Labour should focus on driving down the cost of goodsby Gisela Stuart / June 5, 2013 / Leave a comment
On Monday night, the Institute of Economic Affairs hosted a panel discussion on “Labour and the economy: addressing the cost of living.” It was chaired by Mark Littlewood (Director General of the IEA) and featured Dan Hodges (Telegraph blogger and columnist), Paul Ormerod (economist, author and entrepreneur), John Rentoul (chief political commentator for the Independent on Sunday) and Gisela Stuart (Labour MP for Birmingham Edgbaston). Prospect was the media partner.
We are putting up a blog from one of the speakers every day this week.
In the late nineteenth century Birmingham City Council, under the radical leadership of Joe Chamberlain, passed a resolution that stated: “Whereas there should be a profit made on the gas undertaking, the water should never be a source of profit; all profit should go in the reduction the price of water.” What has this got to do with what Labour should do to reduce the cost of living?
Rising unemployment and the lowest wage growth on record is likely to dominate the political debate. We are seeing the deepest decline in wage growth since the start of the 2008 recession and soaring energy prices continue to squeeze household budgets—the price of gas is up 8.3 per cent year-on-year. There may have been a year-on-year drop of fuel costs, but with petrol at over £1.30 per litre it is for many households simply “a lot of money to fill up the car.” Low inflation is good for some, but for those on fixed incomes and pensioners in particular it increases the problem
Labour’s response to this must be based on the assumption that we will be the government in 2015.
A few don’ts:
– Don’t be driven by electoral positioning
– Don’t get bogged down by gimmicks which don’t add up
– Don’t start believing that governments create prosperity
A few do’s:
– Accept that markets are social—they challenge vested interests and allow outsiders in
– Accept that food, housing, heating and transport proportionally takes out more of the budget of low-income families; rather than subsidising them, drive down prices
– Accept, that in order to influence behaviour, structures have to be simple, transparent and predictable—and there is nothing that helps low income families more effectively than taking a whole lot of them out of paying tax altogether
So what about Birmingham and Joe Chamberlain? He knew that the building blocks of a thriving economy are well run cities. They generate wealth and well-being. And he understood that not all businesses should be run purely in the interest of shareholders. While he ran the city of Birmingham as if it was a business, he municipalised water and gas. The profits made from gas where ploughed back to reduce the city’s rates and became an asset. For water, he made it clear that no profits should be made, but all surpluses ought to go back to providing cheap water and efficient sewage and drainage structures.
Labour should use city regions as the units for economic development and revisit the ownership structures of utilities with regional structures. The focus should be on driving down the prices of goods. While this will help all, it will help low-income families more than others.
Labour’s commitment to increase the supply of housing, rather than Osborne’s gimmick of underwriting some mortgages, is a good start. But let’s go further and rediscover “town hall radicalism.”
More from this series:
Moonshine politics: Talking about a cost of living crisis is just another way of talking about the recession, says John Rentoul
Time to build: To lower living costs, we need more than just economic growth, says Mark Littlewood
Pay the public sector less: Labour could save the country £75bn a year, says Paul Ormerod