It’s living standards, stupid. Why a rising tide won't lift the Conservative boat

When Cameron derides Miliband for not wanting to talking about the economy, he forgets that, for most voters, living standards are the economy.

When challenged to justify their belief that they can win the next general election, the Tories espouse the view first expressed by Bill Clinton’s campaign strategist James Carville in 1992: “It’s the economy, stupid.” With growth forecast to be as high as 3 per cent next year, they are confident that a path to victory is opening up.

To Labour’s criticism that this is a “recovery for the few, not the many”, with living standards falling even as GDP rises, they urge patience. In the argot of the Treasury, wages are a “lagging indicator” and higher output will soon translate into higher salaries. As George Osborne remarked after the publication of the most recent GDP figures, “If Britain is growing then the finances of Britain’s families will start to grow.” The unspoken assumption is that so, too, will the Tories’ poll ratings.

For Labour, this optimistic analysis proves that the Conservatives have failed to grasp that the crisis is not merely cyclical but structural. The link between higher growth and higher wages has been severed and will not be easily repaired. Ed Miliband’s team points to the pre-crash period, when incomes for millions of low-and middle-income earners stagnated even in times of strong growth, as evidence that the market can no longer be relied upon to deliver for the majority. In an economy as unequal as Britain’s, any gains quickly flow to the top. If there is wage growth before the election, it will be of the unbalanced kind seen in April, when high earners collected their deferred bonuses in order to benefit from the reduction in the top rate of tax (the one month since May 2010 in which real incomes rose).

After successfully shifting the debate away from the deficit and towards living standards, Labour believes that the Tories are now stranded in enemy territory. The more they trumpet their success in reducing government borrowing and reviving growth, the more conspicuous their failure to deliver on wages becomes. Miliband’s team was stunned by David Cameron’s recent assertion at Prime Minister’s Questions that the Labour leader only wanted to talk about the “cost of living” because “he does not have an economic policy any more”. As one senior strategist told me, “For any normal voter, living standards are the economy.”

In a tacit acknowledgement of this, the Conservatives are finalising their response to Miliband’s proposed energy price freeze. George Osborne is poised to use his Autumn Statement on 4 December to announce the removal of some green charges from consumers’ bills and to launch a new assault on Miliband’s record as energy secretary. But Labour is unfazed by this manoeuvre, arguing that its policy has a “longer shelf life”. By the time of the election, after further price increases, it is Miliband’s freeze that will still look like the most attractive offer.

Without a good story to tell on living standards, the Conservatives will be forced to run on their macroeconomic record in 2015. Growth is likely to pass its pre-recession peak at some point next year and Osborne may come close to eliminating the bulk of the deficit by the time of the election. But this narrative of success risks undermining their warning that the economy is too fragile for voters to hand Ed Miliband and Ed Balls the keys to No 10. As one Labour figure put it to me, “If they’re saying that the war’s been won, then people might start asking, ‘How do we win the peace?’” The same dynamic that led voters to prefer the modest Clement Attlee to Winston Churchill in 1945 could lead them to favour Miliband over Cameron 70 years later.

Before the return of growth, the Conservatives drew comfort from the Prime Minister’s superior personal ratings. They have long believed that by framing the election as a presidential contest – do you want Cameron or Miliband as your prime minister? – they can overturn Labour’s lead. Yet history shows that a well-liked (or, more accurately, less disliked) leader is no guarantee of electoral success. In the final poll before the 1979 election, Jim Callaghan enjoyed a 19-point lead over Margaret Thatcher as “the best prime minister” but the Tories still won a majority of 44 seats. Similarly, in the 1970 election, Harold Wilson's 23-point lead over Ted Heath failed to prevent Labour suffering a decisive defeat.

Cameron and Osborne take inspiration from the Tories’ unlikely triumph in 1992, the first campaign in which they were involved, but they have forgotten one important ingredient: a change of prime minister. In a recent conversation, one shadow cabinet minister cited Gordon Brown’s “seven years theory” (as described in Damian McBride’s memoir) as evidence of why Cameron will struggle to deliver a Conservative victory.

According to this rule, after a politician has spent this long in the public eye, the voters invariably start to tire of them. Margaret Thatcher and Tony Blair were insulated from defeat by the large majorities they won in their pomp but this luxury is not available to Cameron. Unless he can increase the Conservatives’ vote share, Labour will almost certainly be the largest party after the election. Miliband continues to retain the support of more than a quarter of 2010 Liberal Democrat voters, a swing greater than the cumulative increase in the Conservative vote between 1997 and 2010.

The Tories’ “blue-collar” modernisers recognise that, to adapt Carville, “It’s living standards, stupid” is now a more appropriate slogan. But rebranding the party as one genuinely committed to sharing the proceeds of growth will be the work of a decade, not just 18 months. In the age of the wageless recovery, the Tories are about to discover that a rising economic tide no longer lifts the Conservative boat.

Rafael Behr returns next week

David Cameron with Ed Miliband as they stand in Westminster Hall ahead of an address by Myanmar opposition leader Aung San Suu Kyi on June 21, 2012 . Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

This article first appeared in the 30 October 2013 issue of the New Statesman, Should you bother to vote?

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Why the left shouldn’t abandon freedom of movement

Jeremy Corbyn is right to avoid making promises on immigration. 

Jeremy Corbyn was on the BBC’s Today programme yesterday morning, answering questions about policy ahead of his party conference speech.

The main line of questioning was on immigration, something Corbyn and his team have had to think hard about in recent months.

For over a decade, all parties have been trying to marry policy with popular opinion on Britain’s migrants. Brexit has exacerbated this dilemma, what with the UK’s participation in freedom of movement teetering on the rim of the dustbin of history.

The problem is a familiar one. Immigration is generally a good thing, but in the eyes of the majority of voters – and in reality in certain pockets of the country – it doesn’t look that way. But for a party seen as “soft” on immigration, pandering to the harder line of rhetoric from its opponents merely reinforces the perception that there is a big problem – and validates its opponents’ policies.

The Labour leader has angered some in his party by insisting he won’t be drawn into making “false promises” on immigration numbers. This is the right decision. The Tories’ targets are arbitrary, set them up to fail, and do little to quell public dissatisfaction with the number of migrants.

An inaccurate government headcount, whether it’s successfully brought down or not, doesn’t translate onto your street, or local schools, or queue at the doctor’s surgery – just as a politician’s reassurance about the positive net contribution from migrants doesn’t. The macro doesn’t satisfy the micro.

And Corbyn calling for a cap would not only be unconvincing to voters, but a betrayal of his supporters, who have projected their liberal politics onto him and love it when he champions migrants. Corbyn himself has never really been into free movement; he’s unconvinced by the benefits of the single market. Of course he is. He’s a eurosceptic, and a eurosceptic who is suspicious of capitalism, to boot.

But having a leader of a mainstream party sticking up for migrants is an important thing; someone’s got to make the positive case, and it’s not like Corbyn’s one to compromise for votes anyway. Particularly as he builds his whole reputation on being a “man of principle” and a “real alternative”.

Rather than “false promises”, Corbyn’s given us a number of false problems instead. He speaks about the effect of migration in terms of depressed wages and pressure on public services. If he were in government, he would reintroduce a “migrant impact fund” (amount unspecified) to make up for these.

The first problem with this is that Corbyn knows as well as Boris Johnson and Theresa May and George Osborne and Ed Miliband and Tony Blair and Caroline Lucas and everyone else who’s attempted to make policy on this does that, actually, migrants overwhelmingly come here to work. Indeed, he underlined his stance against scapegoating migrants in a passionate passage of his speech yesterday. They don’t “take” people’s jobs, and it is not the number of them that brings down wages or drives up rents.

Where wages are kept lower than the national average by the presence of migrant workers, you will find numerous agencies that pay them less than the minimum wage, fail to give them proper contracts, and often advertise jobs solely overseas. Where you find these agencies, you find businesses happy to turn a blind eye to their recruitment and employment practices.

Where rents are driven up higher than the local average by the presence of migrant workers, you will find landlords who are happy to make money from people willing to live ten to a house, share bedrooms and have a poor quality of life.

Boston – the town in Britain with the highest proportion of EU migrants after London – is a textbook study of this. A high level of workers is needed for agricultural and factory labour. They aren’t stealing people’s jobs, and unemployment is relatively low. But those who benefit financially from their presence, and take advantage, are the ones who cause the consequent negative social and economic conditions in the town. Conditions that led it to voting higher than anywhere else for Brexit.

So Corbyn’s “migrant impact fund” is a nebulous fix to a false problem that not even he believes in. Even the name of it sends the wrong message, making migration sound like a spate of bad flooding, or noise pollution.

It’s our light-touch enforcement of employment law, and murky regulation of exploitative agencies that slip through its net, which need government money and attention. Perhaps “shark impact fund” would be a better name for Corbyn’s fix-all pot of gold.

Giving councils extra funds for public services is priced into Labour policy already (if the party truly is anti-austerity) – and should not now be linked to a negative idea of migration in a tacked-on attempt to to make something palatable for voters. It’s a bit like Ed Miliband’s “Controls on Immigration” mug. Simply giving something a new name, or stamping on a motto, doesn’t wash with voters.

Those who argue that the country has voted against free movement, and we should accept it, that may be so. But it’ll do the Labour party little good campaigning to get rid of it. Once it’s gone, and we’ve replaced it with some kind of points-based system, places with high levels of migration will still have high levels of migration – because those are the places where jobs need filling. It’ll either be EU migrants who manage to stick around, or other immigrants drafted in out of necessity having been assessed under a points-based system. If investment in these areas isn’t ramped up, residents will still feel left behind, and will still see migrants around them as the cause.

So what about the many pro-Brexit areas where there is a very low number of immigrants? This really is irrelevant. The problem in these areas is the problem the country over: lack of funds. Unless you invest, people will remain unsatisfied. And if people remain unsatisfied, they will continue to look for something to blame. Unfortunately, Corbyn is joining the legions of politicians who are handing them that easy target. And he is least likely to see the electoral benefit of it.

Anoosh Chakelian is deputy web editor at the New Statesman.