Making predistribution a reality

By Emma.
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The cost of living has been an important argument for Labour over the last few months. As the economy has staggered back to life, it has become clear that the coalition have spent the time in the doldrums reordering society to ensure that this is a recovery for the rich, from which the rest of us remain excluded.

Anther key argument Labour have continued to stress is the value of work. Sometimes this has been controversial – particularly when talking about out of work benefits – but the clue really is in the name. We are the Party that values Labour.

It is increasingly obvious that the real challenge in “making work pay” is not in Iain Duncan Smith’s increasingly desperate attempts to rescue his failing and increasingly cruel measures, but in addressing the failures in society that are punishing the working poor. Prices have risen faster than wages in 39 out of 40 months since Cameron became Prime Minister, and the minimum wage has declined by 5%.

The working poor get more and more squeezed, while the rich enjoy the benefits of their tax cut (and the reason there was one month wages went us was as a result of deferred bonus from the top payers as they took advantage of the cut to the top rate of tax). In 2012 there were 4.8 million workers in the UK who were paid less than the prevailing living wage rate in their area – an increase of 14% since 2009. Wages are clearly stagnating as prices continue to rise and rise.

The past few months have focused on the price side of the equation. But now Labour are announcing an even more important move this week. As the Independent on Sunday has revealed, Ed Miliband will next week announce a fully costed plan to boost the Living Wage by giving firms opting into it a tax rebate.

This is the kind of policy that really puts meat on the bones of Ed Miliband’s work and leadership around predistribution. It works with businesses to change their culture without a culture shock and will make a genuine difference to the lives of millions. It shifts the burden of support from the working poor away from a reliance on tax credits towards better pay. That’s good for the Treasury as well as workers.

It’s also good politics. As I wrote earlier this week, Labour needs to demonstrate what it will do with its time in office not just to help in the short term (which measures like the energy price freeze undoubtedly will) but to shift the fairness in our society. This does just that.

When Ed Miliband made his “One Nation Labour” speech at Conference 2012, it was well received, but poorly followed up. That lesson has clearly been learned and Labour has come out of the conference season building momentum on the arguments around the cost of living crisis. And just as we were in danger of pushing the energy message for too long, we’ve come out with a new headline policy that talks to the same concerns, addresses the key Labour vulnerability of spending (the policy will be revenue positive) and helps hard working people find true value for their Labour.

With this one policy, Ed has taken predistribution out of the seminar room and potentially into the wage packets of millions.

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2 comments to “Making predistribution a reality”

  1. Comment by SimonFa:

    “The past few months have focused on the price side of the equation. But now Labour are announcing an even more important move this week. As the Independent on Sunday has revealed, Ed Miliband will next week announce a fully costed plan to boost the Living Wage by giving firms opting into it a tax rebate.”

    What is it about you lefties that make you want to make everything as complicated as possible? Brown was a nightmare for it and that is part of the problem with some of this tax avoidance you don’t like.

    The Adam Smith Institute has been screaming for years that all that is needed is to raise the personal allowances to the full time minimum wage and that equates to the living wage, after tax. Go and do the numbers, it works.

    But what do you want to do? Play around by making it optional and giving firms a rebate. Bloody hell, haven’t you lefties learnt by now that firms will find a way to game the system? Furthermore, the job of administrating it will be a nightmare and I’m betting the dead weight cost will be more than just upping the the personal allowances.

    Frankly I find it an insult that someone working full time on minimum wage is taxed anyway.

    This taxing people on minimum makes me really angry. And yes I do know the argument that they should be made to feel they are contributing to society, that’s rubbish. They pay VAT and if it was that important why have a personal allowance at all?

    PS You counter the rise in the personal allowance by raising the top tax rates to make it neutral What’s not to like?

  2. Comment by SimonFa:

    Here’s a link to the long version of the tax poverty argument with the calculations:

    http://www.forbes.com/sites/timworstall/2013/11/03/5-million-britons-are-living-in-tax-poverty/

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