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

Kristian Niemietz is senior research fellow at the Institute of Economic Affairs, and author of Redefining the Poverty Debate.

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 greenbelts, 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.

Dr Kristian Niemietz is senior research fellow at the Institute of Economic Affairs, and author of Redefining the Poverty Debate.

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