Miliband must reset the objectives of economic policy

Ed Miliband was right when he said an incoming Labour government’s top priority must be to tackle inequality, raise living standards and guarantee fair shares of growth. Now he has to convince voters that Labour has bold policies to deliver that promise, not least on decent wages and an economy in which growth can be sustained and public services protected.

The starting point should be pay. There needs to be a bold increase in the minimum wage; and in sectors of the economy where employers can afford more, there should be a higher floor. The power of government procurement can help ensure that not being a living wage employer is a difficult choice for many firms. And the progress made on the minimum wage and living wages would save the taxpayer a good slice of the billions spent on in-work benefits that subsidise low-pay.

The TUC has long argued that fair pay is not just an issue for those at the bottom, it matters for everyone.  The average full time wage is now worth £2,500 less than it was in 2010. To reverse years of pay stagnation the coverage of collective pay bargaining should be expanded. And Ed must make good on his promise to deal with the cosy closed shop of remuneration committees by compelling employee representation.

The abject failure of the coalition government to get anywhere near its borrowing and deficit reduction targets proves that radical cuts to services and pay are not the right way to go. We’ve seen a collapse in the collection of income tax and other taxes against expectations, so it is fair to say that a large part of remaining deficit is creation of the coalition. Given the international nature of the crash in 2008, an incoming Labour government will have a much better claim to blame its predecessor for the deficit it inherits that the coalition did.

Instead of the failed approach of the coalition, an incoming Labour government will need to grow its way out of the deficit with a credible investment plan for the future. A plan to grow good industries, build council homes, deliver decent jobs and raise wages.

The task is to reset the objectives of economic policy. It’s a goal that not only has popular and moral purpose, but offers a virtuous circle that will heal public finances and deal with the deficit – not as a fiscal straitjacket but as the healthy product of a fairer economy that works for all.

Frances O’Grady is TUC General Secretary