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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Industrial Strategy: Ensuring digital skills are included

The opportunities for efficiency, adaptability and growth offered by digital skills have never been so important to British businesses. The New Statesman asked a panel of experts, including Digital Minister Matt Hancock, Tinder Foundation CEO Helen Milner, Tech City CEO Gerard Grech and Google Policy Manager Katie O’Donovan, to pinpoint the weak spots and the opportunities for a smarter digital skills strategy.

British people spend more per capita online than any other country in the developed world. With 82 per cent of adults using the internet on a daily basis and more than 20 per cent of retail sales taking place online, it would appear that most British businesses are digitally capable. A closer look, however, reveals a significant digital skills gap between larger companies and the small businesses that make up 60 per cent of the private sector – comprising a workforce of over 15 million people, with a turnover in excess of £1.6trillion. Of these small enterprises, a third don’t have a website and more than half are unable to sell goods online. So, are digital skills taking priority in the government’s industrial strategy?

Matt Hancock, Minister of State for Digital and Culture, said digital education from an early age will be a cross-party objective for years to come: “We’re making some progress on this, and one of the most exciting things we did in the last parliament was to put coding into the curriculum from age eight. We’ve recognised that there are down-the-track requirements for digital skills, as much as with English and Maths, and we’ve got a huge array of initiatives to corral the enthusiasm for digital and make sure that it is best used.”

Hancock added that participation in the digital economy is important at every level of business and society: “I can group the facts and figures; 23 per cent of people currently lack basic digital skills, and about 90 per cent of new jobs now need some form of them. I think that what we’ve learnt following the Brexit vote is that the need to engage everybody is more demonstrable than ever before. This is a very important part of the Prime Minister’s agenda, and wider digital engagement is a key part of the broader issue to make an economy that works for everyone.” 

It is this wider opportunity to access and education that forms the bedrock of a new partnership between Google and the Tinder Foundation, aiming to deliver digital skills training to those in society who are most in need. Cue the Digital Garage. The project sees community organisations across the country provide skills support to small businesses, sole traders and indviduals, helping them to make the most of their resources.

Katie O’Donovan, Policy Manager at Google, explained: “Google has a longstanding commitment to train 250,000 people across the UK in digital skills. Since launching the Digital Garage in 2015 we’ve provided mentoring and digital skills training in Leeds, Manchester, Birmingham, Newcastle and Glasgow.  But as the UK faces a new chapter we want to ensure, whether you’re a student looking for your first job, a small business looking to attract new customers or a musician looking to promote your music, the right digital skills are freely available in your local community.

Tinder Foundation CEO Helen Milner recognised that a wider proliferation of digital skills would release a surprising amount of value into the economy. “Some of our research showed that every £1 invested in growing people’s basic digital skills put £10 back into the economy. But it’s not enough to save money - you’ve got to show how you can make money out of it as well.”    

The Labour MP for Aberavon, Stephen Kinnock, has seen at first hand the benefits of support for digital skills, and welcomes opportunities for partnership in his constituency. The shift from manufacturing, he accepts, needs direction and following the depletion of his local steel works he views digitisation as “the only way forward.” Kinnock added that exciting projects such as the Swansea bay region or ‘internet coast’ becoming a testbed for 5G could serve to re-energise communities which are in many ways in a state of decline. Kinnock said: “I’m absolutely delighted that we’re going to have pop-up versions of the Digital Garage in Port Talbot.”

CEO for TeenTech Maggie Philbin, meanwhile, stressed that digital education at school level must be taught through the lens of practical application. She warned: “Many young people aren’t greeted by any coherent messaging in school, so they don’t see why they’d need digital skills in the workplace. We’ve got to start getting a better message across and improve the opportunities for actual work experience that harnesses these skills.”

Karen Price, CEO at The Tech Partnership shares this view. For Price, adapting apprenticeships to incorporate digital skills will help to inspire a culture of innovation. She suggested that “if that's part of an apprenticeship that could be polished to use in a business environment, you'd have a digitally capable young person who could probably move that business on in a different way.”

Nick Williams, Consumer Digital Director for Lloyds Banking Group, views improving people’s digital skills as a matter of urgency and brought up research conducted by the company’s new Business Digital Index for 2016 which found that 38 per cent of small businesses and 49 per cent of charities are currently lacking digital maturity. “It’s no longer a matter of choice,” Williams said, “for organisations to survive, we must focus on a digital message.  Technology’s moved on and people just haven’t kept up. We have to show how these new skills can translate to greater productivity. Ability and access are the two variables to address. We are on the brink of going down the route of a digital divide – those who are capable and those who aren’t – and we’ve got to stop that.”

Rachel Neaman, Director of Skills and Partnerships at Doteveryone, was quick to pick up on this point. She warned that any digital training must not simply be for future generations’ benefit, but also be afforded to those already in work. “What are we doing for the people who currently lack these skills? How do we stop people from being left behind?” Neaman called for an “equal emphasis” on updating and upgrading the existing workforce. Julian David, the CEO at Tech UK, was also keen to highlight that digitisation is “an ongoing process” and therefore “retraining” at regular intervals is needed to cope with a continually evolving demand.

While Hancock spoke of a “unit-based standard learning system”, similar to that used in American schools, to help apply digital skills training where it is most appropriate, IPPR North researcher Jack Hunter said there were real opportunities to be grasped in the coming devolution agenda: “The new mayors that are coming in next year to drive the agenda and economic growth are going to be getting a lot more funding around a variety of different skills streams that feed directly into the digital programme.”

The panel agreed that the digital divide will only grow wider if action is not taken. Director of the Action and Research Centre at the RSA Anthony Painter said that society is being split into two camps: “the confident and creative, and those who feel held back.” Painter recommended that the latter group are given a fresh chance at being empowered digitally. He said: “They don’t tend to use the internet for professional development, whereas the others do. We’ve been having a look at this locally by creating a ‘City of Learning’ which combines a digital platform built around open badges which have micro-accreditations for learning; things that if you get someone’s passionate interest and then start feeding into more formal learning opportunities then you wrap around that a sort of city-led campaign which lets them identify with a common cause – we’re a learning city.”

Tech City UK CEO Gerard Grech concurred and went to explore the link between a strong web presence and business expansion or improvement. The problem identified is that many businesses may not realise the extent of their digital capabilities and thus run the risk of missing out. Grech said: “If you ask a window cleaner if they are a digital business, they might say no, but if you ask how they might go about quoting someone, they could find the address on Google Maps or get the Street View. That’s the idea, to show how digital can be used for them.”

Ultimately, the panel concluded, that the enthusiasm to add a digital depth to Britain’s talent pool was validated by its potential advantages. “A lot of the major challenges facing the economy,” Painter summed up, “are actually rooted in skills. Whether it’s the challenges of Brexit or the challenges of broadband, I think if you fix the skills, everything else falls into place.” The panel agreed that any government has a responsibility to champion digital strategy throughout society, regardless of location or economic standing, and equip businesses with the digital skills required to perform at their best.  

The round-table discussion was chaired by Kirsty Styles.

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