How will Labour respond to the Tories' minimum wage plans?

Many in the party would like Miliband to pledge to raise the minimum wage to the level of the living wage, but a large rise in the former is more likely.

The idea of a significant increase in the minimum wage has been floating around Conservative circles for some months. It is one of the policies advocated by the influential Renewal group, led by David Skelton (a frequent NS contributor), which seeks to broaden the party's appeal among working class voters, and enjoys the support of Tory business minister Matthew Hancock, George Osborne's former chief of staff, who made a notable speech on the subject at the Resolution Foundation last year. 

I was told by several sources before the last Conservative conference to expect an announcement by Osborne himself, but for fear of incurring the wrath of the Low Pay Commission (LPC), which is responsible for setting the minimum wage rate, the Chancellor held back. Now, with the Tories desperate to counter Labour's "cost-of-living" offensive, the idea is back on the agenda, with David Cameron reportedly considering a rise of up to £1. 

The case for an increase in the minimum wage is both political and economic. A significant rise in the main rate, which currently stands at £6.31, would help to counter the charge that the Tories are only "for the rich" and would go some way to redressing the party's disastrous decision to oppose its introduction by Labour in 1999. As Skelton told the FT, "It was a mistake when the party opposed the introduction of the minimum wage and we are still paying for it politically. It made us seem like we were on the side of big business and the rich and it is a hard perception to shake off. This would help enormously." 

The economics are similarly attractive. A 50p rise in the minimum wage (viewed as one of the most likely outcomes), which is now worth no more in real-terms than in 2004, would reduce the benefits bill by around £1bn, improve low-earners' spending power (stimulating growth as a result), as well as increasing productivity, staff morale and employee retention. 

How far the Tories will go remains unclear. The FT reports that Osborne is still unwilling to override the recommendations of the LPC (which may recommend another below-inflation increase when it reports next month) and is concerned about the possible impact on employment (despite the absence of evidence that a rise would cost jobs). One source from the No. 10 policy unit tells the paper: "I think David Cameron would like to do it but he is cautious and I think he would defer to the chancellor on it.  Unemployment has been a good news story for the last two years and we don’t want to rock the boat a year out from the election." But after the briefing of the last few days, it will now be surprising if there is no significant change in the rate this year. 

While the Lib Dems are busy accusing the Tories of "nicking" their ideas, after Vince Cable called for an increase at the Lib Dem conference, many in Labour are feeling far more aggrieved. Is the party that introduced the minimum wage and that has championed it since, really about to allow the Tories to steal the initiative on low pay? 

Having emphasised the need to improve living standards, through lower prices and high pay, Ed Miliband and his team have been thinking hard about what the party can offer on wages. Many Labour MPs and activists (and, indeed, most voters) would like Miliband to pledge to raise the minimum wage to the level of the living wage (£7.65 nationwide and £8.80 in London) but with respected forecasters such as NIESR estimating that a stautory living wage would reduce labour demand by 160,000 jobs, the equivalent of a 0.5 per cent rise in unemployment, this is not on the party's agenda. At most, Miliband will pledge to ensure that all public sector contractors and government departments pay the living wage and provide incentives for private sector employers to do so. Alongside this, Labour figures are considering how best to increase the value of the minimum wage, with linking the main rate to inflation one option being closely examined. Policy is likely to be determined when Alan Buckle, the deputy chair of KPMG, concludes his low pay review for the party. 

But for now, at least, the party can take pride in having moved the centre ground to the left. Until recently, it was still to common to hear Tories warn that the minimum wage was destroying jobs; now they are competing with each other to see who can argue for the biggest rise. Moreover, if all the parties are prepared to engage in a sustained contest over who can best increase living standards, that is good news for all voters and for the economy. 

Ed Miliband speaks at the Labour conference in Brighton last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

Who'll win the Richmond Park by-election?

There are three known unknowns that will decide the contest. 

It’s official: Zac Goldsmith has resigned as the Conservative MP for his Richmond Park seat, and has triggered a by-election there, where he will stand as an independent candidate.

Will it be a two-way or a three-way race?

The big question is whether the contest will be a three way fight between him, the Liberal Democrat candidate Sarah Olney, and an official Conservative candidate, or if CCHQ will decide to write the thing off and not field a candidate, making it a two-horse race between Goldsmith and Olney.

There are several Tory MPs who are of the opinion that, given that latitude to disagree on Heathrow has been granted to two Cabinet ministers, Boris Johnson and Justine Greening, similar leeway should be extended to Goldsmith. It’s win-win for Downing Street not to contest it, partly because doing so would put anti-Heathrow MPs, including Johnson and Greening, in an impossible position. Theresa May isn’t averse to putting Johnson in a tricky spot, but Greening was an early supporter of her leadership bid, so her interests come fairly high up the prime ministerial radar.

But the second reason not to contest it is that Goldsmith’s chances of re-election will be put in a serious jeopardy if there is a Tory candidate in the race. Everything from the local elections in May or the Liberal mini-revival since Brexit indicates that in a three-way race, they will start as heavy favourites, and if a three-way race results in a Liberal Democrat win there will be bloodletting.

Although people are talking up Goldsmith’s personal vote, I can find little hard evidence that he has one worth writing home about. His performance in the wards of Richmond Park in the mayoral election was actually a bit worse than the overall Tory performance in London.  (Boris Johnson didn’t have a London seat so we cannot compare like-for-like, but Sadiq Khan did four points better in Tooting than he did across London and significantly outperformed his general election performance there.) He did get a big swing from Liberal to Conservative at the general election, but big swings from the Liberal candidate to the Tory were a general feature of the night, and I’m not wholly convinced, given his performance in Richmond Park in 2016, that it can be laid at Goldsmith’s door.

If he wins, it’ll be because he was the Conservative candidate, rather than through any particular affection for him personally.

But will being the Conservative candidate be enough?

Although on paper, he inherits a healthy majority. So did Robert Courts, the new MP for Witney, and he saw it fall by 19 points, with the Liberal Democrats storming from fourth to second place. Although Goldsmith could, just about, survive a fall of that magnitude, there are reasons to believe it may be worse in Richmond Park than Witney.

The first is that we already know, not just from Witney but from local council by-elections, that the Liberal Democrats can hurt the Conservatives in affluent areas that backed a Remain vote. But in Witney, they barely squeezed the Labour vote, which went down by just over two points, or the Green vote, which went down by just under two points. If in Richmond Park, they can both damage the Tory vote thanks to Brexit and squeeze Labour and the Greens, they will win.

Goldsmith's dog-whistle campaign for the London mayoralty will particularly help squeeze the Labour vote, and thanks to Witney, the Liberal Democrats have a ready-made squeeze message. (In Witney, Green and Labour votes would have been more than enough to elect Liz Leffman, the Liberal candidate.)

But their good performance in Witney and Goldsmith's mayoral result may not be enough on their own.  Ultimately, the contest will come down to the big question that will decide not just the outcome in Richmond Park but the future of the Liberal Democrats.

Have the voters forgiven the Liberal Democrats for going into coalition?

We know that Brexit can help the Liberal Democrats at the direct expense of the Conservatives. What we don’t know is if Brexit is enough to convince 6,000 Labour voters in Bath to vote tactically to get Ben Howlett out in exchange for a Lib Dem, or for 7,500 Labour voters to back a Liberal candidate in Hazel Grove to defeat William Wragg.

One of the reasons why the Liberal Democrats lost votes directly to the Tories in 2015 was fear: of uncertainty and chaos under an Ed Miliband government propped up by the SNP. That factor is less live in a by-election but has been further weakened due to the fact that Brexit – at least as far as Remain-backing Conservatives are concerned – has brought just as much uncertainty and chaos as Miliband and the SNP ever would have.

But the other reason was disgust at the Liberal Democrats for going into coalition with the Conservatives. If they can’t win over enough votes from the parties of the left, we’ll know that the party still has a way to come before we can truly speak of a Liberal revival. 

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