OUR political climate currently mirrors our economic situation – bleak and shockingly uninspiring. At a recent breakfast for business leaders in London, a veteran newspaper journalist spoke of the challenge faced across the West as one of “unpopular governments and unconvincing oppositions”. The polls in Britain bear this out.
A ComRes poll for the Independent last night put Labour’s lead at just 3 per cent, with just one in five saying that Miliband has what it takes to be Prime Minister. Only 23 per cent are clear on what Ed Miliband stands for, according to an earlier survey. Trustworthiness is as big an issue for the Labour leader as it is for David Cameron. And nearly 65 per cent of Labour voters believe that Miliband’s more centrist brother, David, would have made a better leader.
To win, Labour must find an appealing message. It needs a vision and Miliband has to convince the public to fall behind him. That is the challenge of the Labour conference this week. Unfortunately, he has predictably fixed on the overarching message of hammering the wealthy and lambasting the banks, assisted by his shadow chancellor Ed Balls. After a poll at the weekend showed that 55 per cent of people think the rich aren’t paying enough tax, it’s easy to see why Miliband has taken this populist line.
Cashing in on a public still resentful at having to pick up the pieces of bank bailouts may make good politics and shore up his party’s base. It is dreadful economics, however: Britain needs job-creating entrepreneurs and business people. Demonising them and hammering them with new taxes may placate the class warriors but it will do nothing to boost growth.
Miliband’s also determined to enforce a worldwide split between the retail and investment arms of British-based banks, unless some ill-defined cultural changes materialises within those institutions. Yet this would merely push up the cost of banking for customers, removing banks’ ability to diversify and spread risk across their operations, while doing nothing to prevent another financial crisis.
Northern Rock, HBOS and Lehman Brothers would all have gone bust even if that policy had been in place. Of course, what is doubly frustrating is that serious reform of banking is required. But its focus should be on designing a process for orderly wind-up of failed banks – to allow them to fail, with investors losing their money and not the taxpayer. bailouts should be banished forever. Yet Labour has been silent on this key reform at its conference.
Labour has also yet to realise that, it if is to govern in the national interest, it needs a message built around embracing business and valuing those who create wealth.
A recent report by the Adam Smith Institute pointed out that even the OECD thinks Britain should “consider reducing the top rate of personal income tax”. That same report highlighted KPMG analysis that ranked the UK at 83 out of 86 countries based on top rates of income tax. Despite headlines dominated by Francois Hollande’s 75 per cent tax rate in France, Britain is still struggling to attract talent in an intensively competitive international environment. So it makes no sense that Miliband would cancel the planned cut to the top rate of tax to 45p were he to be elected tomorrow.
According to the Fraser Institute’s most recent worldwide ranking of economic freedom, the UK has fallen out of the top ten for the first time since the 1980s – surpassed by its former colonies New Zealand, Australia and Canada. Britain’s deterioriation was driven by rapidly growing government, and the kinds of policies that Miliband has proposed will make the situation even worse.
When economic recovery hangs so delicately in the balance, Miliband’s rhetoric is foolhardy. It still focuses on fuelling envy and redistributing existing wealth, rather than fostering hard work and the creation of new wealth.
Despite Labour’s poll lead, the public is tired of politicians in general. The political class is offering up a set of predictable messages and a list of policies that will help ruin us. Labour could have used its conference as an opportunity to grasp the nettle and be visionary in its approach to taxation and financial services. So far, it has failed to take advantage of it.
Ruth Porter is communications director at the Institute of Economic Affairs.