London mayor race: the New Labour flavour of Sadiq Khan

London should become “the world’s first Living Wage City,” said Sadiq Khan on Thursday and argued for a change in how the voluntary minimum pay rate is calculated for the capital so it more fully reflects high altitude housing costs. Khan believes if this is done – and a review of the methodology is underway – the London Living Wage would soon rise from its current £9.40 an hour to around £10 or more.

That was the headline news from his speech to the Resolution Foundation think tank. Khan will hope it was appreciated by the estimated 1.2 million Londoners enduring in-work poverty, part of his bedrock voter base. Just as striking, though, was the setting in which his call was embedded.

Within a week of become Labour’s mayoral candidate back in September, Khan informed the Financial Times that he intended to become “the most business-friendly mayor of all time.” This declaration was accompanied by criticisms of the then brand new shadow chancellor John McDonnell. Khan said that, unlike McDonnell, he was against further taxes on business and that he wanted to attract more companies to London: “If business does well, London does well.”

There’s been no retreat from this stance and it seems to have pleased its target audience. In October, when Khan wrote an open letter to London businesses inviting them to help him shape his policies, the influential newspaper City AM approvingly contrasted his approach with that of his party’s new leadership.

Last month, the same paper accused Khan’s only close rival, the Conservative Zac Goldsmith, of ignoring the City, which would not be afraid to back his Labour opponent. By contrast, it applauded Khan, saying he had met with “dozens of City figures” one of whom praised him for knowing “a lot about the issues” and “making noises we haven’t heard from the Labour Party for quite some time.” Khan told the Spectator recently that he welcomed London’s being the home of more than 140 billionaires. “If you shut your eyes it could be Peter Mandelson speaking,” his interviewer remarked.

Can Khan really be the friend of big capitalism in London as well as the champion of London’s poor? His critics accuse him of inconsistency and saying different things to different groups. However, his Resolution Foundation speech set out a vision of a thriving London economy in which the interests of its businesses and those of its lower paid were firmly reconciled.

Does that recipe have a familiar flavour? It is easy to forget that a very similar formula was fundamental to a version of the Labour Party that won three general elections in a row - a Labour Party that saw no contradiction between wooing the Square Mile and introducing minimum pay rates and which, by the way, created the London mayoralty. “New Labour” may have become a washed-up project and a bashed-up brand, but Tony Blair and Gordon Brown’s shared insistence that private profit and social progress can advance hand-in-hand seems not to have been forgotten by the MP for Tooting. Nor has the relevance of their past successes to the London mayoral task.

As well seeking to make the running on the London Living Wage, which he described as “the strongest mechanism we have for challenging poverty pay,” Khan committed in his speech to “working with business to increase productivity,” including by setting up a strategic Skills for Londoners partnership along with educators and London’s 32 boroughs to match funding streams with skills gaps more efficiently.

He said he’d “offer our big businesses a new compact which recognises the driving contribution they make to our prosperity” while promoting “the principles of inclusivity and fairness” - a Khan mayoralty would be about “building a coalition for shared prosperity.” Small and medium-sized enterprises were promised his best efforts to secure from the chancellor the power to vary their business rates to make it easier for them to become London Living Wage employers. Attaining that status would be seen as “a badge of pride” by businesses of every size. He would “work towards that goal through partnering with employers, using carrots, not sticks,” he said.

Housing provision and childcare costs were also part of this picture of an “inclusive prosperity.” Khan said it is “a matter of both social justice and economic failure that so many skilled people, usually women” found that expensive childcare limited their incentive or ability to return to the workforce after having children and vowed to establish a London childcare commission with a view to enhancing provision across the capital.

He called the high cost of buying or renting a home in London “not simply a drag on living standards but on productivity.” According to Khan, “for the low paid it’s the difference between poverty and a decent standard of living” and that for “talented young people” it was “a massive disincentive to stay in London, when they could exchange their skills for a better quality of life elsewhere.” He said his promised Homes for London unit would “look at whether businesses could be invited to make a contribution to a new homes fund” with a proportion of any resulting, truly affordable homes being allocated to employees of the firms involved.

For cynics, all this may simply confirm that Khan, a “soft Left” politician who ran the campaign to make Ed Miliband Labour leader and became Labour’s candidate with the help of strong union backing, is only too adept at facing more than one way. A friendlier view might be that he is not so much borrowing from New Labour as joining up a more progressive bunch of policy dots into a coherent big picture in the way Miliband failed to. Either way, it is astute political positioning which also acknowledges that unless London mayors work effectively with business, not least in lobbying central government, it is much, much harder to get good things done - something “Red” Ken Livingstone spotted very quickly after becoming the first person to win the job.

What’s more, Khan’s platform recognises that a desire for more affordable housing, good living standards and a happy, high-quality workforce - “education, education, education,” anyone? - are common ground between both sides of industry in London, as are cheap and efficient public transport systems, low levels of crime, clean air and pleasant streets. New Labour may be dead, but if Khan becomes mayor of London he will have shown that some of its most basic tenets may yet have new life breathed into them.

Read Sadiq Khan’s speech to the Resolution foundation here.