On 13 July 2016
- Our Work
- The Reformer Blog
Liz Kendall MP, Member for Leicester West, gave the keynote speech at Reform’s Annual Dinner on Wednesday 13 July 2016. Please find the transcript below:
It hardly seems possible that the vote for Britain to leave the EU was taken only 20 days ago.
It has been a tumultuous time in politics since then, to put it mildly.
One by one the leading Brexit champions lost or abandoned their leadership ambitions. And an albeit modest supporter of Remain is in Downing Street tonight.
I hope there will soon be a new leader of my Party too, because whether you support Labour or not, our country and constitution desperately need a strong and effective Opposition to hold the Government to account for its decisions in the difficult times ahead.
However, I don’t want to talk about Westminster’s recent political dramas or who should lead my Party, absolutely critical though this decision is.
Instead, I want to talk about the underlying reasons for the Referendum vote and the reforms that are needed in our country, now more than ever before.
It has been said many times since the historic vote on 23rd June that Britain faces its biggest crisis since the second world war. The uncertainty for our country is huge and the risks to our economy increasingly clear.
But as the French Prime Minister Manuel Valls said in his speech to the National Assembly just after the Referendum: this crisis, much like all crises, must be used as an opportunity for significant change.
He argued it would be an historic mistake to believe the Referendum only concerns the British people, and that the European Union now faces a choice: “either it refuses to change and people continue to run from it, consigning the EU to history, or it reforms to act for its people.”
I couldn’t agree more, and my argument tonight is that we must use the Referendum as an opportunity to make significant changes here in the UK too.
There are many reasons why people voted Leave.
I spent hours in debates about sovereignty and democracy, the intricacies of EU law and the Commission, our trade relations and how much money we get from and give to the EU. Above and beyond all this, when I spoke to people on the high street or doorstep by far the most important issue was immigration.
I believe the very real anger and frustration that drove so many people to vote Leave reflects long- standing, deep-rooted, underlying concerns about how our economy is working, that no-one has been listening to.
As I said during Labour’s last leadership election, whilst our globalised economy has brought huge benefits for some, too many people – especially in our post-industrial towns and villages, and coastal areas – feel left out and left behind. They have not seen the benefits of economic growth in their pay packets or local public services.
In truth, wages for most people in this country were stagnating even before the 2007 financial crisis. The hit to wages following the crash was huge, took years to start to recover, and at the last budget we learnt that earnings growth has begun to slow once again.
On top of this, people on low and modest incomes have seen their tax credits cut and the most disadvantaged parts of our country have suffered disproportionate cuts to funding for their local public services.
As a strong champion for Remain, I argued that voting to leave the European Union would not solve these problems.
But having taken that decision we must not now mislead people about what kind of deal is actually possible with the EU and the implications this will have, or make the wrong choices about what kind of country we want to be post-Brexit – because if we do, we will make these problems far worse.
The Government seems to want to strike a deal with the EU that allows us to control free movement of people and yet at the same time somehow retain access to the single market, including keeping passporting in the City.
I do not believe such a deal is possible.
The most likely outcome is a tailored EEA-style deal, but this could be years in the making and will have serious consequences.
Years of uncertainty, plus the inevitable trade offs between access to the single market and free movement, will make Britain a far less attractive place for companies to invest in.
The last Chancellor called for corporation tax to be cut in order to attract investment into the UK. My fear is that this will soon be followed by calls to deregulate the labour market – despite the fact that we are already one of the least regulated countries in the G7 – and to shrink the welfare state in order to make us more competitive.
A low tax, deregulated, small state Britain is the wrong choice for our country because in a globalised economy we will never succeed in a race to the bottom.
And it will be the people who voted Brexit who will end up paying the price with their wages and employment rights, and cuts to their tax credits and public services.
Britain must choose a different path and reform our economy to create a new model of growth, which ensures no-one is left behind.
Theresa May is right to say we need an economy that works for everyone, not just a few at the top; that irresponsible behaviour in big business can no longer be tolerated; and that there is an “unhealthy and often irrational gap between what companies pay their workers and their bosses”.
She has said she will ensure greater transparency on pay and bonuses and binding shareholder votes on executive pay. Last summer I called for employee representation on UK company boards – so I’m glad the new Prime Minister agrees.
However, ensuring our economy works for the many and not the few will require far more fundamental reforms, particularly when so much of the growth we’ve seen since the crash has been driven by consumer spending, rising house prices and household debt, and with all the uncertainty and risks we now face following Brexit.
First, we need a modern industrial strategy to help rebalance our economy. This should support our existing strengths – like pharmaceuticals, car manufacturing and the creative industries – and invest substantially in future areas of growth like new technology, the digital revolution and clean energy.
Second, we need to turbo charge the devolution agenda to create effective regional economic policies and ensure sustainable growth in every part of the county.
I have been a long-standing champion of devolution, because people in Manchester or Leeds or Birmingham know far better what is needed in terms of skills, housing or infrastructure than the man – or even woman – in Westminster.
In my experience, the most radical reforms to the role of the state are taking place at the local level too.
Whether it’s the not-for-profit Robin Hood Energy company in Nottingham, the staff-led mutual care organisation for people with learning disabilities in Leeds, personal budgets for people with mental health problems in Northamptonshire or the pioneering rent-to-buy scheme in Liverpool, our local council leaders are leading far more innovative and radical reforms than anyone in Whitehall.
But to make devolution really work, the deals being struck across the country must spread jobs, growth and opportunities out to our market towns and coastal areas, not just down to our large metropolitan cities.
They must also be backed by fair funding, because without this the Government is simply devolving responsibility without the ability to make lasting change happen.
When my city, Leicester, has had a 37% cut in it’s funding over the last six years and Liverpool a staggering 58% cut, the potential for devolution to rebalance our economy and transform our public services is being seriously undermined.
Finally, we must take action to tackle the growing inequalities that are holding our country back.
In December last year the Office for National Statistics found that wealth inequality in Britain had risen for the first time in almost a decade, predominantly on the back of rapid rises in house prices in London and the South East.
Between 2012 and 2014, the wealthiest 20% of households had 117 times more assets than the poorest 20%. The top 10% of people now own a staggering 45% of this country’s wealth.
These inequalities aren’t just unfair, they harm our economy too. As the International Monetary Fund says: countries that are more unequal have shorter and weaker periods of growth and countries that are less unequal have stronger and longer periods of growth.
In other words the idea that if a few at the top do well, wealth will somehow trickle down to everyone else is for the birds.
That is why the Government must not go ahead with its decision to cut Capital Gains Tax and Inheritance Tax.
Cutting the tax on profits made on capital gains overwhelmingly benefits the better off who already own capital like stocks and shares. It will not promote the long-term measures businesses need to encourage innovation and productivity, increase investment in technology or research, or help new business start, expand and succeed – all of which are essential to boosting jobs and growth and improving productivity.
Removing Inheritance Tax on all properties worth up to £1 million also benefits only a very few at the top, and fails to ensure taxpayers’ money is focused on rewarding work, enterprise and merit.
The desire to pass on your home to your loved ones is completely understandable and natural. It is what many parents want to do and one of the reasons why people work hard to buy their home and pay off their mortgage in the first place. Their motivations are not selfish, they simply want to help their family.
But the accumulation of wealth through cuts in capital gains and inheritance tax entrenches privilege, distorts life-chances and does nothing to spread growth and opportunity.
This is something progressive reformers can never support because it preserves – indeed entrenches – the status quo, when we want to break it open.
Our tax system must be based on clear principles of incentivising work and rewarding long-term investment and productivity. This should apply as much to the incomes and assets of the wealthy as those on low and middle incomes.
Different decisions can and must be made.
So instead of cutting Capital Gains Tax, we should put this money into initiatives like the Enterprise Investment Scheme. This gives a tax break for long-term investment in new companies. The money can then be used to expand the business, or invest in training, technology or research, to improve productivity.
And instead of giving a £1 billion Inheritance Tax cut to the wealthiest few, we should put this money into early years services to transform life chances.
When the most disadvantaged children in my constituency start school 19 months behind their better off peers, they play catch up for the rest of their lives. They struggle to get five decent GCSEs, let alone go to college or university or get a decent job.
There is nothing economically credible about paying more for problems that could be prevented by taking action earlier on, and having a genuinely long-term economic plan means having high quality early years services, particularly for disadvantaged children, so every child starts school ready to learn.
Let me finish by making two political observations.
The first is about the risks of choosing tactics over strategy.
David Cameron began his leadership of the Conservative Party by saying the Tories had to “stop banging on about Europe”. Yet he ended up agreeing to a referendum on Britain’s membership of the EU in a doomed attempt to appease the right of his Party, and ultimately leading us out of the EU – sealing his place in history for all the wrong reasons.
In my own Party, we have failed to make difficult arguments about the economy, immigration and reforming welfare and our public services, for at least six years. And we are reaping the consequences today.
The lesson I take from what’s happened in both our main political parties is that you never win an argument by pandering to it, or ignoring it and simply hoping it goes away. You win by taking the argument head on.
Doing anything else simply fuels the extremists, whether or the Right or Left, and makes the fight much harder when it inevitably comes.
My second reflection is about the leadership our country now needs, not just from our political parties but all those in positions of influence.
Since the Referendum we have heard a lot about the divisions in our country. Between Remainers and Leavers, our cities and towns, young and old, rich and poor. Between the different nations of our United Kingdom and – lets face it – between the so-called ‘metropolitan elites’ and ‘experts’ and just about everyone else.
But we must never, ever forget that despite the very real differences that exist, we have far more in common as human beings.
We all want a good job that pays a decent wage, a great school for our children, a safe place to live, a home to call our own, time to spend with our loved ones, something to look forward to when we retire, and the confidence that if things go wrong or we get sick or frail, there will be help to get back on our feet if we can, and decent care and support if we can’t.
I have always believed that there is far more that unites us than divides us, and that – as it says on my Party’s membership card – through the strength of our common endeavour we achieve more than we do alone.
Now more than ever before we need leadership that seeks to unite our country, not divide it; puts hope over anger and fear; and above all understands the crisis we now face must be used as an opportunity to make the radical changes our country desperately needs.