In a speech in Birmingham today, Ed Miliband outlined how he’d devolve at least £20 billion of government budgets to the regions:
It’s great to be in Birmingham today.
And where better to talk about Britain’s economic future than here?
The city of Joseph Chamberlain.
The heart of Britain’s industrial revolution.
The beginning of our modern prosperity.
Today, I want to talk to you about what the challenge of prosperity means today.
In particular, how we tackle the cost-of-living crisis and build an economy that truly works for your living standards and your future.
I want to explain why the cost-of-living crisis is such a huge challenge.
I want to say why it is happening.
Explain why this Government’s approach can never come close to resolving it.
And I will set out Labour’s plans for dealing with this crisis.
Helping businesses create more not fewer of the middle income, private sector jobs that are crucial to overcoming this crisis.
And we will do that by devolving more power to the great cities and towns of our country.
The cost-of-living crisis
Since I became leader of the Labour Party, I have been setting out how we will tackle the cost-of-living crisis.
On the first day I became leader, I talked about the “squeezed middle”.
Last September in my Party Conference speech, you may remember I said that while a rising tide used to lift all boats, now it only seems to lift the yachts.
The vital link between the wealth of the country as a whole and people’s family finances had been broken.
You see, look back to the 1980s and 1990s: for each extra percentage added to economic growth, we saw wages of middle-income Britain keep pace.
Many of us will remember the results of that.
The growing prosperity of the country often reflected in people’s own lives.
Earning that bit more.
Expecting better years ahead.
Able to envisage an easier, more prosperous life for their kids.
For so many people it just doesn’t happen that way anymore.
And my message to you today is: unless we act, it won’t change.
It is good that economic growth is returning.
But people are asking: whose recovery is it going to be?
Even the Government doesn’t think that link between wages and growth is going to be repaired.
They estimate that average earnings will only increase at half the rate of economic growth next year and will lag behind for years to come.
And even these figures don’t tell you the whole story about what’s happening to middle income Britain.
They don’t even include the cost of housing.
When we know the struggle so many people face to afford their rent or to buy a home.
And The Resolution Foundation that has done so much work on the squeeze on living standards, says middle income families will be left even further behind.
Millions of people still locked out of the gains of a growing economy.
Not sharing fairly in the wealth of the country.
The wealth they are working so hard to produce.
You see, the cost-of-living crisis is about who gets the rewards, what the prospects are for your kids and whether there is security or insecurity at work.
What the British people know is that we have so far to go to solve this.
Political leaders around the world are recognising that this is the generational challenge that their nations face.
We need to do the same here.
And today I am going to tell you how a Labour government will rise to this challenge.
Causes of the Cost-of-living crisis
This break between growth and living standards is happening for three reasons.
First, while the problem of low pay has been getting worse, a few people at the top have been taking a bigger and bigger share of the rewards our economy produces.
There are now five million people paid less than the Living Wage in Britain.
Our country does worse than the vast majority of other major economies when it comes to low pay.
And pay at the top is just running away from everyone else.
CEOs of our biggest companies are now paid 133 times the wage of an average
worker in their company, compared to 47 times just 15 years ago.
And the gap between the earnings of those at the top and everyone else has been growing not shrinking, even in recent years.
So, first, it is about wages.
Second, it is happening because people are still paying too much for many basic necessities.
That’s partly because of things beyond any business or government’s control: like the global price of oil or of basic foodstuffs imported from abroad.
But it is made far worse when you have markets that are uncompetitive.
Like we too often do in this country.
Take the Big Six energy companies that crowd smaller companies out of the market and are able to keep prices artificially high.
It is no wonder people find it hard to make ends meet, when they are charged prices over the odds.
Third, and more fundamental than either of the first two causes, it is happening because of the kinds of jobs our economy creates.
Over a long period, jobs in the middle that used to guarantee people decent living standards have been disappearing.
Since the 1990s, employment has grown in some very high-paid sectors and in low-paid sectors.
Meanwhile, middle-income jobs in sectors like skilled manufacturing have been in decline
So the problem in our economy is that there are too few jobs with good skills and offering stable prospects.
And more jobs that require fewer skills, paying less good wages and offering less security.
You probably all know someone on a zero hours contract, or whose job has been downgraded, or who once dreamed of promotion but is now simply glad to hold on to what they have.
So the middle class, once the solid centre of our economy, far from expanding is now being hollowed out.
So the question our country faces is who can solve this generational challenge?
What about the Conservatives?
Now, you can hear them whispering it softly at the moment that the cost-of-living crisis is about to be solved.
And I predict they will get increasingly loud.
To all the people worried about the gas bill dropping through the door, worried about affording the deposit to rent or buy their first home, worried about their son’s or daughter’s tuition fees, they want to say: your worries are over.
I wish it were true.
Why do they believe it?
Because they tell us that very soon, on one measure, average wage rises will overtake the level of inflation.
I hope that happens as soon as possible.
And any progress in people’s living standards is a good thing.
But it is time the Conservative Party got in touch with reality.
And here’s a way to do it.
I suggest to Conservative candidates and the Prime Minister that they go on the doorstep of families in Britain and tell them:
“Hello I am from the Conservative party.”
“And I am here to tell you the average of wages has overtaken the CPI measure of inflation and so I can tell you that your cost-of-living crisis is over.”
I don’t know about you, but even as friendly as the people of Birmingham are, I think they would be told where to get off.
And that’s because people know that this cost-of-living crisis runs deep.
And it is about that break between the prosperity of the country as a whole and their family finances.
And sadly that isn’t about to be solved.
The Tories don’t get it.
Now, I welcome the Chancellor’s apparent conversion to the cause of full employment.
It is 70 years after a British government first dedicated itself to it.
I guess better late than never.
But the world is different today.
Full employment is an essential aim of government now, just as it was back then.
But it is not sufficient any more.
The 29 million people in work today, are asking what kind of employment is it?
Is it enough to feed the family?
Make ends meet?
And this government has nothing to say about that challenge.
In the last few years, we’ve seen employment in low paid sectors rise twice as fast as in higher paid sectors.
George Osborne thinks that creating more and more insecure, low paid, low skilled jobs is good enough as an answer to our country’s cost-of-living crisis.
That is why he’s part of the problem.
Not the solution.
And the problem is they think the only way the British economy can grow, is if we run a race to the bottom in terms and conditions.
He is the champion of saying: make it easier to fire people.
Tell people to give up their rights at work in exchange for shares.
The Tories are the party who refuse to take action on zero hours contracts.
Who promised a £7 minimum wage and then failed to deliver it.
And they aren’t making the big reforms that will help Britain’s businesses create the better paying jobs we need.
They believe the way for the country to win their global race is for you to lose.
They have no understanding of how tough it is for hardworking Britain.
And no real solutions either.
We have to build a new kind of economy.
And that’s what the next Labour government will do.
An Economy that Works for You
Tackling the cost-of-living crisis won’t be easy.
Some of these trends causing the cost-of-living crisis here in Britain are the result of long-term changes in the world economy.
Some of the jobs that used to be done in cities like Birmingham are now being done overseas at lower wages.
Or are done by new technologies.
Trade and openness are good for Britain, so we can’t just pull up the drawbridge to stop companies relocating.
And we can’t turn back the clock on technology.
But it is not just factors which we can’t control that explain all this.
It is also factors that we can control.
And there are three big changes the next Labour government will make to help turn this around.
First, we will work to ensure all the real wealth creators are rewarded in our economy, not just a few at the top.
For too long, we have allowed the low paid and the middle to be squeezed while the top run away.
So the starting point is a programme to guarantee that hard work always pays wherever you live in the United Kingdom.
We will do that by strengthening the minimum wage.
By offering tax breaks to employers that pay the Living Wage.
By offering more childcare to working parents so that mums and dads can get back into work and bring home decent wages.
And to ensure fairness in the workplace, we also need new rules on executive pay.
Along with a fair deficit reduction plan that ensures those at the top pay their fair share, including by restoring the 50p top rate of tax.
Second, we need to ensure competitive prices by taking on the vested interests that hold British businesses and families back and keep prices artificially high.
We can’t go on with energy companies that over-charge and banks that fail to lend.
That’s why Labour is now the party of real competition.
Freezing energy prices until 2017 while we transform the energy market to open it up to new competition.
And making sure that developers don’t just hoard land that could be used for the housing that Britain so desperately needs but make it available for those that are willing to build.
Third, we must rise to the challenge of working with business to build a new economy that creates the kind of jobs we need.
This is the most important thing we need to do.
Labour will never be neutral about the kind of jobs that businesses in our country create.
Britain must win a race to the top for high wage and high skill jobs and never be satisfied with low skill, low paying, insecure jobs that don’t allow people to fulfil their potential.
That is the only way we can increase productivity in this country.
Making Britain’s businesses stronger.
And improving the prospects for people right across the country.
New Middle Income Jobs
So how can our country create those jobs?
Given the deficit the next Labour government will face, it is not realistic to think this problem will be solved by the public sector.
We need to see more good quality middle income jobs in the private sector.
To do that means supporting our small businesses, including through lower business rates.
Reforming our banking system, with a network of regional banks right across Britain.
Staying in the European Union and improving it so that it works for Britain.
A revolution in skills and vocational education.
And supporting great British companies, including with new rules on takeovers.
Because you here in Birmingham know what happened to Cadburys when Kraft took them over.
And supporting our great British businesses means something else too.
Britain is the country of the industrial revolution.
Birmingham was one of the great cities of that revolution.
But the country of the industrial revolution has ignored the lessons of its own history for far too long.
The country that once built its prosperity on the great towns and cities, like Birmingham, Bristol, Liverpool, Leeds, Manchester, Glasgow and Cardiff, has become a country which doesn’t do enough to build prosperity in England outside one great capital city: London.
We need a prosperous London.
But we need to build prosperity outside it too.
Devolution to Scotland and Wales has clearly benefitted those nations.
But today, every region in England outside London is below the national average when it comes to productivity.
While London and the South-East is 40 per cent above it.
London and the South-East of England was responsible for 37 per cent of the UK’s growth in the decade before the financial crisis.
And in the years since 2010 that share has risen to 54 per cent.
More than half the growth of the whole of our country taking place in London and the south-east.
Leaving other areas behind.
Britain will never be able to tackle the cost-of-living crisis and create the new jobs that are essential to it, unless we break this pattern.
Unless we change from an economy based on the success of one city – our country’s capital – to all of our country’s great towns and cities.
A truly One Nation economy.
Cities like Birmingham, Manchester and Leeds have brilliant people, companies, and talent.
And individual cities have made huge strides in the last two decades, compared to the dark days of the 1980s.
But we could be doing so much better than this.
Just look at the great and successful economies around the world.
Like Germany, where many of the cities outside the capital consistently perform far better than the national average.
Cities like Munich, which has become one of Europe’s most economically successful.
How has it done it?
With a city authority which has worked with local universities and small and medium sized businesses.
Why are we not realising this kind of potential in our own country?
It is rooted in one thing: the century-long centralisation of England.
Because governments of both parties have not done nearly enough to give the tools to the brilliant people, talented individuals, dynamic businesses of our great towns and cities to do the job they want to do.
Including creating those middle-income jobs that so many people need.
That means ambitious businesses who want to locate and expand in our towns and cities can’t get answers to the most basic questions:
What’s the plan to get the skilled workers I need?
And is it controlled here by someone I can work with or by a quango in London?
Is there a plan for new local roads, railways, or other transport links in the area?
And who can I talk to about that plan?
And what’s the vision for long-term economic development here?
And who gets to shape it?
And please don’t send me to Whitehall.
Without answers to these questions, businesses don’t have the support, conditions or confidence to create new prosperity, including the new generation of middle-income jobs we need.
That is what we will change.
This government had an opportunity to make a difference.
Lord Heseltine’s review called for massive funding to be devolved to Britain’s cities.
And they flunked the test.
Cities like Birmingham put in the work to prepare for it.
But David Cameron and George Osborne allocated just £2bn for a Local Growth Fund in their Spending Review.
Just a fifth of what Michael Heseltine asked for.
The best report this government has produced has been the one that they have most ignored.
We can and must do a lot better than that.
It is why nine months ago, Jon Cruddas, the head of our policy review, and I asked Andrew Adonis to recommend the way forward for Labour.
Building on the experience of other countries.
And learning from great Labour leaders in local government.
Andrew’s work is still underway.
But we have heard his interim conclusions today.
Labour’s message at the next election will be clear:
Devolving power from Whitehall to our towns and cities is essential to generate the new jobs we need.
We propose a new bargain:
Cities and towns that come together with local businesses will be given historic new powers over transport, housing, skills and economic development.
We are determined to make our great cities and towns the powerhouses for the creation of good jobs.
Rebuilding the middle class.
Helping businesses succeed.
And our towns and cities will have greater control over the funding of skills, including with local businesses having a direct say in the funding of apprenticeships for the first time.
They will be able to deliver the Work Programme, with city- and county-regions able to use their local knowledge to help get people back to work.
And towns and cities will be given clear incentives too: by being able to share
in the proceeds of growth in their area.
With power of this sort comes responsibility.
These changes will only bring new jobs, greater prosperity, if the towns and cities are willing to put the private sector at the heart of decision making.
So today, following on from Andrew’s work, and in advance of his final report later this year, Ed Balls and I are writing to every local government leader, every Local Enterprise Partnership and every university asking them to work together and prepare for this devolution.
We will be inviting them to demonstrate the real economic leadership we need to see.
Putting in place a real economic strategy for their own part of our country.
And I can also announce that each and every authority which can bring forward plans of this sort in the first year of the next Parliament, will receive powers and access to resources from Whitehall the like of which we have not seen in living memory.
Real powers for Britain’s towns and cities to make the difference that they are capable of making.
To help create the jobs we need.
To tackle the cost-of-living crisis we face.
Countries all around the world are facing the challenge that Britain is facing.
From the United States to Israel, where I will be later this week, to emerging economies like Brazil, nations are fighting against inequality and struggling to create a strong middle class.
This is the challenge of our time.
And who can answer it here in Britain will define the argument of the next general election.
A year from that election, it is increasingly clear that there is a divide between, on the one side, a Conservative Party about to declare the cost-of-living crisis at an end.
And on the other side, the British people who believe that we are a long way from solving the cost-of-living crisis.
And alongside them, a Labour Party that believes that we have to build a new economy which understands the challenge of our generation.
We are determined to create an economy that works for the many not the few.
We believe it is not good enough to have stagnating or barely rising living standards.
Not good enough that the next generation feels it will do worse than the last.
The people of Birmingham and the people of Britain believe we can and must do better than this.
But only with a government that is willing to tackle low wages and zero hours contracts, and ensure fair pay.
Only with a government willing to reform broken markets and take on the vested interests that hold us back so we can keep prices low.
And a government that will make the big reforms our country needs to help British business create a new economy.
From a revolution in skills to standing up for the great British company.
From backing our small businesses to getting our young people back to work.
From breaking up our banks to devolving power to our businesses and our great towns and cities.
This is our mission.
This is what I believe.
And that is what the next Labour government will do.