It’s the economy, stupid. And Ed Miliband knows it
There’s an almighty battle coming, but the terms of the debate are yet to be set.
As Benedict Brogan wrote earlier this week, “[Ed] Miliband has shown a knack for identifying himself with catchy populist issues.” So all eyes should be on him tomorrow when he’ll be delivering a major set piece speech on “Responsible Capitalism”. This could be the start of something important.
The cost of living and economic credibility are the two key, interwoven threads of the next election. Voters are unlikely to trust someone to deliver on improved living standards if they don’t believe economic growth will continue or indeed improve. Likewise, what good is economic growth if the benefits are felt by far too few? This is essentially the dilemma that will shape the next 15 months leading up to the next general election. At Policy Exchange, we’re focused on resolving precisely that dilemma – how to create a genuinely Popular Capitalism.
The OBR’s growth forecast for this year is 2.2 per cent and inflation has finally fallen to 2 per cent, but wage growth is for the time being at least still stagnant. House prices are, in real terms, more than two and a half times what they were in 1975. Meanwhile, by some estimates energy prices are rising at more than eight times the rate of earnings. ONS analysis shows food prices have risen nearly 13 per cent above inflation over the past six years. There is no doubt the public is feeling discomfort, but it’s not just about squeezed weekly budgets.
There’s clearly something of a crisis in our country with trust – damaging behaviour spread through too much of the banking sector, the media, the police, Westminster and the NHS, causing scandal after scandal. The public are rightly fed up with it all, their suspicions particularly acute when it comes to big business. But we need businesses of all shapes and sizes to thrive if our economy is to keep growing.
The public’s response appears to be supportive of the state taking a greater role in regulating or interfering with business, and Labour’s price freeze on energy is merely the most high profile example of cashing in on this sentiment. The real answer though, lies elsewhere – in creating proper markets and defeating vested interests.
Groups of companies in markets that act as cartels should be stared down. Special favours in the form of subsidies and heavy-handed regulation that puts the sandwich shop round the corner at a disadvantage to the fast food chain should be stripped away. The consumer must be king.
Technology will help with this. The coming revolution in smarter metering, for example, could allow for more diverse tariffs as people have minute-by-minute information on their energy consumption. But this is only the start.
What’s needed is a transformative look at our country more broadly and how we do things.
What can be done to help those on low and mid-level pay? How can we structure taxes so people can keep more of their own money in the first place rather than it being recycled to them through an inefficient system of benefits? What can be done to make people’s labour worth more, so they earn more? Why does enterprise matter? What role does the invention of new, improved (and generally more affordable) goods and services make to our lives? What can be done to improve social mobility?
These are some of the questions that all the political parties face and must answer in the lead up to the next election. One thing is certain – the answer most definitely does not lie with a return to the government running a travel agency or dictating what model of telephone or car we can have. It lies in a recasting of the free market. Popular Capitalism means more choice, not less, and more responsibility, not less, for all. Make no mistake about it: Ed Miliband’s speech this Friday will be setting out the terms of one of the most important battlegrounds of this next election. It’s worth paying attention.