Labour will end in-work poverty within one term – McDonnell’s speech

John McDonnell

Below is the full text of John McDonnell’s speech at The Resolution Foundation.

Thank you for inviting me to be here to speak today. I want to begin by thanking the Resolution Foundation for their Living Standards Audit 2019. As always, it’s an outstandingly detailed piece of research and there are several stark lessons for politicians of all parties.

What comes through loud and clear is that there are both structural and political drivers for living standards growth, and for the inequality of those living standards. We appear, the Living Standards Audit tells us, “to be living through an unprecedented period of rising inequality and falling incomes (at the bottom of the distribution), with child poverty set to reach new highs in the coming years”.

But history tells us, as they go on to say, “that it doesn’t have to be like this”. I said in a different context at the weekend that we must confront the world as it is today, which means examining anew the solutions that have worked in the past.

So we must think carefully about the policy implications when Resolution Foundation researchers tell us in Section 5 that headline figures on inequality hide a trend of rapidly increasing earnings inequality partially offset by rises in headline employment figures which cannot continue forever.

And even politicians who are “intensely relaxed” about the earnings of the filthy rich must worry that since 2003 the typical non-pensioner income has risen by just 7% while for those in the 25-31 age bracket typical incomes have actually fallen since the mid-2000s.

Something is clearly going wrong. I want to take these insights as a starting point today for laying out what I believe a government can achieve and how I intend the next Labour government to do it.

We take as our starting point the goal of totally eradicating poverty. Nothing less should be the aim of a socialist government.

You will have seen Jeremy Corbyn’s recent announcement that we will replace the Social Mobility Commission with a Social Justice Commission, with a responsible minister in the Treasury to drive the agenda forward. I’ve already appointed Lyn Brown to my team to lead on this.

Behind the concept of social mobility is the belief that poverty is OK as long as some people are given the opportunity to climb out of it, leaving the others behind. I reject that completely, and want to see a society with higher living standards for everyone as well as one in which nobody lacks the means to survive or has to choose between life’s essentials.

There is now widespread acceptance, on the left at least, that the political class has not paid enough attention to questions about how the economy is structured, of the importance of creating a society that doesn’t need large-scale redistribution to keep people in good jobs and thriving communities.

Under the last Labour government, the continued decline of the manufacturing sector and thriving regional economies was compensated for by the growth of redistributive in-work benefits. And we should never underestimate the number of lives they changed, after the neglect of the preceding decades.

But that work was largely undone within one parliament by the coalition following the financial crisis. It was easy for them to turn off the taps and plunge people into poverty. It was far less robust a settlement than that created by the Attlee government, most of which took decades to undo.

So that has to be the first strand of any serious attempt to address inequalities of income, wealth, region or age.

Higher minimum wages, stronger trade union rights, sectoral collective bargaining, rewriting of corporate governance rules, an active industrial strategy, regional development banks underwritten by central government, workers being given a stake in the companies they work for and putting their elected representatives on company boards.

A rejection of the belief that it’s OK if your local factory closes, as long as you have cash transfers from the finance sector in the South East, or a new warehouse opening on the edge of town paying minimum wage on its zero hour contracts.

Without a change in the productive economy, any redistribution mechanism will not survive. And neither will it add up to a sustainable political settlement, as the Leave vote in post-industrial areas confirms.

That’s why I want to see a fundamental reshaping of the way our economy works as the first priority of a Labour government. Anything less will be papering over the cracks of our political and economic system.

So changing the balance of power in workplaces across the country – and helping rebalance across the country – should be central to everything we do. But we do need to consider more than just the time we spend at work.

Collectively provided services like our schools and hospitals don’t just bind us together as a society, they can transform lives.

Ending poverty isn’t just about cash, though I will come on to that essential element. It’s about being healthy, having a roof over your head, having access to education and skills training, living in a decent and safe environment, and enjoying life in all its wonderful cultural forms.

That’s why universal public services have always been a key demand of the labour movement, liberating their importance of freeing workers from fear of not having access to the essentials of life.

The current debate around Universal Basic Services has helped to put universal, collectively-provided services on the political agenda. And that’s the second strand of dealing with poverty and inequality from a socialist viewpoint.

It’s why we’ve talked about free school meals, free bus services for young people, free further and higher education, free universal childcare. Not free to deliver of course, but funded through general taxation and made available free at the point of use, to each according to their need.

Ending poverty won’t just be done in the workplace: we need to make sure the essentials of life are never denied to people because of their circumstances. So parents aren’t forced to choose between feeding themselves and feeding their children, or the unemployed teenager doesn’t give up on job interviews because they cost £5 in bus fares each time.

The collective vision of shared wants and needs goes a long way beyond poverty prevention, of course. As governments around the world are coming to terms with the need to put quality of life rather than simply economic growth at the centre of what they do, it’s worth considering the huge role that public life can contribute.

Libraries, parks and public swimming pools were all part of the great inheritance which local government gave people of my generation. Much of them now closed, or closed to those who can’t pay subscriptions to the private companies who run them.

Our society is poorer as a result, and the splintering of the social experiences we share has led to other inequalities, whether it’s a young person learning a musical instrument or a retiree enjoying adult education classes.

While we rightly concentrate on lifting people out of poverty, there is no justification for those who are worse off than others being denied the quality of life that comes from green surroundings, cultural experiences and the time and space to enjoy free time.

Which brings me on to the third strand of tackling poverty and inequality in all their forms.

I’ve spoken about the need to change the way we work, so there is less inequality to reduce in the first place. And about how public services can ensure that nobody misses out on the basics of a healthy material and cultural life.

But there will always remain a need for a strong social security system, through our tax and benefit system. It’s not the only thing that matters – one think tank’s tax-benefit analysis of our 2017 manifesto ignored the vast majority of our policies – but it can’t be neglected.

There will also be a need for a social safety net… for those temporarily or permanently unable to work, or those thrown out of work by things outside their control.

And to give us all the security we need that we will be secure in our retirement and aren’t one missed pay cheque away from destitution, as was the case in the past and still is for many in the world.

I’ve made Labour’s opposition to Universal Credit clear now on several occasions. It’s leading to queues at food banks and children going hungry in school holidays. But as I alluded to earlier, I don’t want us to reinvent the tax credit system that preceded it either.

It’s worth us taking a step back and thinking before we design its replacement in government what we think a social security system fit for the 21st century should look like. Asking ourselves fundamental questions:

  • How do we help people who can work, not only find work, but progress in work, enriching themselves and our economy?
  • How do we secure those who can’t work dignity and a genuinely adequate income, stepping up, as a society, to look after each other in times of need?
  • How do we re-establish the principle of universalism, entrenching social security as a public service for all, not just a safety net for those at the margins?

In a world in which a job for life is becoming a historical memory, this is crucial.

I’m glad to say that our National Policy Forum has been considering these questions over the past year. I hope some of you here have contributed to the consultation.

And I’ll be working with Margaret Greenwood and party members on our answers to those questions, as well as how we put an immediate halt to the damaging changes that are already going through the system.

None of the three policy strands I’ve outlined there are sufficient without the others to eliminate poverty and reduce inequality in a sustainable way. We need a structurally different economy, a social safety net of shared public service provision, and of course a financial safety net as well.

Without any one of these three elements, we will not be able to achieve the sustained eradication of poverty, the dramatic narrowing of inequality, and the transformation of people’s lives that will be the central purpose of the next Labour Government.

The Joseph Rowntree Foundation said last year that “in-work poverty is the problem of our times”. Two-thirds of children in poverty live in a working family. And that’s before billions of pounds more of cuts to working-age benefits that the government has planned.

I am committing today to ending this modern-day scourge to eliminating in-work poverty by the end of Labour’s first full Parliamentary term. We’ll need all three of the policy approaches I’ve outlined to make that happen.

I hope to soon be in a position to make good on my commitments. And I want you to hold me to them. As Chancellor in the next Labour government, I want you to judge me by how much we reduce poverty and how much we create a more equal society. By how much people’s lives change for the better. Because that is our number one goal.

So I want to thank Resolution Foundation for your usual incisive analysis of trends in recent decades… and hand over to others to see where we agree or don’t.

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