Wednesday, 12 September 2012

A Word in Search of a Meaning

I’d like to begin this return to blogging with an apology. I wanted, and still want, this site to be a place where you can get a bit of background to the headlines that you see every day. I have no intention of becoming another angry politics blogger, clogging up the collective bandwidth without adding anything to the public debate. However, sometimes somebody does something so infuriating that I am unable to contain my frustration. Right now, that person is Ed Miliband (disclosure-I’m a member of the Labour Party).

Mr Miliband has had an idea. He has called it ‘pre-distribution’. In a rambling interview with the New Statesman he has told us that this is a central idea in his bid to establish a “new paradigm” regarding how the economy works. As far as I can make out from this interview and from a speech he has made at a think tank (sources on this idea seem few and far between), the plan is that since there will be no money for governments of the near future to redistribute, the focus of government activity must be making the market deliver better outcomes in the first place.

This implies raising wages and lowering the cost of essentials like energy and transport, as well as increasing the quality of education so people can get better paid jobs. All this sounds fantastic, but when examined in greater detail it quickly begins to unravel.

Take the example of lowering the cost of rail fares. More serious analysts than me have pointed out that rail transport is already subsidised by the government. Capping fares will take money away from infrastructure investment as well as company profits. In the end our already creaking railways will get worse, or cost the taxpayer the money that pre-distribution assumes it does not have.

Similar applies to rent caps. If rent is legally limited in a time of a housing shortage, landlords will sell the unprofitable properties, thus constricting the supply of available homes even further. Who does this help exactly?

Raising wages sounds like a fantastic idea. That must be why the Shadow Chancellor was willing to be heckled at the TUC for pointing out that under the current economic circumstances, wage increases will mean job losses, even in the public sector. The money to pay for the increases must come from somewhere, and Mr Miliband seems to have no conception of where that place is.

Finally, what about improving the education system so that everybody can get better jobs? Two points here. Firstly, the labour market is relational. Creating high skilled workers does not create high skilled jobs, but more overqualified workers in low skilled jobs. Secondly, every single politician of every persuasion will attempt to improve the education system. Nobody wants it to get worse. The question is how you do it. On this Mr Miliband is strangely silent. As such he has no policy to announce.

Herein lays the painful truth about pre-distribution. Mr Miliband has created a word, not a policy. It will not stand up to any serious scrutiny, and certainly does not amount to a programme of government.   

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