How Osborne disguised the truth about living standards

The Chancellor boasts in his Times piece that disposable incomes have risen but in the first quarter of this year they fell at the fastest rate since 1987.

With the return of the economy to something close to normal levels of output, attention has quickly shifted to the nature of the recovery. Is it balanced or unbalanced growth? Is it a recovery for the few or one for the many?

In his response to the GDP figures yesterday, Ed Balls emphasised that while the economy is growing (albeit after three years of stagnation), most people's real incomes are still shrinking. He said: "Families on middle and low incomes are still not seeing any recovery in their living standards. While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages."

But in a column in today's Times, George Osborne declares that the government is ensuring that everyone, including low-earners, benefits from the recovery, noting that "inequality is at its lowest for 25 years and disposable incomes grew by 1.4 per cent above inflation last year despite the squeeze, the fastest for three years". 

So who's right? The figures cited by Osborne are correct but they offer a highly partial picture. First, based on the most common measure - inflation - most people's pay is still falling, as it has been since the crash. In the year to May 2013, total earnings rose by just 1.7%, more than two percentage points below CPI inflation (2.9%). Since the election, average pay has fallen by £1,350 a year in real terms, with most now earning no more than they were in 2003. And the situation is unlikely to improve anytime soon. Wages aren't expected to outstrip inflation until 2015 at the earliest and earnings for low and middle income families won't reach pre-recession levels until 2023

But even if we accept Osborne's metric of choice - real household disposable income - the picture isn't as rosy as the Chancellor implies. Household incomes did increase by 1.4% in 2012 but they went on to fall by 1.7% in the first quarter of 2013, the largest quarterly drop since 1987. 

As for inequality, Osborne won't be able to masquerade as an egalitarian for long. While inequality has fallen to its lowest level since 1986 (owing to a combination of lower wages for middle and high income earners, the automatic stabilisers and the rise in the personal tax allowance), it is expected to rise from now on as the welfare cuts bite. In particular, Osborne's decision to cap benefit increases at 1 per cent for at least three years (an unprecedented real-terms cut) means the poorest will see a steep fall in their incomes. The IFS expects inequality "to rise again from 2011–12, almost (but not quite) reaching its pre-recession level by 2015–16."

The Chancellor might want to have a good story to tell about living standards and inequality, but he'll need to change his policies first. 

George Osborne delivers his Mansion House speech on June 19, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Slowly but surely, the patriotism question is making its way into Labour

John Denham observes a strange but happy outbreak at Labour party conference.

It’s a measure of Labour’s distress that it managed to settle the leadership while resolving so few of the challenges it faces. Over the past two years, the party’s electoral base has been torn apart by identity politics. Huge numbers of Scottish Labour voters abandoned party loyalty to vote for separation and then to dump the party itself. In England, voters feared SNP support for a minority Labour government; many others turned to Ukip. In the final blow, millions of former Labour voters, particularly those who felt mostly sharply English, backed Brexit. Many of the party’s MPs wonder how many will ever be coming back.

Faced with this tsunami of political rejection, the issue was simply airbrushed out of the leadership campaigns. Over four months neither Jeremy Corbyn nor Owen Smith even acknowledged, let alone addressed, the potent power of identity. Both cleaved to the belief that the complex weave of hope, fear, powerlessness, aspiration, community and security that are bound up in our sense of ‘who we are’ could all be stilled by the promise of ‘anti-austerity’.

One of the left’s less appealing habits is believing that it understands what voters really want better than voters do themselves. (You tell me you are worried about how quickly migration is changing your community, I tell you’re really worried about spending cuts).  Jeremy Corbyn’s statement that “we are not concerned about numbers” is probably enough to lose Labour the 2020 election on its own. No comprise here with voters on the issue that has dominated public concern for 15 years. To be fair, Owen Smith never offered a radically different perspective. It was never part of the debate.

Yet reality has a fortunate habit of intruding into the debate. In early, sometimes stumbling ways, identity politics is beginning to concern people right across the party. At Liverpool, most of the think-tanks held meetings addressing national identity in England, Scotland and the Union. Most attracted healthy audiences who, by and large, did not think identity was the property of the far right. (Declaration of interest: I was a speaker at some of these). Policy Network, IPPR, LabourList and the Fabians were amongst those taking the debate forward. Much of the New Statesman’s “New Times” edition is preoccupied with the same issues. Newer organisations from different parts of the party are engaging. The Red Shift group of Liam Byrne, Shabana Mahmood and Nic Dakin called for an explicitly English Socialism. Veteran Brexiteer John Mills, is supporting a new Labour Future organisation. Both are exploring how radical national policy and national identity fit together.

More surprising was the overt insertion of patriotic themes into the speeches of Corbyn’s front bench and the leadership itself. Military service sits as easily with the socialism of Clive Lewis as it does with Dan Jarvis. Rebecca Long-Bailey told the conference  Patriotism is not just about waving a flag during the World Cup. It is a real, life-long commitment to the people around you….When you pay your taxes, you are investing in the British people..This commitment to British people should be woven into every aspect of the British economy,

This is a potentially powerful and unifying theme for Labour. National identity and patriotism may still be a minority interest, yet it attracts people from all the party’s wings.  Tristram Hunt, Lisa Nandy, Owen Jones and some of Corbyn’s key supporters are all engaged.

These are early days. National identity was hardly the dominant issue of the conference, let alone Momentum’s parallel event. Too often the tone is narrow and defensive, as though people on the left don’t have identities but we need to understand those who do. There’s a temptation to believe that Labour simply needs some St George flags to unveil on council estates and put away elsewhere. At its best, progressive patriotism can uniting disparate interests and communities. It opens up conversations with people who would reject a political label. It can be a foundation for holding the powerful to account.

In his speech, John McDonnell praised Christians on the Left for promoting the hashtag “patriots pay their taxes”; a message that was reinforced in Corbyn’s own speech: “there is nothing more unpatriotic than not paying your taxes”.  As Hillary Clinton exposed this week, patriotism can separate those who accept their obligations to a wider society, and those who think it is clever to avoid them. In English radical history, the notion of the common weal held that the measure of the powerful was how well they looked after the commons. It has a powerful resonance today and Labour needs to mine it more.

John Denham was a Labour MP from 1992 to 2015, and a Secretary of State 2007 to 2010. He is Director of the Centre for English Identity and Politics at Winchester University