one nation economy

8/12/2019 One Nation Economy

http://slidepdf.com/reader/full/one-nation-economy 1/60

1

Labour Party | One Nation Economy

ONENATION

ECONOMY

Labour’sPolicyReview



5


Britain needs to build an economy that works for all working people once again.

For most o the twentieth century there was a vital link between the wealth o thecountry as a whole and the amily nances o millions o hard-working amilies. Asthe country got better off, so did working people. A growing economy brought sharedprosperity. And that meant that people who put in effort were rewarded, with good jobs, paying decent wages, and were able to make a better li e or themselves. Millionso amilies bought a house, a car, even a second car, took holidays abroad, started theirown business, looked orward to a stable pension in retirement and were condentthat they could set their children up in li e so they could enjoy a better li e thanthemselves.

That seems like a different world or millions o working amilies in Britain today. Andthat’s because that vital link between the overall wealth o the country and the amilybudget has been broken. People are now working harder, or longer, or less thanbe ore. Wages are growing more slowly than prices, not just this month or last month,but or month a ter month a ter month. In act, prices have risen aster than wages in38 out o the 39 months that David Cameron has been Prime Minister, a record sharedby no other Prime Minister in history. Millions o Britain’s amilies are engul ed in a costo living crisis as a result.

The worsening o the cost o living crisis isn’t an accident o the policies o theTory-led government. It is a direct consequence o them. Because this Governmenthas overseen the slowest recovery on record and really seems to believe that theway an economy should grow is by looking a ter a tiny privileged ew at the topand squeezing everybody else. That’swhy they give a tax cut to millionairesat the same time as making li e harder

or millions o working amilies. That’swhy they promote greater and greaterinsecurity at work, planning to make it

easier or businesses to re, rather thanmaking it easier to hire.

FOREWORD BY ED MILIBAND AND ED BALLS

“The worsening of the cost ofliving crisis isn’t an accidentof the policies of the Tory-led government. It is a direct

consequence of them.”




Our country has to change direction.

We need to build a new economy whichre-establishes the connection betweenthe success o the country as a wholeand the success o Britain’s working

amilies. That’s what we call a OneNation Economy, built on the understanding that Britain’s working people are ourcountry’s greatest asset and so when they do well, Britain will do well too.

That depends on creating new, higher paying jobs in this country. It means competingwith the world on high skills, not low wages. Attracting the best businesses rom all

over the world to come here because they know that they can rely on a world-classwork orce. It also means releasing the energies o Britain’s small and medium sizedbusinesses, not just relying on the very biggest rms, as this government does at themoment. It means re orming our banking system so that nance is available to newcompanies as well as old. And it means taking on the barriers that hold our economyback, including real re orm o the big gas and electricity market that has burdenedmillions o British businesses with bills that are just too high.

Building an economy that works or working people again won’t be easy. A ter theailure and damage o the last three wasted years, we know that the next Labour

government will have to stick to strict spending limits. But we can grow and earn ourway to a better uture. And that’s what a One Nation Labour government would do.

Ed Miliband

Leader of the Labour Party

“a One Nation Economy, built

on the understanding thatBritain’s working people areour country’s greatest asset”

Ed Balls

Shadow Chancellor of the Exchequer



7


INTRODUCTION

How are we going to build an economy that works or working people, not just a ew

at the top? That has been one o the central questions Ed Miliband set Labour’s PolicyReview over the past year. This document sets out some elements o where that workhas led. It seeks to in orm debate within and beyond the Party as we look to deliver amani esto that can rise to the scale o the challenges Britain aces.

Those challenges are immense. And none is greater than the cost o living crisis. Priceshave risen aster than wages or 38 o the last 39 months that David Cameron hasbeen Prime Minister. And while amily budgets are squeezed, just as prevalent is adeep sense o insecurity in an economy that many working people know isn’t working

or them.

Just as they know the economy isn’t working or them, they know they have aGovernment that is doing the same. Trickle down economics, standing up or aprivileged ew, and engaging in a race to the bottom on living standards and insecurity

or everyone else; none o this is the answer to the cost o living crisis we are in themidst o . Cutting the taxes o a ew people at the top, whilst raising them or everyoneelse, won’t deliver the type o change people demand and deserve.

But our task is not to assume that people’s disappointment with David Cameron willtranslate into a renewed sense o trust in the Labour Party. We have to earn thattrust by offering not just a different team to this Tory-led Government, but a differentdirection or Britain.

The next Labour Government will have to be very different rom the last. We willace a decit that means that while in the past we could plan on the basis o rising

departmental spending, we will have to plan on the basis o it alling. As well as aairer approach to reducing the decit than the Tories, we will need a new approach to

delivering social justice in an era when there simply is less money around.

So our task is one o economic re orm. We must build greater airness into oureconomy rather than simply dealing with the consequences o it as it stands. This

document sets out how we make a start in doing that.

First, by recognising that that winning the race to the top in the 21st Century can’tsimply rely on a privileged ew creating wealth and letting it trickle down. We willsucceed only with the bulk o hard-working people o Britain playing their part in ournation’s success and being rewarded or doing so. That’s why we need, not just the50% who go on to university, but the orgotten 50% who do not to have a clear, goldstandard route through education and into the world o work. And it’s why we have totackle the exploitation o zero hour contracts and strengthen the minimum wage sothat those in work see a labour market that is set up or them to succeed not to maketheir lives ever harder.




Second, by backing those areas that will drive growth and create quality jobs. That’s

why we need a new approach to business taxation. In an era when money is tight wemust prioritise support or the hundreds o thousands o small businesses that arestruggling, not the biggest businesses that have seen large tax cuts in recent years.These are the businesses whose innovation and dynamism we are relying on to driveour economy on but which politicians too o ten think don’t matter to our uture.

And rom strengthening the Green Investment Bank to providing long term certaintyto the industry with a 2030 decarbonisation target, we will do government’s job:providing a ramework that let’s British business compete with the best in the world.

Third, it means tackling economic problems at their root, rather than dealing with thesymptoms. Bringing down the Housing Benet bill by building the homes that weneed, not by penalising disabled amilies with a bedroom tax; lowering low skilledimmigration by reducing exploitation and undercutting in our labour market, notsetting a target to reduce immigration that counts British people leaving as a success;building long-termism into the culture and corporate governance o boardroom Britain,not just bemoaning the act that we simply don’t invest enough to compete in the21st century.

Fourth, we need a dynamic private sector that creates wealth, rather than simplyextracting it. That means calling time on markets that aren’t working or Britain. Fromtrain operators to pension unds, energy companies to banks, we will be relentless inbreaking up the vested interests that are holding this country back.

It is a changed economic agenda rooted in our politics: a party changing to get backin touch with ordinary working people so that we can address the cost o living crisisthey ace.

The chapters below reect the work on economic re orm that has been carried outover the past twelve months. Over the coming months we will publish two urtherdocuments, setting out One Nation Labour’s plans or social and political renewal.

These will be submitted to the relevant policy commissions within the National PolicyForum and through that root play a part in building a mani esto worthy o the Britishpeople in 2015.

Jon CruddasPolicy Review Coordinator



9


The nancial crisis caused decits to rise across the world. Because of the

economic failure of the Tory-led Government over the past three years thedecit still remains high and will need to be addressed by any incominggovernment in 2015.

One Nation Labour’s priority is to put jobs and growth rst, with an approach tothe decit that puts a fair sharing of burdens at its heart. Our task is to unitenot divide Britain, so in tough times it is more important than ever that peoplecontribute according to their ability to do so.

Britain Today

The approach o the Tory-led Government has resulted in the slowest economicrecovery or one hundred years and alling living standards. While the United States,which took a more balanced approach to decit reduction, has an economy now4.6 per cent larger than it was be ore the nancial crisis, in the UK the economy isstill 3.2 per cent smaller. What sounds like abstract statistics has or ordinary amiliesmeant a cost o living crisis with alling wages, rising prices, and growing insecurity.

FAIR DEFICIT REDUCTION

Real wages

Source: ONS

-6

-4

-2

0

2

4

6

8

M a y - 1 0

J u l - 1 0

S e p - 1 0

N o v - 1 0

J a n - 1 1

M a r - 1 1

M a y - 1 1

J u l - 1 1

S e p - 1 1

N o v - 1 1

J a n - 1 2

M a r - 1 2

M a y - 1 2

J u l - 1 2

S e p - 1 2

N o v - 1 2

J a n - 1 3

M a r - 1 3

M a y - 1 3

J u l - 1 3

% c h

a n g e o n p r e v i o u s y e a r

Real wages

RPI

Wages




The Tories’ ailure to support living standards and growth means that they have

also ailed to bring down the decit. Borrowing is orecast to be the same this yearas it was last year and the year be ore, with the Tories borrowing £245 billion morethan planned during the course o this Parliament. At the time o the 2010 SpendingReview the Office or Budget Responsibility orecast that the decit would all to£18bn in 2015-16. They now orecast that it will be £96bn, even with the urtherdeep cuts to public spending which the Tories have announced.

Instead o supporting living standards and growth with a air approach to the decit,the Tories have given a tax cut to those with incomes o £150,000 or more. Thismeans an average tax cut o £100,000 or 13,000 millionaire. It is based on the

outdated idea that the route to a strong economy is tax cuts or the wealthiest thatsimply trickle down to everyone else. It has le t ordinary amilies bearing the weighto decit reduction, just as they ace the cost o living crisis o alling wages and risingprices. Labour would not be cutting the 50p income tax rate, but would be using themoney to protect tax credits instead.

One Nation Labour’s Approach

A Labour Government in 2015 will there ore ace a country in which amilies are beingsqueezed but also where a high decit remains. We will have to govern with much less

money around. The last Labour government was able to plan its 1997 mani esto onthe basis o rising departmental spending. The next Labour government will have toplan on the basis o alling departmental spending.

In tougher times, we will make tougher choices, but as we do so our commitment toairness will run through everything we do. A One Nation approach recognises that a

sustainable recovery will be made by the many, not just by a ew at the top. Fairness,rising living standards or the many, growth and decit reduction go together. It is onlywhen the millions o people on middle and low incomes are able to go out to work toraise the living standards o themselves and their amilies that we will see the tax

revenues to bring down the decit. It is only when those on middle and low incomesreceive a air reward rom the wealth which they create that we will see a broad-basedrecovery.

That is why a air approach to decit reduction will be at the heart o how One NationLabour governs. We would bring back a lower 10p rate o income tax, paid or by amansion tax on houses worth more than £2 million, helping those on middle and lowincomes. We have also set out plans to restrict the pension tax relie enjoyed by thoseon the highest incomes to pay or a Compulsory Jobs Guarantee to get the long-termunemployed back to work.



11


And the getting the decit down will require other difficult choices. We need to prioritise

and strike the right balance between universal and targeted support. So at a time whenthe public services that pensioners and others rely on are under strain, and the statepension is protected by the triple lock, it can no longer be a priority to continue payingthe winter uel allowance to the wealthiest pensioners. To underpin our approach we arealso carrying out a zero-based spending review – a root and branch review o every poundthe government spends rom the bottom up – which we have already begun and willcomplete in our rst year in office. We will also ask the Office or Budget Responsibilityto independently audit the costings o spending and tax commitments in Labour’s nextmani esto.

A One Nation Labour government will bring down the decit in a balanced way. It willmake airer choices on who bears the weight o decit reduction, including those on thehighest incomes. And it will build a recovery which is made by the many, supporting theliving standards o Britain’s hard working amilies in order generate the wealth we needto bring down the decit.

Key Facts:

• The Tories are borrowing £245bn more than planned over this Parliament,with the decit at the same level this year, last year and the year be ore.

• The cut in the 50p income tax rate has given an average tax cut of £100,000to 13,000 millionaires.

• Instead of investing for the future the Tories are planning to cut capitalinvestment by 1.7 per cent in 2015.

One Nation Labour policies:

• Labour would not be cutting the 50p income tax rate, but would be using themoney to protect tax credits instead.

• We would use a mansion tax on houses worth over £2m to re-introduce alower 10p rate o income tax, helping those on medium and low incomes.

• We would not continue paying the Winter Fuel Allowance to the richestpensioners.

• We will ask the O ce for Budget Responsibility to independently audit thecostings o spending and tax commitments in Labour’s next mani esto.



13


JOBS FOR THE FUTURE: BACKING SMALL

BUSINESS AND THE GREEN ECONOMY

In the past our economy has been too reliant on a narrow group of sectors, such

as nancial services, to drive growth. The growth in high paying jobs was alsoconcentrated in these sectors. But the high skill, high wage jobs of the futurewon’t come from the same places as before. We need to identify the sectors,areas and types of businesses who will be able to generate well paid and secure

jobs in future. The government cannot create those jobs, but as in other countrieswe can set policy to support those sectors, areas and types of businesses whichwill underpin our future success.

The opportunities from our transition to a low-carbon economy will be at theheart of our support for developing sectors. Across energy generation, energy

efficiency, housing and infrastructure, technological development means thatwith the right framework of support we can increase the chance that British rmsand British workers are able to make the most of the opportunity that exists. Theprize is very real - 400,000 additional jobs by 2020 - and the chance to generateproductive, high skilled and well paid jobs that would underpin a successful raceto the top. 1

Small and medium sized businesses also have a growing role in building arecovery made by the many. As analysis by Labour’s Small Business Taskforce,chaired by Bill Thomas, found that in the early 1970s there were fewer than 1

million small businesses and the consensus was that growth would be drivenby small numbers of very large corporations. Now there are nearly ve millionsmall and medium sized businesses, providing more than 50 per cent of GDP andforming a vital route into work with nine out of 10 people joining the privatesector from outside the labour market going into small or medium sized rmsor setting up their own business. Crucially, most jobs in the next 15 years willbe created by businesses which don’t yet exist. Supporting that dynamism andinnovation is the only way we’ll compete in a world that sees markets changingfaster than ever before.

Britain Today

Small businesses in the UK today are acing a double squeeze, with the cost o doingbusiness going up while they are still unable to get the support they need rom thebanks. Business Rates have risen by more than 10 per cent already this Parliament,with more than 10 per cent o members o the Federation o Small Businesses sayingthat they are now paying as much or more in Business Rates than they are in rent.Meanwhile, energy bills are the second highest outlay a ter wages, with average billsrising since 2010.

1 Renewable Energy Association, Renewable Energy: Made in Britain, 2012




Clean energy investment trends

Productive small businesses are not only acing these rising costs, but also cannot

access the unding they need to grow. As described in the chapter on banking below,the banking system is not supporting businesses that are creating jobs, with lendingto businesses alling steadily since 2010 and by £4.5 billion in the three months toMay.

The Tories’ priority has been to cut Corporation Tax or multinationals and largebusinesses. The UK needs a competitive rate o Corporation Tax or multinationals,but with their tax bills being cut by £10 billion over this Parliament there are realquestions about the balance o support between large and smaller rms. A urther cutin Corporation Tax is planned or April 2015. That would leave Britain with a 20% rate,

a lower rate than any other major developed country and equal with the likes o SaudiArabia and Russia.

Support or small businesses must be matched by investment in the growth sectors othe uture like the green economy. But it is only by creating the right policy rameworkthat we will attract the scale o investment we need. The Tory-led Government has

ailed to do this and investment has slumped. Large scale clean energy investmentell rom £7.2bn in 2009 to under £3bn in 2012 and its projected to decline urther

in 2013. 2 This has been widely blamed on the Government’s ailure to provide thepolicy certainty needed to de-risk investment. An unwillingness to commit to a 2030

decarbonisation target; signals that the Government would unpick the 4th CarbonBudget; an implicit policy bias towards gas over low carbon alternatives; and the slowpace o energy market re orm have all combined to destabilise the investment climate.

2 Source Bloomberg New Energy Finance, 2013.



15


This, in turn, is putting an estimated £180bn worth o investment at risk this decade. 3

Falling investment and uncertainty about the UK’s commitment to the green economyhas direct effects with less output in the economy. But the timing o this policy ailing,when the competition to see which countries will best seize the opportunities o thegreen economy, is particularly worrying. In the 21st century comparative advantage isas much about who got there rst and developed the specialisms and expertise, as itis about actors that are set in stone. The cost is real. Fewer opportunities or Britishbusinesses to buy and sell green goods and services, and crucially ewer high-skilled jobs across this sector has an impact both now and or the uture.


In an era when there is less money around your priorities have to play a much biggerrole in driving policy decisions. To help build an economy that works or workingpeople One Nation Labour will support the small businesses who, as Labour’s SmallBusiness Task orce has showed, have the innovation and dynamism to grow theeconomy and create new jobs. That is why we will not go ahead with the Tories’additional Corporation Tax cut or multinationals and large businesses in 2015-16, butwill use the money to cut and then reeze Business Rates or small and medium sizedbusinesses instead. This cut in 2015-16 and reeze in 2016-17 will mean an averageBusiness Rates saving o nearly £500 on 1.5 million properties. This compares to just

80,000 businesses that would benet rom a cut in Corporation tax. It shows thatwith the right choices we can build an economy made by the many.

We will also set up a proper British Investment Bank to help small businesses getaccess to the unding they need, combined with a network o regionalbanks which understand the needs o businesses in theirlocal areas. We are driving the campaign to bring SmallBusiness Saturday to the UK. And we must tackle theculture which re uses to take pride in pro essions suchas engineering and prevents good manu acturing rms

accessing schools to talk to young people. We shouldbe supporting employers trumpeting British businesssuccess, such as through the Made in Britain Mark.

with the rightchoices wecan build an

economy madeby the many

3 Green Alliance, The Future o UK In rastructure, 2013.




When it comes to specic sectors Labour will back low-carbon industries by givingthem policy certainty. Those investing in green energy can do so with certainty overthe return they will make. That is why we have committed to the decarbonisation othe power sector by 2030 and have called on the Government to support us. We willalso commit to the new system o contract or difference and capacity auctions beingintroduced through the Energy Bill. And we will create a new Energy Security Boardwith statutory responsibility or identi ying our energy needs, taking co-ordinatedaction to meet this need and providing a clear ramework or investor certainty.

The Green Investment Bank should also be playing a key role in providing unding,which is why we have said that it should have borrowing powers and become a realbank. Finally, we have committed to actively use the public sector to boost demand orgreen goods and services.

We need to ensure that investment in the green economy creates opportunities orBritish rms and workers. British manu acturing should be producing the plants,equipment and technology or the clean energy sector and our small and mediumsize rms should be a critical part o the supply chain. And this will mean more o the

high skilled jobs we need to win the race to the top. Labour is committed to an activeindustrial policy to ensure British rms and workers benet rom long-term policysupport or the green economy. This is about ensuring we are doing everything we canto secure or Britain a competitive advantage in the green economy or the uture.

Small Business Saturday

Small Business Saturday is a day when people are encouraged to support the smallbusinesses who are at the heart o their local communities. It has been a hugesuccess in the United States, where it was supported by President Obama and ledto 100 million Americans spending $5.5 billion with small businesses last year.

Labour’s Shadow Business Secretary, Chuka Umunna MP, has led the campaign tobring a Small Business Saturday in the UK and brought together a movement osmall business organisations and councils to make it happen. It will take place on 7December and will benet small businesses on the busiest shopping day o the year.



17


Key Facts:• Corporation Tax paid by multinationals and large businesses is being cut

by £10 billion over this Parliament, while Business Rates paid by small andmedium sized businesses have increased by more than 10 per cent.

• More than 10 per cent of members of the Federation of Small Businesses arepaying as much or more in Business Rates as they are in rent.

• Nine out of 10 people joining the private sector from outside the labourmarket going into small or medium sized rms or setting up their own

business.• Energy investment has fallen from an all-time high of £7.5bn in 2009 to under

£5.3bn in 2012. The total loans made available to nance large scale greenprojects has allen more dramatically rom £7.2bn in 2009 to £3bn in 2012

• Support for the green economy could unlock 400,000 additional high skilled jobs by 2020.

One Nation Labour policies:

• Labour will not go ahead with the Tories’ additional Corporation Tax cut forlarge businesses and will cut and then reeze Business Rates or small andmedium sized businesses instead.

• We have accepted the recommendation of Labour’s Small Business Taskforcethat we should support a network o regional banks which will understand andmeet the needs o businesses in their area.

• We are committed to a 2030 power decarbonisation target and a clear deliveryplan to achieve this.

• We will create a new Energy Security Board with statutory responsibility foridenti ying our energy needs, taking co-ordinated action to meet this needand providing a clear ramework or investor certainty.

• We would expand the Green Investment Bank and give it borrowing powers sothat it can provide the unding required.



19


ONE NATION BANKING

The banking system should be serving our businesses, providing the funding they

need to start up and grow. Small businesses in particular rely on bank nance,and should be able to trust in the banks to understand their needs and act in theirbest interests. That’s not the banking system we have now.

Turning this around is at the heart of a One Nation Labour approach, because itis only by backing our small businesses that we will be able to generate the jobswe need and build a broad-based recovery. We need a One Nation banking systemthat serves Britain, rather than having Britain serving our banks.

Britain Today

Almost every day we are aced with the ailure o our banks. Lending down, bonusesup and a culture o making a ast buck rather than taking responsibility.

Lending to businesses has allen steadily since 2010, including by another £4.5 billionin the three months to May this year, meaning that they are unable to get the undingthey need to invest, create jobs, and raise living standards.

The nancial crisis, caused by excesses in the banking system, led receipts to all by10 per cent and opened up the decit. But it also uncovered scandals such as themis-selling o Payment Protection Insurance – where the banks have been orced topay more than £17 billion in compensation – and the mis-selling o complex interestrate products to small businesses.

Change in Bank Lending to Small and Medium-Sized Enterprises,(£ million since April 2011)

Source: : Bank ofEngland, Bankstats




Case Study: Bank Mis-selling to Small Businesses

The Hendersons run a sign-making company in Putney, South London. They weresold an “interest-rate dual-amortising swap product” by the bank which they had joined 40 years ago and trusted. Jane Henderson describes how she was asked bythe bank’s broker: “Are you ready to trade?” She thought that it was just a loan. Butthey lost hundreds o thousands o pounds – and hal their staff lost their jobs – ona nancial bet that still cost them money even a ter the loan was paid off.

They are among 40,000 businesses who have been sold ‘interest rate swaps’. Aninvestigation by the Financial Conduct Authority ound that in nine out o tencases mis-selling had taken place.

These show a ailure at the very heart o our banking system. Too many peopleworking at the top o our banks lost sight o their responsibility to support the realeconomy and took excessive risks to enrich themselves at the expense o ordinarypeople. The last Labour government, along with governments round the world, shouldhave done more to prevent the crisis with tougher regulation. At the time the Torieswere calling or urther deregulation and even now they re use to introduce properregulation and re orm o our banks.

They have re used to give regulators the powers to break up the banks i they donot ully implement re orm and change their culture. They have cut taxes or thebanks, re using to repeat Labour’s bankers’ bonus tax. Bonuses at the banks andother nancial sector rms rose by 82.7 per cent in April thisyear as they rushed to take advantage o the Tories’ tax cut

or millionaires. The Government’s attempts to increase banklending to businesses – such as the so-called ‘Project Merlin’deal with the banks, the National Loan Guarantee, and theFunding or Lending Scheme – have ailed to do so.

We need a OneNation banking

system that servesBritain, rather thanhaving Britain

serving our banks



21



Labour will develop the One Nation banking system we need – banking which worksor every region, every sector, every business and every amily in the UK. London is

one o the world’s great nancial centres and Britain’s banking sector is one o ourmost important employers. We must ensure that it operates to support the rest o theeconomy, through ve key areas o re orm.

First, real separation between investment and high street banking. I we do not seere orm o the banks with a tough ring ence between “casino” banking, and high streetbanking, alongside a genuine change in banking culture by 2015, Labour will breakup the banks. A backstop power to deliver this break up was recommended by theParliamentary Commission on Banking Standards, but rejected by the Tories.

Second, we will set up a proper British Investment Bank to support nance or smalland medium sized businesses. As the report by Nicholas Tott or the Labour partyrevealed, all the most success ul economies around the world recognise the need

or state support or business lending: rom Asian capitalist states like Singapore,through active industrial states like Germany, to supposedly ree market states like theUSA. The Government’s response to our proposals, setting up a Business Bank, is toounambitious and too slow to provide the support we need.

Third, the consultation we have run with small businesses around the country overthe last year has highlighted a deep distrust o the banks. Businesses do not believethat the banks understand them or their local economies. We have there ore acceptedthe proposal o Labour’s independent Small Business Task orce to support a regionalbanking system which reaches out to businesses up and down the country.

Fourth, we will tackle excessive pay in our banking system. Entrepreneurs and wealthcreators should be rewarded, with exceptional rewards or exceptional per ormance.But too o ten pay and bonuses in our banking system reward ailure and is out o allproportion to the contribution being made. That is why we have proposed a repeat

o the bankers’ bonus tax to provide a Compulsory Jobs Guarantee or young people.Banks should also have to put an ordinary member o staff on the committee whichsets executives’ top pay and the Government should implement Labour’s proposal –already in law – to increase transparency on pay. Controlling pay would mean that thebanks would have more money available to lend to small businesses.

Finally, there should be Code o Conduct or bankers so that those who act recklesslycan be struck off – a proposal which now has cross-party support. Bankers who attemptto rip-off their customers or take excessive risks must know that they will personally

ace the consequences.




Banks must not be isolated rom the rest o the economy. We need a One Nation

banking system which will serve the whole o the country. These policies to re orm ourbanks will help underpin a recovery made by the many, supporting the growth and jobswe need to raise living standards.

Key Facts:

• Lending to businesses fell by £4.5bn in the three months to May 2013.

• Bonuses in nancial and business services rose by 82.7 per cent in April this

year as high earners took advantage o the Tories’ tax cut or millionaires.• The banks have already had to pay out more than £17bn for mis-selling

scandals, and the regulator has ound that in more than 90 per cent o casesthere were aws in the sales o complex interest rate products to businesses.

• It’s no wonder small business doesn’t get a good deal when ve bankinggroups hold over 90 per cent o the small business banking market, limitingcompetition in the market.

One Nation Labour’s policies:

• We would be repeating the bank bonus tax to fund a Compulsory JobGuarantee or young people.

• If we do not see reform of the banks with a tough ringfence between casinobanking, and high street banking, alongside a genuine change in bankingculture by 2015, Labour will break up the banks.

• We are proposing a proper British Investment Bank to support lending tobusinesses, and a regional banking network to serve every part o the country.

• We will introduce a Code of Conduct for bankers so that those who actrecklessly or who are ound to be mis-selling can be struck off.



23


AN ENERGY MARKET PEOPLE CAN TRUST

Annual energy bills have increased by almost £300 for families since 2010, 4 and

make up one of the core elements of the cost of living crisis the country faces.Families that are being squeezed by rising bills can’t afford to buy the things thatBritish businesses try to sell and small businesses struggling to balance theirbooks can’t innovate or take the risks necessary to ourish and succeed. Both seeprices rising but never falling, and conclude that this is a market that works forsome but not for them.

But this is a market that is too important to our country to leave in a state ofmistrust and uncertainty. Instead we need a new settlement that provides certaintyfor those looking to invest, but that consumers can trust to work for them.

Britain Today

The energy market is dominated by six big companies who generate most o thepower we use and supply gas and electricity to over 98 per cent o homes. Lack ocompetition, limited transparency and weak regulation have blunted the incentives orthese companies to keep prices down.

This has become acutely clear in recent years as price uctuations in the wholesalemarket have been used to drive up the prices people pay.

This has happened because when the price suppliers pay or their energy (thewholesale price) increases, energy companies pass this on to consumers. But whenit drops, consumers do not see the benets through reductions in bills. 5 So whenwholesale electricity prices increased in 2008, or example, energy companies passedmuch o this on. But when wholesale prices declined by 46% in 2009, average pricespaid by amilies dropped by only 5% and business by 15%.6 Four years later andconsumers are still waiting to see the ull decline.

4 O gem, Supply Market Report, 2013.5 Which?, The Imbalance o Power, Wholesale Costs and Retail Prices, 2013; Consumer Focus http://www.consumer ocus.org.uk/policy-research/energy/paying- or-energy/wholesale-retail-prices6 Based on DECC Updated Energy and Emissions data. October 2012. Historical data is taken rom central scenario. All prices are inthe real 2012 prices




This has resulted in a growing mark-up between the price energy companies pay orenergy and the price they charge their customers. For example, the average mark upon electricity sold to households has risen rom 7p between 2001 and 2009 to 9.2pbetween 2010 to 2013.

Source: Based on DECC Updated Energy and Emissions data. October 2012. Historical data is taken from central scenario.All prices are in the real 2012 prices.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

E l e c t r i c i t y m a r k u p p / k w h

Mark up on wholesale electricity prices

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0.0

1.0

2.0

3.0

0.5

1.5

2.5

3.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

G a s m a r k u p i n p / k w h

Mark up on wholesale gas prices

Mark-up domestic electricity

Mark up commercial electricity

Mark up on domestic gas

Mark up on commercial gas



27


prices through to January 2017. This will prevent urther increases in mark-ups on

the back o the major increases in this Parliament and save signicant sums orhouseholds and businesses.

But action rom a One Nation Labour government must be matched by action romeveryone to reduce the energy we use so that our bills are affordable in the long-run.The Green Deal is ailing to deliver. Since its launch, only 384 deals have been signedup to and just twelve have gone live. This is woe ully inadequate so we will overhaulthe Green Deal and replace it with a new Energy Save scheme to help reduce theenergy we use.

Finally, radical re orm must be combined with strong action to ensure increasedinvestment in our uture energy supply. So we will provide policy certainty by settinga 2030 power sector decarbonisation target; commit to the new system o contract

or difference and capacity auctions being introduced through the Energy Bill; give theGreen Investment Bank borrowing powers; create a new Energy Investment Board; andactively boost demand or clean energy through the public sector.

Key Facts:

• Annual combined energy bills have increased by almost £300 for families overthe last 3 years.

• Wholesale prices declined by 46% in 2009 but average prices paid by familiesand businesses only dropped by 5% and 15% respectively. Four years laterand consumers are still waiting to see the ull decline.

• Clean energy investment fell from £7.2bn in 2009 to under £3bn in 2012 andits projected to decline urther in 2013 under David Cameron.





• Pass legislation to force energy companies to separate their generation andsupply businesses and track all electricity and gas on open exchanges.

• Introduce a simpli ed tari structure that gives ordinary people more powerto get the best deal rom the market.

• Abolish Ofgem and put in place a tough new energy watchdog with the powerto orce energy companies to pass on price cuts when wholesale costs all andthe market does not respond.

• Take immediate action upon entering o ce to rebuild trust in the market byreezing prices through to January 2017.

• Replace the Green Deal with a new Energy Save Scheme.

• Support investment by committing to a 2030 power sector decarbonisationtarget alongside the new re orms being introduced through the Energy Bill,giving the Green Investment Bank borrowing powers, create a new EnergySecurity Board and boosting demand or clean energy through an active publicsector.



29


RUNAWAY REWARDS AT THE TOP…

Pay at the top has seen huge increases in Britain in recent decades. These

increases have been justied on the basis that, while they might increaseabsolute inequality, large rewards to those at the top were necessary to driveup living standards for the many. ‘Trickle down’ economics assumed that suchrewards would create incentives for innovation and entrepreneurialism, and thateveryone would benet from the resulting growth, jobs and better wages.

On the basis of this approach we have seen dramatic rises in executive pay,year on year. But those pay rises have too often taken place regardless of theperformance of the company concerned or the situation of the wider workforce.

Alongside the scale of such payments, the structure of rewards for those atthe top has reinforced a focus on short-term prots, weakening incentivesfor investment and innovation, while helping to create a more volatile andunbalanced economy. This has led to a bias towards competing on low wage,low skill business models. In so doing top pay, far from oating all boats, hascontributed to the cost of living crisis Britain faces.

We can no longer simply rely on a few at the top to drive growth. A One NationLabour government would turn this situation around by tackling excessive toppay where it is undeserved and taking action to ensure the gains from companysuccess are more equally shared.

Britain Today

Pay packages or top earners have increased dramatically over the last thirty years, aroutstripping improvements in the pay o ordinary workers over this period. Those atthe top o business have enjoyed increases o more than 3000% overthe past 3 decades 11 , leading to levels o wage inequality notseen since the 1930s. Average chie executive remunerationin FTSE 100 companies rose rom 11 to 88 times the

average wage between 1980 and 2011.12

We can

no longersimply rely on

a few at the topto drive growth

11

The High Pay Commission (2011) Cheques With Balances: Why tackling high pay is in the national interest, London12 Figures quoted in Bell and Van Reenan (2011) Firm Per ormance and Wages: Evidence rom across the corporate hierarchy,London: Centre or Economic Per ormance, LSE and Hutton (2011) Hutton Review o Fair Pay in the Public Sector: Final report,London: HM Treasury




13

Tatton, Elston and Matthews (2010) What are we paying or? Exploring executive pay and per ormance, London: High PayCommission14 High Pay Centre (2012) The State o Pay: One year on rom the High Pay Commission, London: HPC

Source: Analysis from the Resolution Foundation using data from ONS, Annual Survey of Hours and Earnings.

Average weekly wages by percentile (RPI adjusted), 1975-2010

Since the 1980s top pay has been characterised by increasingly complex packagesmade up o per ormance-related share options and bonus schemes that seek to alignthe interests o managers with those o the rm. While it is right that those whowork hard, generate wealth and create jobs are rewarded, too o ten these changesencouraged CEOs and senior managers to ocus on short-term prots and maskeddisproportionate pay increases that bore little relation to long-term company success.Between 2000 and 2010 average CEO remuneration in FTSE 350 companies increasedby 108%, while the value o those companies rose by just 8% over the same period. 13

These trends have continued through the economic downturn, uelling a public debateabout rewards or ailure. In 2012, the average FTSE 100 chie executive saw theirannual pay packet rise by 12% to £4.8m, despite a stagnating economy and alling realwages. 14 In some sectors bonuses are no longer a reward or exceptional per ormance,but have become a matter o routine and entitlement.



31


15

ONS Average Weekly Earnings Dataset, Labour Market Statistics, August 2013, http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/august-2013/dataset--earnings.html

This is not just un air. It is bad or business and our economy. In nance the ocus on

short-term value over long-term success drove a culture o risk-taking that helpeddrive the global nancial crisis in 2008. And every time a chie executive gives himsela massive pay rise - more than they deserve or the company can bear - it underminestrust within that company and across society.

Yet the Tories still believe that we get economic success by ocusing on rewards orthe privileged ew. They have re used to implement the recommendations o theWalker review requiring banks to publish details o the number o staff with pay oover £1m, which the last Labour Government legislated or, and rejected calls topublish company pay ratios. Instead their approach to growth is to introduce a tax cut

or millionaires, and to do nothing about the return o big bonuses in banking. In April2013, bonuses in nance and business services were up by 82.7% on the previousyear as high paid bankers de erred their payments to take advantage o the 50p taxcut.15 Millions o pounds o revenue will have been lost as a result, at a time whenpeople across the UK are acing a cost o living crisis.


An unequal recovery won’t be a stable recovery. A One Nation approach starts romthe understanding that sustainable growth will be built by the many and not just a

ew at the top. That means hard-working people being rewarded and motivated inthe workplace, and having the money to buy the goods and services that businessesare selling. This means changing the way we run our economy so that rewards orcompany success are more airly shared. And it means creating a boardroom culturethat rewards wealth creation, not ailure.

Real transparency is crucial to making that happen. Companies should be required topublish the ratio o the pay o their top earner compared to the average employee andto justi y i that ratio is excessive. I it can be justied by per ormance, they shouldhave nothing to ear. I it can’t it is in the company’s long-term interests or that to be

made public.

We need shareholders to better exercise their responsibilities to scrutinise top pay,because in the end pension unds are made up o the investments o hundreds othousands o hard working amilies who deserve to know that those investing ontheir behal are making the right decisions. So institutional investors should have todisclose how they vote on pay and other issues.




Key Facts:

• Average chief executive remuneration in FTSE 100 companies rose from 11 to88 times the average wage between 1980 and 2011.

• Between 2001 and 2011, average CEO remuneration in FTSE 350 companiesincreased by 108%, while the value o those companies rose by just 8% overthe same period.

• In 2012, the average FTSE 100 chief executive saw their pay rise by 12%

to £4.8m, at a time when the economy was stagnant and pay across theeconomy was alling in real terms.


• Increase transparency by requiring companies to publish the ratio of the pay oftheir top earner compared to the average employee and the pay packages othe ten highest paid employees outside the boardroom

• Look at how to simplify executive pay packages so that they comprise a basicsalary, with only one additional per ormance related element where necessary

• Put an employee representative on remuneration committees, ensuring theviews o ordinary staff are heard when decisions to award top pay packagesare made

• Require investment and pension fund managers to disclose how they vote onpay and all other issues

• Introduce binding votes on remuneration packages that work, by ensuring

shareholders must approve a decision in advance, not a ter the event

Getting top pay right also means having pay structures that people understand

and which don’t encourage short-term decision making. So we would also simpli ytop pay packets to make them easier to scrutinise and introduce binding votes onremuneration packages that ensure shareholders must approve a decision in advance,not a ter the event.

And we also need to recognise – as many great companies do – that rms areaccountable to their workers as well as their shareholders. So we will put an employeerepresentative on remuneration committees, ensuring the views o ordinary staff areheard when decisions to award top pay packages are made.



33


…LOW PAY AND INSECURITY

FOR EVERYONE ELSE

For many decades rising prosperity benetted the bulk of working people. As the

economy grew, hard working families saw their incomes rise. They were able tobuy their own home, a car, and take holidays.

But that assumption has broken down. While those at the top have continuedto do well, middle earners are no longer guaranteed to share in our nation’ssuccess. In recent years, people on middle and low incomes have experienced anunprecedented squeeze on living standards fuelled by falling wages, rising pricesand increasing job insecurity. Turning that around is central to the change a OneNation Labour government will need to bring to Britain.

Britain TodayThe vital link between the growing wealth o the country as a whole and amilynances has broken down. In recent decades even when productivity growth hasbeen strong, there gains were not passed on in increased earnings or the averageemployee. Average wages rst started to all behind productivity increases in theearly 1990s. 16

Separation of UK trends in hourly earningsand productivity in early 1990s

16 Commission on Living Standards (2012) Gaining rom Growth, London: The Resolution Foundation

Notes: All data is controlled for the GDP deator. “Workers” includes employees and self-employed. Reproduced courtesy of the ResolutionFoundation, using data from ONS, General Household Survey (GHS), Labour Force Survey (LFS) and Annual Survey of Hours and Earnings (ASHE)

0.9

1

1.1

1.2

1.3

1.41.5

1.6

1.7

1.8

1.9

2

2.1

2.2

1985 1990 1995 2000

I n d e x ( 1 9 7 2

B a s e Y e a r )

Labour Productivity: GDP per Hour

LFS Workers Median Hourly Earnings




Some o this squeeze ollows rom long-term changes in our economy. Over the last

ew decades less o what our economy produces has been paid out in wages and morein prots to owners and shareholders. But this is only a small part o the story. Thoseat the very top o business have also gained a much higher proportion o the wage billthan middle and low earners. Since the late 1970s wages have grown almost twice as

ast or the top 10% as they have or those in the middle. Since 1979, 22p o everyextra pound earned has gone into the pockets o the best paid 1%. This tiny raction othe work orce now takes home more than 14% o all earnings, up rom 6% in 1979.17 At the same time international competition, economic migration and greater labourmarket exibility have increased the pressure aced by those in low paid jobs.

While many o these actors are long-term, the problem now is that things aregetting worse not better. People are working harder than ever be ore. But or artoo many wages are alling and prices are rising. Real wages have allen or 38 outo the 39 months that David Cameron has been Prime Minister, many more thanany Prime Minister on record. Working people are today on average almost £1,500worse off a year than in 2010. Official orecasts suggest that over the course o thisParliament they will have lost a total o £6,660 in real terms. 18 Job insecurity andunderemployment have also risen signicantly, with over 1.4 million people working

ewer hours than they would like and a sharp rise in casual and temporary work. 19 A recent survey ound that more than hal o all adults in Britain are struggling tokeep up with their bills and debt repayments, up rom a third in 2006. 20

For the Conservatives this insecurity is not a problem, it is their entire economicstrategy. David Cameron o ten talks about the “global race”. It is essential that wecan compete with China and India and others. But the Conservative vision is a race tothe bottom in wages and skills, rewarding those at the very top but leaving everyoneelse squeezed as never be ore. While the Tories now say they support the minimumwage, having opposed its introduction, the truth is that they have not backed wordswith action. The number o completed inspections carried out by HMRC in relation to

National Minimum Wage en orcement more than halved a ter David Cameron tookoffice and there have been just two prosecutions or National Minimum Wage offencessince 2010. 21

17

High Pay Centre (2013) Top to Bottom: Understanding Fairer Pay, London: HPC18 Based on OBR projections, see http://www.labour.org.uk/uploads/ee276edc-9d40-2934-992c-5168aed82f .pd19 Over 2 million people are now working part time or temporary jobs because they are unable to nd ull time or permanent work.House o Commons library note, based on ONS data April-May 201320 Money Advice Service 2013: https://www.moneyadviceservice.org.uk/en/campaigns/uk-money-habits-study21 Hansard, written answer, 18 April 2013, Column 521W



35


Instead o tackling job insecurity, the Tory-led Government has made it easier to re

people by doubling the period an employee must have worked or a rm be ore theycan le an un air dismissal claim and introducing charges or those who take their caseto tribunal. Downing Street even toyed with the call rom venture capitalist AdrianBeecro t to give small businesses the power to re at will through compensatedno ault dismissal – a proposal that could have affected more than 3.6 millionprivate sector workers and was only dropped when it was rejected by the businesscommunity. At a time o high unemployment, we need to make it easier to hire people,not re people..

So it is not surprising that David Cameron has been silent on the increasing prevalence

o ‘zero-hour contracts’ in some parts o the economy. One survey estimates thata million people could be working on these arrangements 22. This exibility works

or some, but the lack o rules around the appropriate use o these contracts leavesscope or exploitation and abuse. In some cases zero-hours workers are requiredto be available or long periods without any promise o work. Some are required towork exclusively or one employer despite having no guarantee o work. And someemployers appear to be using zero-hours contracts despite the act that employeesare in practice working regular hours.

Britain’s economy is not working or working people. We cannot go on with an

approach that simply promises more o the same: year a ter year o squeezed livingstandards or the majority o working people.


The Labour Government took signicant action through the introduction o theNational Minimum Wage and tax credits to help working amilies. Alongside thoseapproaches the next Labour Government will need to ocus on the type o economywe are building and how that can help to tackle the cost o living crisis Britain aces.That is how we will tackle the new inequality: the widening gul between those at the

very top and everyone else.

One Nation Labour believes that a sustainable recovery relies on work that paysor the many, not just a ew at the top. You cannot build a lasting recovery on the

consumption o the richest alone. Instead we will build an economy that works orworking people by taking action to tackle the low pay and insecurity that is uellingthe cost o living crisis.

22

CIPD Press Release, 5th August 2013: http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2013/08/05/one-million-workers-on-zero-hours-contracts-nds-cipd-study.aspx




First, we would support the campaign or a living wage by requiring listed companies

to report on whether or not they pay the living wage. We would look or nationalgovernment to ollow the lead o Labour Councils in taking the living wage intoaccount when awarding procurement contracts. And we are exploring how we mightestablish Living Wage Zones or areas where enough employers are prepared to paythe living wage. These would create incentives by sharing the savings to the taxpayerwith rms and areas that help to tackle low pay and boost the numbers o better paidand higher skilled jobs on offer.

Second, we need a airer tax system. One Nation Labour would reintroduce a lower10 pence starting rate o tax, paid or by a tax on houses worth over £2 million.

This would benet 25 million taxpayers on low to middle incomes.Third, we would take action to tackle insecurity in the workplace. Flexibility hasbenets, but exploitation needs to be stopped. So we would stamp out the un airpractices and abuses associated with zero-hours contracts: banning employers rombeing able to require zero-hours workers to be available on the off-chance that theywill be needed; stopping employees rom being required to work exclusively or onerm i they are on a zero hour contract; and banning the use o zero-hours contractswhen employees are in practice working regular hours.

And ourth, we would protect working people rom theirwages and conditions being undermined by strengtheningthe National Minimum Wage – increasing maximum nes

or those who deliberately pay below the minimumwage to £50,000, the same level as or y-tipping, andgiving local authorities as well as the HMRC a role inen orcement. The next Labour Government will urtherstrengthen the minimum wage, with Alan Buckle,Deputy Chairman o KPMG leading work on how we makethat happen.

Fi th, we will help tackle the cost o living crisis and makework pay by extending ree childcare or 3 and 4 year olds rom15 to 25 hours per week or working parents. This will be paid orby an increase in the bank levy.

we would stampout the unfair

practices and abusesassociated with zero-

hours contracts



37


Key Facts:• Prices have risen faster than wages for 38 out of the 39 months that David

Cameron has been Prime Minister – more than any Prime Minister on record.

• Working people are today an average of almost £1,500 a year worse o thanin 2010.

• Job insecurity and underemployment have also risen signi cantly, with over1.4 million people working ewer hours than they would like and a sharp risein casual and temporary work.


• Support the campaign for a living wage by requiring listed companies to reporton whether or not they pay it, using government procurement to promotethe living wage, and establishing Living Wage Zones sectors or areas whereenough employers are prepared to pay the living wage.

• Reintroduce a lower 10 pence starting rate of tax, paid for by a tax on houses

worth over £2 million.

• Ban the exploitative use of zero-hours contracts, so that rms can’t requirezero-hours workers to be available on the off-chance that they will be neededor that they work exclusively or them. We will also ban the use o zero-hourscontracts when employees are in practice working regular hours.

• Increasing the maximum ne for those who deliberately pay below theminimum wage to £50,000, the same level as or y-tipping.

• Strengthen the minimum wage with Alan Buckle, Deputy Chairman of KPMG,

leading work on how we make that happen.

• We will help tackle the cost of living crisis and make work pay by extendingree childcare or 3 and 4 year olds rom 15 to 25 hours per week or working

parents. This will be paid or by an increase in the bank levy.



39


BUILDING LONG TERMISM

INTO THE ECONOMY

Different economies compete in different ways. Much of that difference is routed

in the nancial, corporate governance and cultural incentives that sit behind thedecisions rms make. In particular those incentives shape the business modelsrms adopt, and the investment decisions they take.

Getting those incentives right is crucial to building the high skill, high wage,economy we need if we are to win the race to the top and raise living standards.

Making that happen means overcoming the widespread culture of short-termismthat for too long has held our rms back. One Nation Labour agrees with much ofBritish business that building an economy that works for working people meansgiving management the space and incentives to invest for the long-term ratherthan simply focusing on getting through the next few months.

Britain Today

Business leaders, economists, trade unions and some investors all agree that thepressure or companies to make a ast buck rather than take a long-term, sustainableview is becoming an entrenched and worrying eature o Britain’s economy.

The Cox Review – commissioned by Labour – demonstrated how short-termism curtailsambition, inhibits long-term thinking and provides a disincentive to invest in research,

training, recruitment and skills.

At the heart o the problem lies a market ocus on short-term prots as the leadindicator o management per ormance, with less attention paid to rms’ potential.Quarterly reporting o prot levels to the markets is seen by many business leaders ascontributing to this culture.

The nature o share ownership in the UK also has an impact. The world where shareswere held or long periods o time by committed shareholders is long gone. The TUChas pointed out that at the end o 2008, 41.5% o UK-listed shares were owned by

investors rom outside the UK who will nd it harder to develop engaged relationshipswith the rms they invest in.

Existing rules also do little to ensure that institutional investors act in the long-terminterests o the companies they are investing in or o the ordinary savers whosemoney they are investing.

The eet ootedness o investors that are ocused on short-term prots alongside theshare price o ten providing the lead measure o a rm’s success seriously limits theability o a rm’s management to take a long-term view o creating value.




Amongst the results o this eature o our economy is a tendency to engage in drastic

cost-cutting and staff-shedding whenever revenue growth ails to keep up withexpectation. It also discourages expenditure on research and development, which theKay Review pointed out has been declining steadily as a percentage o GDP.

Short-termism doesn’t just harm individual companies; a ailure to look to and investin the longer term can be to the detriment o entire industries and have a signicantimpact on the competitiveness and economic prosperity o our country as a whole.Winning a race to the top with high skill high wage business models does not happenby accident. It requires investment. The most telling eature o the short-termism thatdogs Britain is that the UK has the lowest rate o investment as a share o GDP o any

G8 country.

G8 investment

Source: House of Commons Library calculations

And while most G8 countries have increased investment as a proportion o nationalincome since 2010, the UK has seen the biggest all o any G8 country other than Italy.

The Government is also ailing to deliver on in rastructure, which is essential to theUK’s long-term ambitions. Just seven o the 576 projects listed in their in rastructurepipeline are nished and less than 20% have begun construction. Meanwhile,initiatives like UK Guarantees are underper orming, with just two projects havingreceived a guarantee so ar, over a year since the scheme was announced.

The Cox Review identied the causes o short-termism as: the way in which equity

markets now operate; the lack o nancing mechanisms to help smaller companiesgrow and develop; and the short-term ocus o governments.



41



One Nation Labour has made the case or changing the rules and incentives withinwhich rms operate to better support productive rms. These rules need toencourage long-term investment rather than short-term speculation so we can makeour economy stronger, more balanced and better able to attract new investmentand create the skilled jobs or the uture. That is the sustainable way to boost livingstandards.

Central to this is a ramework that helps rms take risks, innovate, not rest on theirlaurels; supports them in investing in their people, not poaching trained workers romothers; and allows them to pursue the creation o sustainable value over the long-term, rather than simply prioritising the ast buck.

To help address this Labour has said quarterly reporting rules should be abolished tohelp shi t the emphasis away rom a ocus on short-term prots towards long-terminvestment.

Our takeover rules also need re orm. It’s wrong that short-term speculators who holdshares or days or even hours have the same voting powers as those investors whoare in it or the long-term and support value creation. So to help tackle this problemLabour has said we should restrict who should be able to vote on a takeover to those

already holding shares when a bid is made, giving long-term shareholders a greatersay.

A ailure to tackle short-termism can also impact directly on the living standards oordinary people up and down the country. Many pension unds and their advisorsprioritise their own ees and the short-term per ormance o their unds. This eatsaway at the savings and pensions o ordinary workers. So Labour is clear there shouldbe duties on investors to act in the best interests o ordinary pension savers and alsoto prioritise the long-term growth o companies they are investing in over short-termprots. These duties should be put in the Stewardship and Corporate Governance

Codes which companies and investors have to ollow.

Government too needs to take a more long-term approach when it comes to themajor investment decisions acing the UK. Too o ten the country does not haveappropriate mechanisms to promote clear decision making and actually deliver criticalin rastructure when and where it is needed. The Armitt Review, commissioned byLabour, has recommended a coherent 25-30 year national in rastructure strategy. Thiswould mean a new independent National In rastructure Commission to assess the UK’sin rastructure needs in consultation with stakeholders, make recommendations to theGovernment, and then monitor its implementation. Only a commitment to long-termdecision making will ensure the UK is equipped or the uture challenges we ace.



43


BACKING THE FORGOTTEN 50%

For years we have had governments which focus largely on the 50 per cent of

young people who go to university. That still matters hugely. But it is now timeto put things right for the young people who don’t plan to go to university, the‘Forgotten 50 per cent’.

Trickle down economics told us that the success of a country was determined just by the few at the top. Wealth would trickle down so it did not matter ahuge amount what those on lower incomes did. But that’s not what happened.Succeeding as a country in the 21st Century, winning the race to the top, meansunderstanding that all our young people must play their part in making thathappen.

Making that a reality means providing clear routes for these young people fromschool, into training and good quality jobs, to match the route from school, ontouniversity and a graduate career. It will help us build a different sort of economy,one in which all young people maximise their potential, develop high levels ofskill and knowledge, and contribute to growth. It will also play a part in tacklingthe cost of living crisis that has seen wages stagnate for too many for too long.To do this we need to raise the status and quality of vocational learning and raisedemand for skills in the labour market.

Britain TodayFor the young person not planning to go to university their route through educationand into a good job with prospects is incredibly difficult to navigate. At its core this isbecause o two actors. First we have an education system that, rather than catering

or this route as valuable in itsel , sees it as the second string o an academic system.And second, the world o work is not set up with well established routes into careers

or those that don’t go to university.

Today, the options open to young people seeking a vocational career are con using

and o ten poor quality. There is no clear, motivational ‘end point’ to be reached at 18 atwhich a young person gains a recognisable and respected vocational qualication. Thislack o a coherent pathway or young people who do not intend to ollow the purelyacademic route through GCSEs, A levels and on to university needs urgent attention.Pro essor Alison Wol estimates that currently 350,000 young people in a given 16-19cohort gain little or no value rom the education system .

Beyond school age the picture is also poor. Employers tell us they need many moreyoung people with technical ability and good English and maths skills. And youngpeople tell us the jobs they are in don’t offer the right training or opportunities to

progress.




The lack o opportunities or the ‘Forgotten 50 per cent’ is a large contributor to the

high level o youth unemployment in the UK currently, with almost one million youngpeople out o work. In countries with strong vocational education and high numbers oquality apprenticeship places like Switzerland, Germany and the Netherlands, the levelo youth unemployment is much lower at under 10% 23 - in the UK it is 20%24.

The ollowing table gives an insight into why we need to ocus on raising both thenumber and quality o apprenticeship places or young people i there is to be a clearrole or apprenticeships as the route rom school or college into a good career. Incompetitor countries with low youth unemployment more than a quarter o employerstrain apprentices, apprenticeships are geared towards the under-25s and the majority

are high-skill.

Comparing apprenticeship models in Englandand other European countries

Apprenticeship – England 2011Apprenticeship – Austria, Germany,Switzerland 2011

Employed status Trainee status

Wage (high relative to other countries) Trainee allowance

Short duration (average one year) Long duration (average three years)

Most at lower skill level (Level 2) Most at higher skill level (Level 3)

Outside providers train Employers train on-the-job

Only 60% o apprentices are under 25 Apprentices are normally under 25

Minimum 100 hours off-the-job training Minimum 900 hours off-the-job training

4-8% o employers train apprentices 25-30% o employers train apprenticesSource: Dr Hilary Steedman, Centre for Economic Performance, 2011

The low level o engagement with apprenticeships by British business is a key eatureo our labour market. Currently, businesses cite various barriers to raising skills levelswithin their work orce, including costs, lack o access to suitable training and a ear opoaching. This contributes towards skill shortages in certain sectors o the economy – such as advanced manu acturing, digital & creative industries and engineering. Inother industries there still also exists a low employer commitment to training due to

23

OCED, Employment and Labour Markets key tables, July 16 2013, http://www.oecd-ilibrary.org/employment/youth-unemployment-rate_20752342-table224 House o Commons Library Standard Note, 11 September 2013



45


25

BIS, Quarterly Statistical First Release, FE and Skills, 27 June 201326 The Public Accounts Committee (2012) Adult Apprenticeships, London: The Stationery Office. http://www.parliament.uk/documents/TSO-PDF/committee-reports/pubacc.1875.pd27 BIS/D E presentation to unionlearn con erence

competitive strategies that value low wage costs over a trained work orce. We need to

overcome both these supply and demand problems on skills.The Tory-led Government has ailed to prioritise apprenticeships or young people andhas no plan or a gold standard vocational route through education. David Cameron hasalso scrapped work experience or 14 year olds, sidelined skills in the curriculum, andpresided over the dismantling o careers advice or young people– a move denouncedby O sted, Barnados, the CBI and the Education Select Committee.

The increase in apprenticeships under this Government has been largely comprisedo low skill places or the over 25s, so providing ew opportunities or young people.The majority (57%) o the increase between 2010 and 2012 has been in level 2(GCSE equivalent level) apprenticeships 25. We need many more high skill, qualityapprenticeship places but in total, almost two-thirds (63%) o all apprenticeships are atlevel 2 and one in ve places lasts or less than six months 26. The vast majority o newapprentices (70%) are also existing employees and 94% o these are over 25 yearsold27.


Labour has established a Skills Task orce, led by Pro essor Chris Husbands, Director othe Institute o Education, and comprised o business and education leaders. Its remitis to examine how we can trans orm education and skills policy so all young peoplehave access to high standard vocational education and employers offer more trainingand quality apprenticeships. This approach is rooted in the belie that it is only witheveryone playing their part that Britain can compete in a high skill, high wage race tothe top.

We need a clear route through education or young people choosing vocationaloptions. This will require more and better vocational education up to 18, with all youngpeople undertaking some vocational learning rom 14. We also need much greater

employer engagement with schools to help deliver quality work experience andemployability skills.

To give young people on a vocational track a prestigious end point, Labour announcedlast year that we will introduce a ‘Technical Baccalaureate’ at 18. This will be awardedto those achieving a rigorous vocational qualication accredited by employers, a workexperience placement and achievement in English and Maths. It will provide a goldstandard that is understood by students and employers.




For those young people leaving school there are currently ar too ew apprenticeship

places available and the quality o those that do exist is o ten poor and low-skill. Toincrease the number o high quality apprenticeship places we need employers to takemore responsibility or training the next generation o workers.

So Labour will introduce a new something or something deal with business; wewill give employers more ownership o skills unding in return or a commitment toincrease the level o high quality training and apprenticeships they offer. We wantemployers to have more control over the design o training programmes so they meetthe needs o business and can be tailored towards lling skills gaps.

To achieve this we need to build power ul, employer-led partnerships both sectorallyand locally so businesses come together to train. So Labour will give new powersto employers in a sector or community to enable them to work together to drive upstandards in vocational qualications and training.

Key Facts:

• In this country we continue to build our educational infrastructure around a so-called ‘gold standard’ route, rom GCSEs at 16, through to A-levels at 18 –but public policy ignores the act that in reality only 54 per cent o all 16-18year olds are pursuing a purely ‘academic’ route ull-time at level 3. ii

• The UK Commission for Employment and Skills (UKCES) Youth Inquiry showedthat just 22 per cent o employers recruit young people (aged 16 to 24). iii

• Currently, less than 50 per cent of students have English and MathematicsGCSE (grades A*-C) by the time they reach 16 years old. At age 18 the gureis still below 50 per cent. Only 4 per cent o the cohort achieve these keyworkplace skills during their 16-18 education. iv

• The labour market o ers very low returns for the current stock of low levelvocational qualications, in act it o ten gives negative returns or them.Young males with level 2 NVQs earn 12% less than their contemporaries with

ewer qualications. v

• Only 4 – 8 per cent of employees train apprentices.



47


One Nation Labour’s policies:• A gold standard ‘Technical Baccalaureate’ at 18 for those achieving a rigorous

vocational qualication, a work experience placement and achievement inEnglish and Maths.

• High quality vocational education up to 18, with all young people undertakingsome vocational learning rom 14.

• Greater employer engagement with schools to help deliver quality workexperience and employability skills.

• English and Maths compulsory for all students up to 18, regardless of theirprior attainment. All young people need these key skills i they are to succeedin the workplace.

• A something-for-something deal with employers, giving them ownership ofskills unding in return or increasing the training and apprenticeships theyoffer.

• Labour will give new powers to employers in a sector or community to enablethem to work together to drive up standards in vocational qualications and

training.

• And we will build an industrial strategy in which government procurementcontracts to large rms depend on providing apprenticeships.



49


CONTROLLING SOCIAL SECURITY SPENDING

TACKLING THE ROOT CAUSES

If we are going to turn our economy round and tackle the cost of living crisis we

will have to be laser focused on how we spend every single pound. Social securityspending, vital as it is, cannot be exempt from that discipline. But an approachto controlling social security spending must start from an understanding of whatdrives that spending.

Britain’s economy doesn’t work for working people. Too many are out of work,those in work struggle to get by and see their living standards squeezed, and fartoo few houses are built so the costs of a home go up and up.

These failings of our economy can be seen only too clearly in their impact onthe social security system. The costs of unemployment, a failure to build homesmanifesting itself in a rising housing benet bill, and an acceptance of low pay allpass on costs to the taxpayer to meet.

That is why turning around our economy so it works for working people onceagain and tackling the root causes of social security expenditure are one andthe same thing. It is only by addressing these root causes of spending that it cansustainably be controlled.

Britain Today

The Tories’ approach is to divide the country. Cutting support or those in work, hittingthe vulnerable, and labelling those who cannot work as scroungers. At the same timetheir programmes, such as the Youth Contract and the Work Programme, are ailing todeliver.

And their ailed approach means that instead o controlling costs they are spending£20bn more on social security. High unemployment, including one million youngpeople out o work, doesn’t just increase social security costs now but increasescosts in the long-term as they lose skills and contact with the workplace. Under thisgovernment more men and women - hal a million - have been out o work or over

two years than at any time since the Labour government took office in May 1997.Meanwhile, disabled people are suffering rom a awed testing regime which ocusespurely on what benets people are entitled to rather than on what support would helpthem to get into work.

For those in work, real wages are alling, down by nearly £1,500 a year since theTories came to office. And the taxpayer is le t picking up the bill or that low pay. Andwhile some people want to work exibly, too many can’t get the hours they want orare employed on insecure zero hours contracts. At the same time, those who make acontribution too o ten nd that it is not recognised in the system, urther reducing therewards rom work.




Even the housing benet bill is rising, despite the Tories’ bedroom tax which hits many

o the most vulnerable people in our society. This is because rents, and there orespending on housing benet, are going up while the Tories are building ewer homesthan at any point since the 1920s. Thirty years ago or every £100 we spent onhousing, £80 was invested in bricks and mortar and £20 was spent on housingbenet. Today, or every £100 we spend on housing, just £5 is invested in bricks andmortar and £95 goes on housing benet.


For One Nation Labour, controlling social security spending

and putting decent values at the heart o the system arenot conicting priorities. It is only by re orming socialsecurity with the right values and tackling the problemsin our economy that we’ll be able to control costs.

That is why overcoming worklessness, rewarding workand tackling low pay, investing in homes, and recognisingcontribution are One Nation Labour ways to re orm oursocial security system.

It is also why the next Labour Government will repeal DavidCameron’s Bedroom Tax. It is a cruel measure that disproportionatelyaffects the disabled. For the vast majority o those affected, there is nowhere smallerto move to, hitting vulnerable people through no ault o their own. While there is nowa real risk that it will end up costing more than it saves, we have been clear that therecannot be extra borrowing to pay or social security changes. So, to ensure that it canbe reversed without any additional borrowing, unds have been earmarked or thatpurpose, including rom reversing George Osborne’s recent tax cut or hedge undsand his shares or rights scheme that has been rejected by businesses as unworkableand could become a tax avoidance loophole according to the Office or Budget

Responsibility.

Labour is the party o work, so our rst step must be to ensure that those who canwork are able to do so. That is why we have proposed a compulsory jobs guarantee

or young people out o work or a year. We will say to businesses across the countrythat we will pay the wages or 25 hours a week, on at least the minimum wage, ully

unded by a tax on bankers’ bonuses. And the business would provide training o atleast 10 hours a week. We would do the same or everyone over 25 unemployed ormore than two years, ully unded by a restriction on pension tax relie or those onthe highest incomes.

Labour is the partyof work, so our rst

step must be toensure that thosewho can work are

able to do so.



51


And we also need to support as many disabled people into work as possible. In

government we introduced tests or the Employment and Support Allowance. But wenow see over 40 per cent o people winning their appeals, so it’s clear the systemneeds to be looked at again. The test should be re ormed to properly distinguishbetween different personal situations and to ocus on helping to identi y the real skillso each disabled person, the opportunities they could take up, and the support theyneed to make that possible.

For those in work, who are not getting paid enough to make ends meet, we needaction to tackle the cost o living crisis that is eeding back into high social securitybills. One Nation Labour will promote the Living Wage, tackle the abuse o zero hours

contracts, and crack down on those not paying the minimum wage.On housing, building more homes is the only sustainable way to help bring rents andthe housing benet bill down. We would give councils the power to negotiate onbehal o tenants receiving housing benet to get lower rents, and recycle some othe benet savings into building more homes. This approach aims to shi ting spending

rom benets to building and bringing down the long-term housing benet bill. TheGovernment has also introduced a cap on the benets a household can receive.This primarily affects Housing Benet. While it is right that those in work should bebetter off than those on benets we need a cap that works. So we will establish an

independent commission to set the right level o the cap or local areas.

To rebuild trust in the system it must better reect the contributions people havemade during their working lives. So we are also examining ways o ensuring that thosewho have contributed more are able to get a higher rate o Jobseekers’ Allowance thanthose who have only worked or a ew years.

Finally, to ensure that governments tackle problems coming down the track that riskdriving up the wel are bill, planning social security spending should become a key parto each Spending Review, with a cap on structural social security spending. Such a

cap will ensure that we make policy to keep the social security budget in limits andintroduce greater discipline, as ministers rom across Departments ocus on the biglong-term drivers o spending in the broader economy.

This One Nation Labour approach, tackling the causes o alling living standardsthrough the application o Labour values, is the only way to bring discipline to socialsecurity spending and get the long-term bill down. An economy with more secure,better paid jobs, and more affordable homes will be one in which not only do we tacklethe living standards crisis, but where we ensure that social security remains affordable

or the long-term.




Key Facts:• Nearly one million young people are unemployed.

• Under this government there are more men and women - half a million - whohave been out o work or over two years than at any time since the Labourgovernment took office in May 1997.

• The Tories are spending £20bn more than planned on social security.

• The Tories are building fewer homes than at any point since the 1920s.

• Thirty years ago for every £100 we spent on housing, £80 was invested inbricks and mortar and £20 was spent on housing benet. Today, or every£100 we spend on housing, just £5 is invested in bricks and mortar and £95goes on housing benet.


• We are proposing a fully-funded compulsory Jobs Guarantee for young peopleout o work or a year and or those over 25 out o work or two years.

• The test for Employment and Support Allowance should be reformed so thatit properly distinguishes between those who are able and unable to work, andidenties the real skills o each disabled person and the opportunities theycould take up.

• Labour would invest in building new homes to bring down the housing bene tbill, including by recycling benet savings achieved by local authorities intonew home building.

• Labour will cap structural social security spending as part of each SpendingReview so that it is properly planned and controlled.

• Labour will reverse the Bedroom Tax, with a funded plan to do so withoutadditional borrowing.



53


IMMIGRATION THAT WORKS FOR BRITAIN

Britain has beneted over many centuries from the contributions of immigrants

welcomed to our shores. They have built some of our biggest companies,sustained our National Health Service, and undertaken groundbreaking researchin our universities. It has played an immensely important role in our nation’shistory. But it is because immigration is so important that it needs to be made towork for everyone, not just for some.

For One Nation Labour talking about immigration is not about pandering toprejudice or populism. It is about halting the race to the bottom wherebyexploitation and undercutting of workers’ wages are, for too many people, a factof everyday life. It is about saying that at a time when a million young people are

unemployed, we need to do everything possible to encourage employers to givethem a chance. Above all, it is about building an economic recovery that is built tolast and in which everybody plays their part.

Britain Today

Our vision is o an economy where work pays or all; where all rms succeed becauseowners, managers and employees see themselves as being part o one shared project.Britain does not have an economy like that today. In some industries, like social care,we are a long way away rom that vision. On occasion rising low skilled immigration,

collided with a labour market that is too o ten nasty, brutish and short-term.

O course, many migrant workers are hired because they have high skill levels orbecause o perceptions o their dedication. They are simply seeking a better li e inthis country. And they should never be blamed or that. But the growth in low skilledimmigration to Britain over recent years was not a sign o a healthy economy, but adys unctional one, in which:

• Workers in low paid work saw their wages squeezed 28.

• Exploitation, in certain sectors, was common, with hundreds of thousands of people

paid less than the minimum wage 29.

• Some employers preferred to reach for quick- xes, rather than provide training tothe next generation o young workers 30.

28 A recent study (Reed and Latorre, 2009) re erenced by Ox ord’s Migration Observatory ound that or the period 2000-2007,

every percentage point increase in the share o migrants in the UK’s working age population lowers the average way by 0.3%.Another study (Dustmann, 2008) ound that each 1% increase in the share o migrants in the UK-born working age populationleads to a 0.6% decline in wages o the 5% lowest paid workers.29 A report by the Resolution Foundation suggested that up to 220,000 workers may be paid less than the minimum wage; “Doesit pay to care? Underpayment o the National Minimum Wage in the social care sector”, Matthew Pennycook, August 201330 Less than 1 in 10 employers offer an apprenticeship; Steedman, “The State o apprenticeships in 2011”, London School oEconomics, 2010




Over the last decade, the number o migrants in low skilled jobs more than doubled –

reaching one in ve by 2011.

Percentage of workers who were non-UK born at each occupationskill level 31

There are real problems in our labour market requiring urgent government action, romrecruitment agencies that only hire rom abroad, to the minimum wage being side-stepped with overcrowded accommodation used to house large numbers o migrantworkers.

The Tories have not tackled these problems. Only two rms have had prosecutionsbrought against them or not paying the minimum wage since 2010. Instead they

are more interested in gimmicks to divide people than they are in genuine re orm toimprove the system:

• Preferring to send out ill judged ad vans to ethnically diverse areas than taking thebasic steps necessary to tackle illegal immigration;

• Setting a target to reduce ‘net migration’, which counts British people leaving thecountry as a success;

• Floating a series of measures in order to sound ‘tough’, which in practice haveturned out to be unworkable, including a risible plan to require schools to check the

immigration status o their pupils

31 ONS, 2011



55



Labour’s approach to immigration has changed under Ed Miliband’s leadership.Three core principles underpin that new approach:

1. A system that controls the pace o change

2. Re orms to the British economy so that it is less reliant on low skilledmigrant labour

3. Measures to ensure migrants able to integrate and play their part.

This chapter ocuses on the rst two o these elements.

A system that controls the pace of change

The pace o migration, particularly low skilled migration, was too ast. That is whyLabour supports action to bring it under control, including a cap on workers romoutside the EU, and has said that ull ‘transitional controls’ will be applied to restrictthe movement o workers to the UK rom any uture countries joining the EU.

Alongside controls we also need a mature recognition that there are different kindso immigration: immigration that works or Britain and immigration that doesn’t. Thatis why Labour would do more to bring down low skilled and illegal immigration, rather

than ocusing, as the government has, on reducing the numbers o legitimate oreignstudents.

Finally, we need to go urther to tackle illegal immigration by giving UK Bordersofficers powers to inspect premises unannounced and closing down the loophole thatis currently allowing abuse o ‘student visitor visas’.

An economy less reliant on low skilled migrant labour

I we are going to build an economic recovery that is made by the many, we will need anew approach to our labour market and immigration.

That starts with halting the race to the bottom in the exploitation o workers and theundercutting o their wages. One Nation Labour would start by increasing maximumnes or those who deliberately pay below the minimum wage to £50,000, the samelevel as or y-tipping. And because many o these problems take place within specicsectors o the economy we would extend the remit o the Gangmasters LicensingAuthority to areas where exploitation and undercutting is common.




For sectors where evidence o an over-reliance on low skilled migrant labour is

emerging we will give the Migration Advisory Council the powers to trigger a sectoralaction plan, to identi y the cause o the problem and whether more needs to be doneto help domestic workers meet the needs o that industry. Social care is clearly aproblem in this regard so a task orce looking at exploitation in that sector has beenestablished by Ed Miliband.

Alongside tackling exploitation, Labour will encourage employers to invest in the nextgeneration o young workers, rather than reaching or quick-xes rom migrant labour.That will include requiring rms to offer apprenticeships in return or hiring ‘Tier 2’migrants and using procurement rules to ensure that large rms offered government

contracts offer apprenticeships.

Key Facts:

• More than half the fall in net migration since 2010 is accounted for by moreBritish people leaving and ewer returning home.

• Illegal immigration appears to be getting worse. Since the election in 2010:

− the number o en orced removals has allen 7.4% ( rom 15,192 to 14,062)

− the number o people who were re used entry at port and subsequentlydeparted has allen 46.4% ( rom 26,378 to 14,134)

• The number of migrants in low skilled jobs has more than doubled over thepast decade: 1 in 5 workers in low skilled jobs were migrants by 2011.

• People in low paid work have seen downward pressure on wages, as a resulto rising immigration. One study (Dustmann et al) ound that every 1%increase in the ratio o immigrants to natives in the working age populate led

to a 0.5% decline in wages among the lowest 10% o earners• In April 2012 the number of UK jobs paid below the national minimum wage

was estimated to be 287,000. Yet only two prosecutions have been broughtagainst rms since 2010 or ailing to pay the minimum wage.

one nation economy

Documents