Will Hutton’s challenge to the Labour party
“Given the economic, constitutional and social impact of what the coalition is planning, effective opposition is overdue. Yet David Cameron and Nick Clegg have had a more or less free ride, intellectually and politically. Received wisdom is that public spending is the most serious threat – not the operation of British capitalism. It has not been an entirely free ride – witness the protests over tuition fees – but there urgently needs to be a sustained and coherent challenge. Labour should not shed the reasonableness of the Blair years, but Ed Miliband, until now feeling his way, must use the opportunity of Ed Balls's promotion to the shadow chancellorship to open up the economic arguments. All change is predicated on a more rational national conversation. In that spirit here are 10 ideas.
1. Break up the banks
British banks have long abdicated their responsibilities to British entrepreneurs, small firms and Britain's less advantaged cities and regions. Credit is too expensive and available on too tough terms. Thankfully that is now obvious to all. Labour urgently needs to define its position before the banking commission reports in September. A second financial reform would be the creation of a city by city network of virtual stock exchanges on which very small companies could raise capital on privileged terms.
2. Build great companies
Too few British firms have good owners. Two more important companies – Smith and Nephew, and De La Rue – are fighting to retain their independence from foreign takeovers. Their shareholders do not care about innovation, their staff or customers; their priority, and thus that of the directors, is only next month's share price. Increasingly Britain is a hollowed out economy for hire rather than a centre of business decision-making and wealth generation in its own right. There has to be root-and-branch overhaul of the framework for owning, directing and launching takeovers of Britain's companies.
3. Bust the monopolies
Takeovers create monopolies and diminish competition. The new oligarchs in finance and the media have concentrated not just economic but political power. Mega banks, mega media corporations like News Corp, mega retailers or mega mining finance houses limit the dynamism of our economy. Yet Britain's competition regime remains weak and confused. The competition commission needs greater powers, more autonomy and more resources: it needs to become a genuine force that is feared. American capitalism took off when the US busted Standard Oil in 1911. Britain needs its own trust-busting moment and tradition.
4. Abolish redundancy payments
We live in an economy based on knowledge, and this is where growth in employment will come from. But it is a fast-moving and risky world. The average firm is shrinking and its life expectancy shortening. Companies of whatever size are wary about taking on workers if they have to pay large sums in redundancy in the event of their business becoming outmoded by new technologies. They are also wary of undertaking vital research when the payoff is so insecure. Britain should follow Denmark and phase out all but minimal redundancy payments – I know this sounds frightening but I'll explain in a moment. A quota of all procurement, public and private, should be allocated to small firms. There would be a surge of private sector innovation, investment and employment.
5. Livelihood insurance
Reducing redundancy payments will create more risk in the labour market. Ed Balls should propose a national livelihood insurance scheme to replace the redundancy regime. Workers and their employers would pay insurance premiums into a livelihood insurance fund (companies might divert funds from the redundancy pot) that would guarantee up to 90% of previous earnings for up to three years after redundancy. This would provide a cushion on which workers could fall and then begin retraining.
6. A citizen grant of £50,000 for every 21-year-old
This grant would be available to every 21-year-old as a citizen entitlement. It could be spent solely on education – repaying tuition fees – or on training or on starting a new business. The aim is to create citizen entrepreneurs navigating their own careers and lives with solid assets behind them from early adulthood. They would have a stake in our society, be incentivised to think long term and responsibly about what they wanted from their lives. It would be funded by new taxes on property (see below). The coalition's abolition of the child trust fund – Labour's faltering step in this direction – was a monumental mistake.
7. Payback time for babyboomers
Britain must confront a taboo – our refusal to tax property. And we must be brave enough rapidly to increase the pension age to 72. It is unfair that nearly a million 18- to 24-year-olds are unemployed and face impossible house prices while millions of babyboomers sit on £1.3 trillion of untaxed wealth in housing. Labour should commit to lowering the top rate of income tax to 40%, but pay for the reduction – along with the citizenship grant – by introducing capital gains tax on all housing sales. This, together with increasing the pension age to 72 by 2030 and removing some exemptions from VAT, would comfortably raise the funds for the spending commitments above – and allow some partial reversing of the coalition's spending cuts.
8. An end to parents-pay education
Social mobility is collapsing in Britain. We need opportunity for all – impossible while the private school system remains so entrenched, their students offered a direct route to the upper echelons of British society. Private schools should lose their charitable status and be compelled to admit, through competitive examination, children from households with less than £40,000 a year. Their fees would be paid by the government.
9. An honest media
British democracy is coarsened by a media that is becoming ever more partisan and uninterested in impartial dissemination of information. Britain should introduce a fairness doctrine regulated by a media standards commission.
10. A written constitution along with proportional voting
The coalition government's unilateral reduction of the number of MPs in the Commons and the sidelining of the boundary commission process has made the case for a written constitution unanswerable. We can no longer have a constitution that is remade by whatever party in power to suit its particular interests of the moment. Proportional voting – a single transferable vote – is a necessity. In particular, there should be an entrenching of local government's power: it should have the constitutional right to raise up to half its revenue from local taxation.”
Will Hutton is former editor-in-chief of The Observer. He is currently executive vice-chair of The Work Foundation (formerly the Industrial Society), having been Chief Executive from 2000 to 2008.