Inequality is now an issue for ‘middle Britain’, Stewart Wood tells Robert Philpot and Adam Harrison

When Ed Miliband made his first 10 appointments to the House of Lords last November, three of them were academics. None were exactly political neophytes: Ruth Lister, the expert on poverty, social exclusion and women’s issues, is a regular on the Compass events circuit, while Maurice Glasman’s work with David Miliband’s Movement for Change and nascent blue Labour thinking had already made his a familiar name to many in the Westminster village.

But Stewart Wood’s nine years as a special adviser to Gordon Brown, and his role heading up the strategy and communications side of the Ed Miliband campaign, means that the Magdalen tutorial fellow represents political experience of an altogether different kind. Out of the ivory tower and into the political trenches in a way that few academics who turn their theoretical expertise into rather more ‘hands on’ experience ever manage.

And he evidently has the confidence of his leader: in addition to that seat in the Lords, Miliband has appointed Wood to the shadow cabinet as minister without portfolio, providing advice on ‘ideas and strategy’. It is a challenging brief. Barely 18 months after a general election in which Labour faced its second-worst defeat since 1918, the party has opened up a steady, if unspectacular, poll lead. But winning in 2015 may actually be the easier – if not easy – part. ‘Let’s face it,’ says Wood. ‘We are facing social democracy in tougher times if we get into power again. You have to have an approach that is relevant to those times and that is what we are trying to develop.’

Over the past 12 months, the outlines of that approach have begun to emerge: a focus on the ‘squeezed middle’, the ‘new inequality’, a ‘something-for-something’ welfare state, and a ‘better capitalism’. Put up in lights in Miliband’s conference speech as a battle between ‘predator and producer’ businesses, it is this last idea which has captured most media attention, sparking a lively public debate.

But Wood believes it would be a mistake to see each of these parts in isolation, and, while his language may be less colourful than the rhetoric employed by his boss, their thinking, unsurprisingly, is closely aligned: ‘The best way to get those in the “squeezed middle” to have more income is to have better jobs, based on better skills with companies that are dedicated to long-term value rather than mergers and acquisitions – trading bits of paper in order to generate short-term earning.’

Neither can the concerns of the ‘squeezed middle’ be separated from the question of inequality. Citing recent polling that shows 60 per cent of Americans – in a country that supposedly cares less about the pursuit of equality than Europeans – want to see the federal government take more active steps to reduce the wealth gap between those at the top and those in the middle, Wood suggests that the ‘politics of inequality’ are changing.

However, in order to capitalise on this, the left needs to think differently about how it addresses the subject: ‘This is not some sort of abstract academic concern about the income at the very top and the very bottom,’ he begins. ‘I think that’s the way the left has thought about inequality before, very much in income terms, very much about the very top and the very bottom.’ But he goes on to challenge the orthodoxy of some on the left who have argued that there was a well of public sentiment that the party was failing to tap into by not talking more about closing that gap. ‘I think that is a very important thing to know about a country but I don’t think that resonates with people, I don’t think that’s what people care about. I think the gap between the people in the middle and the people at the top is something the people in the middle now care a huge amount about.’

The key to tackling this challenge, the shadow minister believes, is ‘creating a new economy … with one of the central hallmarks being creating jobs that boost incomes for the middle classes.’ But surely this is a long-term solution to a long-term problem. Wouldn’t an incoming Labour government be better off adopting a more traditional approach to tackling inequality – namely, raising taxes sharply on the very rich and redistributing it to those on low and middle incomes?

While Wood launches a staunch defence of the 50p top rate of tax introduced by Labour during its final months in government – ‘the idea that that is somehow a tax on aspiration, given that this is the top one per cent of our population we’re talking about, I think is nonsense’ – it is clear that he does not see higher taxes on the very rich as the solution. Instead, he warns Labour not to be ‘tempted by short-term fixes through the tax system’. ‘That’s not what the tax system is about. I think the tax system has to reflect core principles about fairness but also about efficiency. I’d be very wary of doing short-term tax pyrotechnics in order to deliver for your core vote.’

Indeed, argues Wood, Miliband’s emerging ‘new economy’ agenda, ‘very much focuses not on a litany of new spending commitments, but on a rewiring of the rules, the regulatory principles about the way our economy works … It is actually precisely focused on a world in which there is more fiscal constraint.’

While Wood wants to put the issue of inequality – albeit reframed – at the centre of the political debate, he is also keen to suggest that a future Labour government should not necessarily be looking to top-down regulatory solutions. So while he believes that the solution to the ‘suspicion that top pay and bonuses are going to people irrespective of contribution’ is to have workers’ representatives on remuneration committees, he declares himself ‘agnostic’ about how that is achieved: ‘I think it’s an open question about the role of legislation versus the role of best practice and incentives. Whether it’s through regulation [or] whether it’s through kitemark schemes, [and an] Investors in People sort of approach, I’m neutral.’

Similarly, Wood argues that Miliband’s commitment to the Living Wage will not be delivered through legislative fiat: ‘It’s quite important for the Living Wage that it’s something that emerges from discussion, negotiation and companies taking an interest in how to retain good workers and how to have a better employee-employer relationship. For me, at this point, the Living Wage campaign is about that. It’s about voluntarist approaches … Effectively if it was legislation you’d be making the minimum wage into a Living Wage if you raise it a few quid.’

There is, then, Wood indicates, nothing old Labour about Miliband’s new economy. He also wants to avoid a false impression arising from the Labour leader’s comments about the Occupy LSX protesters camped outside St Paul’s cathedral: ‘Ed wasn’t saying, absolutely did not say, that the Labour party supports [the] protesters. Some people have said that; it’s either a wilful misreading or it’s just a mistake. What he said was that mainstream politics would be foolish to ignore the sentiment that is behind a lot of people who are at St Paul’s.’

And Miliband’s comments suggesting that David Cameron was looking after the interests of the top one per cent and that the pursuit of a ‘fairer capitalism’ was ‘not in his DNA’, says Wood, should also not be misinterpreted: ‘There’s absolutely no sense in which we have a strategy that is either predicated on, or implicitly informed by, a class war.’ Isn’t Cameron’s wealthy background relevant at all? ‘No,’ responds Wood, ‘I don’t think it’s relevant. The cliché is that you should care about where people are going, not where they’ve come from and I actually do think that.’

Nonetheless, argues Wood, there is ‘widespread outrage’ at the way ‘some parts of the population … seem protected’ from the country’s economic difficulties. The prime minister, he says, has a ‘blind spot’ to this ‘problem at the top’, offering only ‘a lot of warm words and not a lot of action’.

But does Miliband not have a similar ‘blind spot’ towards irresponsibility at the bottom of society? Wood agrees that on this issue, ‘there’s a lot of anger among people who voted for us and people who didn’t vote for us about the lack of fit between what people get and contribution.’ Nonetheless, he suggests, ‘I think the anger at the top is equally justified, perhaps more so.’ Wood also points to Miliband’s ‘responsibility speech’ in June, which ‘was not just about responsibility at the top. What it was about was saying, “look, there is a long-standing concern about the welfare system being fleeced” … Rightly or wrongly there is a widespread perception that there are issues there.’

In fact, contends Wood, ‘politically it’s very unsustainable just to have a welfare system that is all about the top 80 per cent giving to the bottom 20 per cent’. Renewing the ‘insurance function’ of the welfare state, so that ‘the same welfare state should be available’ to the 80 per cent ‘should they face their own particular kinds of risk’ is key to renewing what he terms ‘the welfare contract’.

Labour’s political challenge, suggests Wood, is to ‘construct a majority supportive of a reformist progressive agenda’. And his belief is that now it has become an issue for ‘middle Britain’, inequality can, in a way that it has not for more than 30 years, play a part in doing so. If Wood is right about that, he and Miliband will not just have won an election, they will have rewired the rules of the political game as it has been played in Britain since Jim Callaghan left Downing Street.

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Photo: Isaac Strang