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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The price of accessing higher education

Should young people from low income backgrounds abandon higher education, or do they need more support to access it? 

The determination of over 400,000 young people to go into higher education (HE) every year, despite England having the most expensive HE system in the world, and particularly the determination of over 20,000 young people from low income backgrounds to progress to HE should be celebrated. Regrettably, there are many in the media and politics that are keen to argue that we have too many students and HE is not worth the time or expense.

These views stem partly from the result of high levels of student debt, and changing graduate employment markets appearing to diminish the payoff from a degree. It is not just economics though; it is partly a product of a generational gap. Older graduates appear to find it hard to come to terms with more people, and people from dissimilar backgrounds to theirs, getting degrees.  Such unease is personified by Frank Field, a veteran of many great causes, using statistics showing over 20 per cent of graduates early in their working lives are earning less than apprentices to make a case against HE participation. In fact, the same statistics show that for the vast majority a degree makes a better investment than an apprenticeship. This is exactly what the majority of young people believe. Not only does it make a better financial investment, it is also the route into careers that young people want to pursue for reasons other than money.

This failure of older "generations" (mainly politics and media graduates) to connect with young people’s ambitions has now, via Labour's surprising near win in June, propelled the question of student finance back into the spotlight. The balance between state and individual investment in higher education is suddenly up for debate again. It is time, however, for a much wider discussion than one only focussed on the cost of HE. We must start by recognising the worth and value of HE, especially in the context of a labour market where the nature of many future jobs is being rendered increasingly uncertain by technology. The twisting of the facts to continually question the worth of HE by many older graduates does most damage not to the allegedly over-paid Vice Chancellors, but the futures of the very groups that they purport to be most concerned for: those from low income groups most at risk from an uncertain future labour market.

While the attacks on HE are ongoing, the majority of parents from higher income backgrounds are quietly going to greater and greater lengths to secure the futures of their children – recent research from the Sutton Trust showed that in London nearly half of all pupils have received private tuition. It is naive in the extreme to suggest that they are doing this so their children can progress into anything other than higher education. It is fundamental that we try and close the social background gap in HE participation if we wish to see a labour market in which better jobs, regardless of their definition, are more equally distributed across the population. Doing this requires a national discussion that is not constrained by cost, but also looks at what schools, higher education providers and employers can do to target support at young people from low income backgrounds, and the relative contributions that universities, newer HE providers and further education colleges should make. The higher education problem is not too many students; it is too few from the millions of families on average incomes and below.

Dr. Graeme Atherton is the Director of the National Education Opportunities Network (NEON). NEON are partnering with the New Statesman to deliver a fringe event at this year's Conservative party conference: ‘Sustainable Access: the Future of Higher Education in Britain’ on the Monday 2nd October 2017 from 16:30-17:30pm.