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Ed Miliband MP, Leader of the Opposition, said to the Policy Network Conference today:
I want to start by thanking the Stock Exchange for hosting us, and Policy Network for organising today.
Policy Network has long been committed to new thinking and building a progressive alternative.
And the speakers on today’s programme are a tribute to your influence.
I also want to thank Larry Summers.
He has always brought rigour and seriousness to the great problems of politics, the economy and society.
And he showed that again with his speech this morning.
My argument today is this.
In the 1990s most economic conferences of this type were held against the backdrop of a set of assumptions that had emerged from a decade earlier.
Three were particularly important:
- Low inflation was the key to growth.
- A rising tide would lift all boats and wealth would trickle down to all.
- And the rules governing our economy were unchangeable.
New Labour challenged some aspects of those assumptions, but also left others unchanged.
But as I will argue, all of them have been discredited by the events of the last five years.
And that is why today’s conference is so important.
Because it is a meeting of economists, business people and politicians who believe the old answers won’t work.
And who believe in the need for new ideas to rise to the challenges facing Britain today.
Events over the summer have simply reinforced how urgent this new thinking is.
Britain’s economy has now been shrinking for three quarters in a row.
This means young people across the country denied hope and opportunity.
It means families who are struggling to pay their bills each month.
And businesses struggling to keep their heads above water.
The Government made a bargain with Britain:
It said all this is a price worth paying to get our economy back on track and put the nation’s finances in order.
But it has failed.
Public borrowing, far from falling, is actually rising.
26 per cent higher than it was at the same point last year.
Alongside the Government’s economic failure, we have watched their political failure.
No longer able to say “we’re all in it together” after the Budget for millionaires, the failure of Lords reform and boundary changes, and a reshuffle which changed nothing but the faces.
Now there are some who believe that this economic failure means that all the Labour Party needs to do now is:
Attack the Government.
Wait for it to fail.
Wait for it to fall.
So that we can go back to governing as we did before.
But that would be the wrong strategy for my party and the wrong strategy for our country.
The lesson that Ed Balls and I take from this summer is the opposite:
We need more change, not less.
Because the scale of the challenges have become greater:
And building an economy that works for working people once again.
Just as the pre-war consensus could not solve the problems Britain faced in 1945.
Just as the postwar consensus could not solve the problems of the late 1970s.
So the ideas of the last three decades will not solve the central economic challenges we face.
Instead we need a new agenda.
An agenda sufficient to the scale of the challenge, and to the demand of the British people for change.
Today is part of building that agenda.
That is a task not just for politicians, but for all of us who want to see Britain rise to these challenges.
I said earlier that economic conferences of the 1990s were created in the context of the assumptions of the Thatcher era.
Our new agenda must be built around new assumptions.
So first, my starting point is an obvious one, and that is the immediate crisis.
It’s easy to forget now but the old assumption was that low inflation would guarantee stability and growth.
And at conferences like these in the 1990s there were debates about the role of Governments versus central banks in making low inflation happen.
But low inflation didn’t ensure growth and stability.
In future the lesson is that macroeconomics is much more complex and faces much more uncertainty than was believed.
And the challenges we face go much wider than simply securing low inflation.
They include proper financial regulation.
And there is a more immediate lesson for the crisis we are in.
A lesson this Government desperately needs to learn:
Growth does not happen automatically.
Anyone working in construction over the last year knows that they just don’t have the orders.
Struggling small businesses know they have fewer people coming through the door.
The young people scouring the Jobcentre for work know that there aren’t enough vacancies.
In the aftermath of a financial crisis, monetary policy alone, leaving it to the Bank of England, cannot solve the growth crisis we face.
I’m afraid the Government believed its own propaganda – that they could cut as far and as fast as they liked and the private sector would pick up the slack.
And that this was a route map for every country to follow.
If ever greater austerity at home is a flawed philosophy, the rush to collective austerity – every country following this route - is the ultimate in misguided dogma.
Because it denies countries the export-led route out of the problems they face.
And we see the results in Britain and in much of the developed world.
Two and a half years on and the British economy has not grown at all in that time, and we are in a double dip recession.
So the evidence is in - everyone now knows that the Government’s approach was wrong.
But they are lashed to the mast of a plan A that has failed.
As a result, instead of a change of direction, we get increasingly complex schemes and initiatives.
We have more of them today.
Someone in New Labour said if you want to understand aspiration you need to understand conservatories.
They were right.
But a one-year holiday from the current rules on planning for a conservatory extension of up to eight metres into a garden does not represent an economic plan.
The problem with these schemes is that it is unclear that they will have any substantial effect, and crucially that they are too complex to restore the confidence we so badly need.
For the housebuilders, for the small business, for the young jobless, they have made no difference.
So the immediate priority for our new agenda is measures that will restore both demand and confidence.
That is what Labour is aiming to do with its Five Point Plan for growth and jobs.
If the Government really wanted to get infrastructure moving they would follow our advice.
Bring forward long-term investment projects like schools, roads and transport, not just tinker with the planning rules.
If they really wanted to make a difference to housing they would tax bankers’ bonuses and as we recommended, build tens of thousands of new homes.
Not simply fiddle with the social obligations of developers.
And as we face a crisis of youth unemployment, they should be offering young people a Real Jobs Guarantee.
That is the action our new agenda requires now.
It is the only way to start to turn things around.
But the answer is not simply to deal with our short-term crisis and then go back to business as usual.
The second of the old assumptions was that a rising tide would lift all boats.
And that cutting taxes at the top, trickle down economics, would eventually put income in the pockets of everyone else.
The last Labour Government challenged this by recognising that we needed redistribution to share the proceeds of growth.
We introduced tax credits which helped take around a million children out of poverty.
We should be proud of that achievement.
But today there are still 2.3 million children growing up in poverty.
And we have inequality that scars our country.
This shows that redistribution is necessary and will remain a key aim of the next Labour government.
But is not sufficient to achieve our goals.
So we need new ideas if we are to tackle the problems the economy faces.
What’s more, the Government’s economic failure means that whoever wins the next election will still face a deficit that needs to be reduced.
The redistribution of the last Labour government relied on revenue which the next Labour government will not enjoy.
The option of simply increasing tax credits in the way we did before will not be open to us.
Of course, redistribution will always remain necessary.
But we’ve learned that it is not sufficient.
And fiscal circumstances will make it harder not easier.
The new agenda is that we need to care about the model of the economy we have and the distribution of income it creates.
We need to care about predistribution as well as redistribution.
Predistribution is about saying:
We cannot allow ourselves to be stuck with permanently being a low-wage economy.
It is neither just, nor does it enable us to pay our way in the world.
Our aim must be to transform our economy so it is a much higher skill, higher wage economy.
Think about somebody working in a call centre, a supermarket, or in an old peoples’ home.
Redistribution offers a top-up to their wages.
Predistribution seeks to offer them more:
With higher wages.
An economy that works for working people.
Centre-left governments of the past tried to make work pay better by spending more on transfer payments.
Centre-left governments of the future will have to also make work pay better by making work itself pay.
That is how we are going to build growth based not just on credit, but on real demand.
And that is how we are going to help the squeezed middle of this country and, build a better economy when there is less money around.
And how we do this takes me to the third part of our new agenda: the rules of the way our economy works.
In the 1990s New Labour rightly embraced markets, most famously in our change to Clause 4.
The party embraced the creativity of capitalism.
And demonstrated it didn’t want to nationalise the corner shop.
New Labour did challenge some of the Right’s assumptions, introducing a National Minimum Wage to prevent exploitation and enabling more young people to go to university.
But in general, it was too silent about the rules that shape the way markets work – the key to responsible capitalism.
New Labour saw its task as showing it understood the dynamism of capitalism.
As a result it was harder for it be the party to reform it.
Today, clear about the role of markets, we can more confidently be the people who set out how the rules need to change.
And it is urgent that we do so.
Urgent in the wake of the financial crisis.
Urgent if we are to tackle the challenge of predistribution that I have just talked about.
And urgent if we are going to compete as a country.
I appeal to everybody in this room to work with us on this agenda.
It is about changing the relationship between finance and the real economy.
That is why we have made proposals on changing the way our banking system works, and promoted a British Investment Bank.
We need fundamental change so that we have banks that serve the country not a country serving its banks.
We need to tackle the short-termism that has characterised Britain for so many decades.
That is why Sir George Cox, formerly Director General of the Institute of Directors, is leading our review on short-termism.
Because Labour is on the side of the business people who want to take the long-term decisions to make their business a success now and in the future.
Not the speculation that tries to make a fast buck out of it.
All of the issues, from quarterly reporting to takeovers, are on the agenda of this review.
We need proper competition in all sectors of the economy so that consumers get a fair deal.
That means not allowing cosy cartels to develop in any sector, from energy to our train network.
Especially those which are essential to the standard of living of millions.
We also need a proper industrial policy for the country: all Government departments working together, including through procurement, to support British business.
For too long we operated on the assumption that this meant a return to 1970s-style picking winners.
It’s about recognising the proper relationship between the private sector and government working together.
It’s what all major industrialised countries do.
And part of that industrial policy agenda is about recognising the importance of the green economy for the future.
Not posing the environment and the economy as alternatives as the current Chancellor does.
We need a skills system that doesn’t leave us as a country where the 50 percent of our young people who go to university have a career, but the other 50 per cent feel completely left out, hoping to be lucky and get an apprenticeship.
That means building a skills system that deals with the supply of skills and also drives up demand for those skills.
And we plan to build that new agenda with schools, young people, businesses and trade unions working together to fashion our new vocational training system.
And finally the new rules of the game must ensure responsibility from top to bottom in our society.
We need a welfare state that encourages people to work, and rewards those who do.
We also need companies that reflect the values of our society.
It was controversial at last years’ Labour Party Conference when I talked about predatory and productive behaviour.
But the move towards a more responsible capitalism is actually being led by many business people.
Firms who want to invest in their workforce, and who know that companies flourish best when rewards are fairly shared.
And those businesses should feel that the rules of the economy are on their side, not making their life harder.
And I believe creating this responsible capitalism will be better for our country.
A responsible capitalism is a resilient capitalism.
I recognise that this agenda is about long-term change in the economy and it will take time.
But I believe the British people know in their heart of hearts that our economy needs big change.
Not business as usual, let alone politics as usual.
They recognise the scale of the challenge. And they demand that we rise to it.
We’re not going to wait for this Government to fail.
That’s why I say the new agenda is so important.
It is essential, if we are to pay our way in the world, pay down the deficit, and build an economy that works for working people.
The task for my party, and for you, is to develop this new thinking that will allow us to build the new economy.
That is the shared challenge we face today.
I look forward to working with you on it in the months and years ahead.