Stronger trade unions, improved regional policy and an end to austerity should form part of a plan to return growth in living standards to its pre-crisis levels, according to a leading leftwing thinktank.

Calling for a fairer tax system and a less flexible labour market, the Fabian Society said a comprehensive strategy was required to boost household incomes.

Three Labour MPs – the shadow Treasury minister, Anneliese Dodds, the shadow industry minister, Chi Onwurah, and Rachel Reeves, the chair of the Commons business committee – contributed to the report, Raising the Bar.

Andrew Harrop, the general secretary of the Fabian Society and the report’s editor, said: “We should judge our economy by the pace at which ordinary household incomes rise because the point of economic growth is to place prosperity into the hands of the people.

Against this benchmark, the UK’s recent economic record is truly terrible with the living standards of working-age households only just higher today than in 2007. Raising the Bar challenges the fatalism of our economic policy-makers and sets out a comprehensive six-point plan to get family incomes to grow the way they used to.”



Harrop added that for decades in the run-up to the 2008 financial crisis, real family incomes grew by 2% a year. “Earnings are not expected to return to pre-crisis levels until the 2020s and planned cuts to social security will further reduce the living standards of low and middle-income households. Yet policy-makers behave as if nothing can be done.”

The Fabian six-point plan involves:

A more stimulative monetary and fiscal policy, with an end to austerity, increased public investment and a cautious approach to raising interest rates.

Tighter regulation of zero-hour jobs, a broader and more generous minimum wage, and a redesign of universal credit to make work pay for mothers.

Increased powers for trade unions.

Devolving strong economic powers to local and regional authorities, and encouragement for public bodies to spend locally.

An industrial strategy focused on boosting R&D, targets to promote green technology, and an emphasis on “everyday jobs”.

Higher taxes for rich individuals and large corporations but an end to social security cuts.

Geoff Tily, a senior economist at the TUC, the umbrella body for British trade unions, said the public spending cuts since 2010 had not only damaged the public realm, but had also sucked out demand from the economy, leading to weaker growth, and lower earnings and household incomes. Higher hourly earnings and higher productivity now depended on raising demand, he said.

He added: “The attacks on public sector wages and public sector services were not only unjust, but also macroeconomically unsound. Reversing cuts should strengthen the private economy, permit wage increases and ultimately restore family incomes (as well as boosting government revenues and so repairing public sector finances). A more reasoned assessment of demand, and hence recognition of more spare capacity than currently understood, should also reduce the chance of interest rate rises.”