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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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.