Need to Know | 13th April 2015

Labour’s manifesto: Miliband pulls off a tricky marriage of radicalism and credibility

The party’s programme aims to reduce inequality through “big reform”, not “big spending”. The defining question is whether it would work.

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From its text-based cover to its opening section devoted to fiscal responsibility, Labour’s manifesto is a document for austere times. Gone are the days when the party could hope to spend its way to social democracy.

The £90bn deficit that Labour would inherit in government means that it cannot repeat the public spending promises that defined previous manifestos. Miliband’s aim of eliminating the current deficit by the end of the next parliament (allowing borrowing for capital investment) is not as onerous as the Tories’ pledge to achieve an overall surplus – but it means significant cuts to all unprotected areas (everything excluding health, education and international development).

Asked during the Q&A at Labour’s manifesto launch at the Old Granada Studios in Manchester whether he would end cuts after 2015-16, as the IFS says he has the flexibility to do, Miliband insisted that he would not.

There are still spending pledges in the document – £2.5bn more for the NHS, a cut in tuition fees from £9,000 to £6,000, an increase in free childcare from 15 to 25 hours – but they are all funded by parsimony elsewhere. Labour can no longer merely rely on the “proceeds of growth”.

For Miliband, these fiscal constraints are also an opportunity.

But for Miliband, these fiscal constraints are also an opportunity. The end of “big spending” only strengthens the case for “big reform”. He has long believed that one of New Labour’s greatest failures was its refusal to change the fundamental structure of the economy. The large public spending increases that were made were insufficient to reduce inequality. Now those days of plenty are gone it is even more imperative to pursue radical intervention. It is this idea – “predistribution” (seeking to achieve more equal outcomes before the state taxes and spends) – that underpins the manifesto.

Many of the most notable policies in the document do not involve state expenditure: increasing the minimum wage to £8 by October 2019, banning “exploitative” zero-hours contracts, freezing energy bills until 2017 and giving a new regulator the power to cut bills, capping rent increases and guaranteeing three-year tenancies, introducing worker representation on company remuneration committees and imposing a “market share test” on banks. Miliband’s ambition is to rewire British capitalism along Nordic and German lines in order to reduce the unchanged inequality that the last Labour government bequeathed.

With this promise of change, not dependent on state largesee, he believes that he has an offer that is both “radical” and “credible”. Labour’s aim is to reassure voters disillusioned with the coalition that it can make the sums add up while still building a different country to that envisaged by the Conservatives.

With his party ahead in the polls, long after the Tories expected to achieve “crossover”, Miliband was in confident form at the press conference that followed his speech. Asked what in the manifesto could not have appeared in the 1997 edition (in reference to his repudiation of New Labour), he joked that the question would have been better directed at the 2010 version (which he wrote).

The sincerity of Miliband’s desire to reduce the UK’s gross inequality is plain.

After the Tories ‘ spree of unfunded spending commitments in recent days, he declared that they were “making the Green Party look fiscally credible”. It was now Labour, he said, that was the “responsible” party. But there are some MPs who fear that his new focus on fiscal conservatism only fuels the Tories’ narrative that it was too much spending, rather than little regulation, that led to the crash. They also worry that Labour’s programme remains insufficiently “transformative” to attract left-leaning voters enticed by the Greens and the SNP.

But the direction of travel is unmistakeable: in five years Miliband has moved further away from New Labour than many thought possible when he won the leadership. The closing section of the manifesto laments “an economy that might work for some in the City of London” but that “shuts out millions of people in the rest of the country” – words that would never have appeared in any document sanctioned by Tony Blair and Gordon Brown.

Should Miliband win the chance to implement his programme (almost certainly after bargaining with other parties in a hung parliament), the defining question will become whether it works. Will the broken link between national growth and living standards be re-established? Will the gap between the rich and the rest be significantly reduced? Miliband may have avoided rash promises of the kind made by David Cameron and Nick Clegg on immigration and tuition fees but he has, in some ways, raised even greater hopes by pledging to build “a different kind of economy”.

The sincerity of Miliband’s desire to reduce the UK’s gross inequality is plain: it is by that standard that he deserves to be judged if he becomes Prime Minister in a few weeks’ time.