Will Labour end up u-turning on yet another plank of its thin and shrinking policy platform? This morning’s Financial Times highlights fresh tensions over Angela Rayner’s proposed reforms to workers’ rights, after Peter Mandelson pushed back against them in the Sunday Times.
In response, the Labour deputy leader has equated reluctance about her proposals with the “squealing” from business over the introduction of the minimum wage in 1998; rather than putting companies out of business, she argues, “it’s endured, and it’s one of the things that across all political spectrums [people] say that it was actually crucial”.
Perhaps so. Certainly, it is almost difficult to imagine Britain being a lower-wage economy than it already is, given a lost decade and more of real-terms wage growth and the growing disparity between what British workers take home and both what similar roles earn overseas and the inflating costs of housing, heating, and other essentials.
But that in itself says something important about the minimum wage: it is a palliative, a policy to brute-force up the price floor for labour. It only actually helps to create a higher-wage nation if the actual economy is doing the work, dragging up the median income against which the minimum wage is based.
That leads to the other crucial difference between now and 1998: that New Labour inherited strong economic growth and low taxes. There was a lot of slack in the system for Labour to play around with it, be that by raising taxes or increasing regulation.
The same is not true today, which is why Jeremy Hunt and Rachel Reeves are duking it out of a relatively tiny sliver of economic territory. That there is little scope to cut taxes without impacting important departmental budgets is accepted by the left; less accepted, but no less true, is that there are also no easy ways of raising lots of new revenue.
As such, all of Labour’s ambitions (such as they have deigned to share with the public) hinge on the panacea of ‘growth’. But the Opposition has not yet evidenced a compelling analysis for why the economy is so stagnant, let alone a coherent plan to remedy it. Sir Keir Starmer’s big idea is to make it someone else’s problem.
In these circumstances, the marginal costs to business and the economy of gold-plating employment rights could weigh much more heavily on economic performance than they did in the late Nineties – especially when other government priorities, such as getting more of the “economically inactive” back into work, might militate for a more flexible labour market.
None of that is a slam-dunk case against reform. Both Labour and Conservative MPs could make (different versions of) a strong case that politicians have no right squeezing ordinary people as hard as they can in the name of ‘growth’ whilst ducking the big interventions, such as housebuilding and infrastructure, that have a much larger role to play in kick-starting the economy.
The charge sheet against the Government on that score needs no repetition. But whilst Labour might talk a good game on housing, it remains to be seen whether Starmer will actually follow through with it. His plans to cede substantial new powers to local councils, the institutions with the very worst incentives when it comes to nationally-important construction and development, is unpromising.
If Rayner really wants to position herself as a champion of the workers, she must recognise that the top priority must be building the homes, transportation, and energy infrastructure needed to make the essentials of life affordable. That will do much more to boost our real, post-tax incomes than any new employment protections.