealed from the public gaze. No need then to challenge the status-quo, to adopt Crosland’s positive measures to “equalise the distribution of rewards and privileges.” Indeed, under New Labour it made sense to suck up to the City and reassure the banking and corporate class that the government was extremely relaxed about their wealth. It made sense to keep the trade unions at a distance for fear of contagion.

This strategy was too shallow to sustain a reforming party capable of responding to the demands of the time, let alone to the fearsome economic and social crisis that confronts the country – and which the incompetent and biased government is making worse. The benefit cap issue illustrates the weakness of Labour’s response to the government’s policies. The party’s tradition of social justice demands a whole-hearted rejection of the policy and the falsity of the coalition’s arguments for it. Instead, we get clever-arse Liam Byrne saying that the party agrees with the proposal “in principle”, but also finding a patently devious reason to oppose it that invites derision.

The government’s policy exploits a popular notion that benefits in the UK are too generous. But this is not the case. Allowances for children in the benefits structure are not sufficient fully to pay for their upkeep. A large family may therefore accumulate a sizeable but inadequate sum in benefits. High rental costs for private tenancies, especially in London and the south east, swells that sum to median income levels - but that money goes not to the family, but to their landlord.

Labour’s unwillingness to enter the debate leaves the government unchallenged where a more robust opposition could have exposed the falsity of its case. Even the simple idea that the median wage is an appropriate measure for a cap on a family’s benefit entitlement is flawed. As I understand the position, an equivalent family in work would be entitled to the very child benefit (and other work-related benefits) that the government intends to deny to a family receiving over £26,000 in benefits.

But there is a greater cheat here. Cameron and his allies have skilfully made this an issue between the working poor and the poor on benefits. Of course, a shamefully large number of our people work for poverty wages. But the comparison that a social democratic opposition could have made – while condemning policies that are penalising the working poor - is not between median earnings of £26,000 a year and benefit levels, but between median earnings and the rewards that the government tolerates in the financial and corporate world. In 2010, the pay of bosses of the UK’s top 100 companies jumped by an average of £1.3 million to almost £4.5 million. A report released during the debate on the benefits cap last week showed that the average pay for senior bankers in the City was £1.8 million.

Moreover, an effective social democratic party ought to be thinking structurally about such injustices as the high rents that private landlords are able to charge. Given the damaging consequences of current high rent levels, the party ought surely to be advocating the re-introduction of rent controls. But the only Labour figure I know of who is advocating rent control is Ken Livingstone. In the 1970s the then Labour government did introduce a fair rent regime that protected tenants from unduly high rents while allowing landlords a return on their investments. Mrs Thatcher undid that protection in the late 1980s.

Ed Miliband has at last struck a blow over Stephen Hester’s bonus and the City bonus culture in general. But he must develop the argument against the high-pay culture at a systemic level. The government has very cleverly finessed the public debate on high earnings, at least at a rhetorical level, if not on City bonuses. Their basic message is that massive wages and rewards are legitimate if those who earn them head profit-making companies. It is a plausible message in the current atmosphere, but (once again) an effective social democratic party ought to challenge it fiercely, and not parrot it, as Chuka Umunna has been doing on behalf of the party, saying “it is right that those who work hard, generate wealth and create jobs are rewarded” and it is only “rewards for failure” that are wrong. Indeed, he disavows the argument from inequality, arguing instead that unearned high rewards ought to be opposed on the ground that they are “ bad for business”.

This is a long way from Crosland. The high and increasing level of rewards for corporate and financial bosses is creating a degree of inequality in the UK that is de-stabilising our society and condemning millions of people to hardship and penury. As the evidence of the Spirit Level has demonstrated, a more equal society is also a more harmonious and less divided society, you might even say, “a big society”.

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