Beyond redistribution

Fabiana Autumn 2012First published in Fabiana magazine (page 10)

Devolving power from state to markets and local government is an effective strategy, writes Richard Angell and Adam Harrison

At the heart ofThe Purple Book, released last year and authored by a host of Labour figures examining the way forward for the party, was the belief in the need to redistribute power throughout society via reform of the economy, the state, and the politi- cal system: from market to employees and consumers; from public service to citizens and local communities; from Whitehall to town hall.

With the public finances under pressure and future growth uncertain, the old, straightforward Croslandite model of using capitalism to redis- tribute its proceeds via the state for social ends has come to the end of its useful life. Instead, we must ask how we can make markets work well in the first instance, without the state having to clear up behind it. Such an approach also looks to Labour’s earlier collectiv- ist history, from the time of its founding where working people came together through free association to provide for what the state at that time would not.

It is in following these paths that Labour MP and historianTristram Hunt cites the work of Jacob S Hacker, whose concept of ‘predistribution’, ‘the way in which the market distributes its rewards in the first place,’ is core to rethinking Labour’s political economy. Recognis- ing that the market has been ‘predis- tributing’ its rewards towards those at the top, we can consider how we ensure this no longer happens in future. New Labour’s national minimum wage was an early example of this – and Tory antipathy towards this indicates their deep- seated resistance to taming the market.

Citing how 19th century cooperatives once formed a central feature of working-class communities based on mutual assistance and reciprocity in the absence of a redistributive central state, Hunt argues we should encourage new models of ownership which strengthen employees in their work- places, actively encouraging the formation of mutuals and cooperatives through incentives such as tax breaks, and by lightening the regulatory burden for new mutual start-ups.

Further, we should promote employee share-ownership by reintroduc- ing the tax break on creating employee benefit trusts that was abolished in 2003, and hardwire progressive principles in through establishing the tax break only where a significant number of shares have been distributed to all employees.

The Stoke-on-Trent Central MP also called for the proposed sale of 600 branches of LloydsTSB demanded by the Vickers Commission be made to a mutual – and, indeed, they now belong to the Cooperative bank.

It is to be hoped that other propos- als from the same publication will also become reality, not least Labour MP Liz Kendall’s call to invest in public services that help ensure fair predistribution, and that help women in particular to remain in work. She argues that while a return to economic growth is absolutely critical, it may not guarantee increased prosperity being shared fairly among all fami- lies. Universal, high quality and afforda- ble childcare and elderly care are key to achieving this.

In terms of political reform, Andrew Adonis called for devolution of new powers to local authorities to allow them to offer greater tax and fiscal incentives to help shape the local econ- omy, encourage new businesses and provide jobs. Progress backs elected mayoral authorities for the six major city-conurbations beyond London. Although Liverpool and Bristol have opted for elected mayors, giving city- regions rather than single authorities their own mayors would help reap the benefits enjoyed by the Greater London area in terms of transport, planning economic regeneration, and national and international profile. Powers should pass from Whitehall to the mayors of the six city-regions to turn this potential into a reality.

All parties are currently grap- pling with working out what localism can and should mean for our political economy.The Conservatives’ ‘big soci- ety’ has barely left the starting blocks because they fail to grasp the impor- tance of cooperation in society – that we achieve more together than we do alone. In contrast, The Purple Book maps a Labour way forward which believes in people’s ability to do the best for their communities when given the power and tools to act, backed up always by an active and responsible government and an enabling state.

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Richard Angell is deputy director of Progress and Adam Harrison is deputy editor at Progress

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