This government would rather kill the living wage than let it fall into the hands of Miliband

But if the living wage is forced on companies who win government contracts, it could change how we think about privatising public services

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Yesterday, Ed Miliband’s speech on the living wage included a gaggle of rare concrete policy recommendations. Among them, one has been singled out for particular discussion - the suggestion that “central government” should learn from “local government experience with procurement” and make payment of the living wage a condition for the awarding of major government contracts to large firms.

Following the speech, a rather plaintive sounding Number 10 stuck up its hand to tell on Ed. Altering procurement in this way is all well and good, it claimed, but to do so would be in breach of EU red tape. Miliband has dismissed this as “ridiculous”.

Conservative Boris Johnson, meanwhile, doesn’t seem too fussed about associating himself with the thorny issue, unveiling a London living wage trademark, and praising the living wage’s “red blooded capitalist” appeal.

Whatever the outcome of the legal debate, the government’s open discomfort with the idea of a living wage shows that a nerve’s been hit somewhere. Why is it both government and opposition forces view this idea as so significant?

Perhaps it has to do with the shift in power it offers.

To put this policy into effect would be to employ privatisation of public services as a force for change in business - a very 21st century form of market regulation. It’s a lefty idea at heart, but with its emphasis on government and corporate co-operation in establishing best practice, it won’t alienate the Tory moderates.

This is particularly powerful because recent public outrage at privatisation scandals has been driven by a flow of power in the opposite direction: privatisation has been perceived as a force for change in government, and not for the better.

Over the summer, G4S’s Olympics bungle stirred tabloid ire, but the angle taken was interesting. Rather than expressing doubt at the government’s judgement, or attacking the firm directly, papers led with their fury at the inconvenience to ‘our boys’ caused by the consequent alteration of government plans.

More recently, One Barnet, a mega-outsourcing scheme which would see elements of Barnet’s public services run by private companies, has come under heavy fire, with Councillor Brian Coleman leading the charge.

Coleman’s main beef with the scheme, expressed in a withering article in the Barnet Press, is that it might over-ride the instincts and judgements of councillors. In this, he feels, it is “fundamentally un-conservative”. Once again, the drive to outsource is perceived as driving government compromise.

Privatisation is often seen as an ideological issue, but more often it’s a practical means to right wing ideological ends - the reduction of red tape, the unbiased allocation (and saving) of public money.

The public don't believe that privatisation is providing these ends, and as a consequence bringing this quasi-leftist notion of adding a requirement to offer a living wage to the procurement process has the potential to curry wide favour. A centrist electorate who are suspicious of real or perceived public sector inefficiency but also resent the intrusion of excessive profiteering and cost cutting (and consequent loss of quality) into public life could well welcome a middle way. Policies like Miliband's allow for reliance on private sector expertise but curb the potential for profiteering. If nothing else, a good spin doctor might offer the public the attractive idea of taking some of these bungling firms down a peg or two.

The government is desperate to kill this policy because it is scared that it does not - and cannot - own it. If it falls unimpeded into Miliband’s hands, it could be the Labour leader’s first truly mass-appeal policy, and that’s not something anyone on the increasingly obscurantist right wants to see.

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