Progress | Centre-left Labour politics

Getting to predistribution

Predistribution requires redistribution of economic power, argues Sonia Sodha.

Ed Miliband’s speech this week was a resounding success: it more than achieved what it needed to do, showcasing Ed as a future prime minister and uniting commentators from the left and right in praise, a feat rarely achieved in British politics.

Contrary to those who have criticised it as policy-light, the speech also set out some important signals for how a future Labour government would seek to create more inclusive growth generated by fairer markets: the breaking up of the banks; long-needed reform of our education system to create a vocational gold standard; using procurement to reward businesses that offer apprenticeships; and ending the system of quarterly reporting for publicly listed companies. These are important steps in moving towards the vision of a one nation economy that Ed set out.

The task ahead for the policy review being led by Jon Cruddas is to develop this agenda further into a winning manifesto for 2015 and a workable programme for government. But the challenges it faces are probably greater than any other review of opposition policy in recent memory.

This is because creating a one nation economic model will require more than traditional government levers. Ed was right to focus on skills policy, procurement and regulation as hugely important in getting us on the road to fairer, more sustainable growth. But these levers will only go so far.

The defining feature of responsible capitalism is its focus on ‘predistribution’: making people better off, creating more better-paid jobs and avoiding consumers being ripped off in uncompetitive markets like energy, banking and pensions. In many ways predistribution is a confusing label. It still requires redistribution, but redistribution of economic power, not just resource. The structural issues in our economy – whether excessive financialisation, lack of investment as a symptom of short-term equity markets, or the new inequality between the very top and the rest – are caused by an imbalance of economic power within markets. Too much power sits with big global companies, and not enough with the people who work for them, who own them via their pension funds, and who buy from them.

As I argued here, addressing that imbalance of economic power requires a different type of government intervention to build institutions that collectively empower employees, savers and consumers to hold companies to account, whether for how the proceeds of growth are shared between a company’s employees, for the investment decisions of companies they have a stake in via their pension funds, or to ensure they get the best deal as consumers.

What would this look like in practice? There must be a significant role for trade unions, but coverage is poor in the low-paid low-skill sectors in the private sector – if trade unions are to fulfil their predistributive promise, they and the Labour party must be able to prove their relevance to people working in those sectors. Ending the culture of short-termism in the British boardroom will require proper reform of the pensions industry to ensure it acts in the long-term interest of savers, not the short-term interests of asset managers. There is an important role for consumer organisations to play in collectivising the buying power of consumers to get better deals from companies operating in uncompetitive market, as shown by the Big Switch run by Which? to get a better deal for energy consumers.

The challenge is that it is much harder for government to try to change culture and increase accountability in our economy through institutional reform than it is to use more traditional Whitehall levers. This type of reform is also much more difficult to communicate to the public. But in developing a one nation economic agenda, these are issues the policy review should explore in the months to come.

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Sonia Sodha was formerly a senior policy adviser to Ed Miliband and writes in a personal capacity. She tweets @soniasodha

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Sonia Sodha

is a former adviser to Ed Miliband and writes for Progress in a personal capacity

1 comment

  • I agree with your conclusion that predistribution requires a redistribution of economic power but this must be much more emphatic; I would pass a law saying that no company can employ more than 150 people on the basis that in this size of enterprise income distribution is likely to be less.

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