The Tories will find it harder to justify austerity now growth has returned

As the economy accelerates, it will become increasingly difficult for Osborne to defend the 1% cap on public sector pay rises.

With the return of growth (some forecasters predict output as high as 3% next year), the Tories are increasingly confident that they can win the next election. While vulnerable to Labour's charge that this is a "recovery for the few, not the many", with living standards falling even as GDP rises, they argue that higher growth 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.

But as I write in this week's NS politics column, Labour doesn't buy this optimistic analysis. In its view, the link between higher growth and higher wages has been severed and will not be easily repaired. Ed Miliband’s team point 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).

A further problem for the Tories is the issue of public sector wages. In his most recent Budget, George Osborne extended the 1% cap on pay increases until 2015-16, entailing further real-terms cuts for workers. But with the return of growth, such austerity will become harder to justify; voters will want their slice of an expanding cake.

If, as the Tories hope, private sector earnings begin to rise, they will no longer be able to defend public sector pay restraint on the grounds of fairnes, while voters in general are likely to become less sympathetic to the case for deficit reduction as growth accelerates. One reason why Osborne imposed immediate cuts in 2010 was that he feared they would be harder to defend if he waited until a strong recovery was underway.

If the Tories want to win over the voters they will need to remain the largest party in 2015, they would be wise to offer some relief to the public sector. As Renewal, the Conservative group aimed at broadening the party's appeal among working class, northern and ethnic minority voters, has noted, the majority of Tory target seats have a higher than average share of public sector workers, including 60% of Labour-held targets and half of the top 20 Lib Dem-held targets. While the Tories are likely to pledge to cut taxes for all workers, in the form of a £12,500 personal allowance, they should also consider easing the squeee on the public sector.

George Osborne and Michael Gove listen to speeches at the Conservative conference in Manchester earlier this month. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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John Prescott on Labour: “This must be the worst operation I’ve ever seen”

The Labour peer and former deputy prime minister laments his party’s “civil war status”, saying “I wish Momentum would go away”.

I’ve attended a thousand PLP meetings. This must be the worst operation I’ve ever seen. It is more about personality politics than in the past.

The [last] Labour government was successful in most of the issues that we always thought was important to Labour: in the growth of the hospitals, the education system, the economy, people at work. All that was a successful record.

Not that it’s ever mentioned now. It was soured largely by Iraq. That period is almost obliterated by that. So you find present government, or even present leadership, in no way refers to that period of the Labour government. So the real problem is, if you’re disowning the most successful three periods of a Labour government, then you’re in some difficulty as to what you’re replacing it with.

It’s never happened before – it’s open war, civil war, inside the PLP. Some members in the PLP sit there with their social media, already typing out the fight going on to the mass of reporters who are amassed outside and told to come along and report because there’s going to be a big row. All that means we can’t really have unity. The division now is the attack on the leadership. A core who sit in the same places, make the same accusations against the leadership, right or wrong, every bloody week. They do it by a death of a thousand cuts – keep on making the same complaints.

I just think that the PLP is in civil war status. It’s not carrying out what it should do – that is, project Labour’s policies and be supportive of our people in the field.

All this criticism is about removing him. And then what adds to that is when Tom Watson comes along and joins in with this criticism. He’s entitled to do so, but he is the Deputy Leader, for God’s sake – quite different from the way I saw the role as defined; to support the party in a positive way, right. Get out and increase his membership, etc.

And the Leader, he's faced with a really difficult position, because he was elected and had never been a minister before. My heart went out to him when he had to deal with PMQs. Even with my 50 years, I found it impossible and fell on my face a few times.

We have a shadow cabinet now – cor blimey, you can be in the shadow cabinet in 12 months! You do need to have a bit of experience. So that does affect it, without a doubt. Then you get people on one side who refuse to serve in the shadow cabinet criticising the shadow cabinet. If you join the shadow cabinet, you’re a traitor to one cause or the other.

It's how you manage that division. The leadership is critical – for Jeremy to go out and do all of these things when he’s not been a minister is difficult. I think he’s been improving in doing the job. But frankly, it gets into people’s minds in a very short period of time, whether they think you’re the leader or not. And we do have a dilemma. It’s difficult for him – he’s reaching out a bit now, but almost the list has been drawn. I can’t see these people coming across now and uniting in the name of the party, supporting our people out in the elections. If you can’t unite the party, how the hell can you carry the country?

There are problems on the left and problems on the right, but we’ve always managed them – especially in the PLP. Robust arguments. But now it’s the battlefield, and all that comes out is a divided party.

I’m an old Labour man, right, I’m Labour to the core. To sit and watch it waste away its great reputation, what it’s done for our people in the country, and then when our people start stopping to vote for us, you’ve got to ask what’s bloody going wrong.

What Jeremy does is his decision. But he’s made clear he wants to stay. Now, if that stays the same, and the others stay the same, we’re going to have a stalemate divided Labour party – it’s disastrous.

So on the one hand, the PLP could try to be a little bit more supportive, and to recognise the party’s elected a leader, or they can go through the same process come June and call for another election, put it to the vote. They’re the options given to us by our party.

Our bloody country is decimated and we’re talking about the fucking sponsorship rules for the election of leader! I wish Momentum would go away, they’ve given us the same problems we had with Militant. I don’t think they’re as powerful as Militant, but they’re dedicated to the same cause. Their debate is how you change the Labour party.

By Christ, we can't win like this! I’m an old-fashioned type, and I’m proud to have belonged to a team that did win three elections. There was no other leader who did that before. But I don’t put it down to leaders, I put it down to the nature of the party. We’re responsible, not the leaders.

John Prescott is a Labour peer and former deputy leader of the Labour Party.

As told to Anoosh Chakelian.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition