Miliband’s middle class pitch fails to confront Labour’s statist legacy

Ed Miliband is getting serious about shedding his Red Ed image. In an article in the Daily Telegraph, the Labour leader tried to rebrand himself as a champion of the aspirational middle classes. This shouldn’t be ignored. His argument was somewhat unusual insofar as it contained an implicit admission that the cost-of-living crisis and the squeeze on living standards both predate the 2010 election.

Miliband is thus signalling a willingness to question some of his own party’s problematic legacy. Could Labour overcome its narrow focus on income redistribution, and develop a credible agenda to address the broader issue of living standards?

Potentially, yes. But its soul-searching will have to be more than skin deep. The basic problem is this: many of the middle class grievances that Miliband has identified have their origin in misguided state intervention, and yet the Labour Party’s general default position is to call for more intervention.

Take the decline in private pension savings. Across most of the post-war period, the UK had a successful system of old-age provision, in which state pensions complemented private savings without crowding them out. Employees could ‘contract out’ of the earnings-related state pension system, and would receive National Insurance rebates broadly equivalent to the pension entitlements foregone. They could then use those rebates to build up their own stock of assets. Yet successive governments steadily eroded this option by diminishing the rebates and increasing the system’s complexity, and Labour played a major part in this. Could the Labour Party bring itself to allow people, once again, to make their own arrangements, free of state control?

Or take the explosion in housing costs, the single biggest squeeze on living standards. Opposition to the current system should come naturally to the Labour Party, since it works exclusively in favour of a fortunate minority. Landlords are subdividing existing properties into ever-tinier units, while small but well-organised groups of homeowners successfully block the development of new houses, with the planning system fully on their side.

Yet bizarrely, Labour castigates private developers for not building enough homes, as if those developers would deliberately throw away profit opportunities. On green belts, house height restrictions and much more, Labour has nothing to say. The temptation to turn this into an ordinary people versus big business issue is apparently just too great.

Labour also remains wedded to the green agenda, even though it conflicts fundamentally with the aim of raising living standards. It is a straightforward choice: what is more important, the living standards of ordinary folks – or the fads of the chattering classes? If the former, it should be open season on cost drivers like renewable energy subsidies. But with price freezes and general business-bashing, Labour remains inside its comfort zone.

A recognition that not all was well before 2010 is not enough. Labour cannot become the party of living standards (for the middle classes or otherwise) unless it is prepared to challenge its own tribal instincts.

This article originally appeared in City A.M.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

4 thoughts on “Miliband’s middle class pitch fails to confront Labour’s statist legacy”

  1. Posted 15/01/2014 at 18:20 | Permalink

    ‘Wedded to the green agenda’? Kris, could you state for the record whether you believe in global warming and secondly whether it’s being exacerbated by human activity? Because in many of your articles I sense a contempt towards those who seek to avert climate change; surely a broadly free market agenda can be reconciled with limiting serious environmental damage..?

  2. Posted 15/01/2014 at 19:05 | Permalink

    Bemused observer, I know nothing about climatology, so I can’t say whether or not I ‘believe’ in AGW on those grounds. But when dealing with properties of the physical world that I know too little about, I generally try to assume that the scenario which poses the greatest challenge to my political beliefs is the correct one. Or in other words: Yes, I ‘believe’ in global warming, and I ‘believe’ that it is exacerbated by human activity – not because I have read scientific papers that convinced me so, but because the alternative would be too comfortable.

    Therefore, as far as the policy implications are concerned, I am not arguing that all green policies should be abolished. I am arguing that they should all be replaced by one single transparent, neutral, market-compatible tool. Carbon tax or cap-and-trade, the standard Economics 101 textbook policies. That’s it. No green industrial policy, no shoring up of subsidy junkies, and not a penny for fashionable nonsense.

  3. Posted 15/01/2014 at 23:02 | Permalink

    I think I tend to be less climate-change-sceptic then Kristian so let me answer the question and Kristian can answer it in his own way. What I would say is this (and I have put it this way in many articles). The government (and Ed Milliband led this policy in the last government) has chosen the about the least efficient way imaginable to try to reduce carbon emissions (Kris has also discussed this in various articles). However, there is also a choice – reduced carbon emissions (by any means) leads to higher costs of production and lower living standards. Successive governments (with the policy being articulated notably via Chris Huhne, but also by the last government and also the Green Party) pretend that intervention can somehow create “green jobs” which will somehow raise national output. This is either a deceit or showing a high degree of economic ignorance. This is a reasonable question for you to ask but it would be a much easier debate if those who wish to reduce carbon emissions would accept that this is a cost and not a benefit.

  4. Posted 16/01/2014 at 10:42 | Permalink

    One problem is the confusion of reducing emissions with ‘sustainability’. In the short to medium term we could bring down emissions relatively cheaply by more efficient forms of fossil fuel use. However to many ‘green’ activists this is anathema (as is nuclear power) and hence we have this costly emphasis on wind turbines, solar panels and so on well before such technologies are remotely economic. I agree with Philip, the belief that this will generate net new jobs in the UK is wishful thinking – although Germany, Denmark, China et al are doing very nicely out of our obsession with sustainability.

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