Osborne's minimum wage move is a huge political opportunity for Labour

By conceding that a large rise would not cost jobs or damage the public finances, Osborne has made it harder for the Tories to credibly oppose a more radical offer from Miliband.

Margaret Thatcher memorably described New Labour as her "greatest achievement". In the same spirit, Labour can greet George Osborne's announcement that he favours "above-inflation increases" in the minimum wage as a remarkable act of political flattery. When Tony Blair and Gordon Brown introduced the policy in 1999, the Tories rejected it as a jobs killer; they are now competing with Labour to promise the biggest rise. There is no better example of how Miliband's party has shifted the centre ground to the left. 

But in both its content and its timing (the day before Miliband's long-trailed speech on the economy this morning), Osborne's gambit is uncomfortable for Labour. It is a reminder of the biggest advantage that a government has over the opposition: while the latter can only talk, it can act. But Osborne's move also opens up new political opportunities for Labour. If the Tories want to enter a bidding war with the opposition on living standards, Labour should be confident that it is one it can win.

Having shifted from denying the living standards crisis to seeking solutions to it (while attempting to blame the last government), it will become harder for the Tories to fend off reminders of how much ground has been lost since 2010 (with the average family, as Labour never lets us forget, £1,600 a year worse off). After the biggest fall in real wages under any government in recorded history and the retoxification of the Conservative brand through the abolition of the 50p tax rate , the danger for the Tories is that a rise in the minimum wage just looks like crumbs from the table. While the Conservatives enjoy a convincing poll lead on the economy, they have long trailed Labour as the party that would do most to improve family incomes. Osborne's announcement might have left the Tories in a better position than before, but they will still struggle to win an election defined by living standards. A tactical victory could become a strategic defeat. 

By conceding that a rise in the minimum wage (which has fallen back to its 2004 level) would not cost jobs and would have a neutral effect on the public finances (with the anticipated fall in corporate tax receipts offset by higher income tax receipts and lower benefits), Osborne has also made it harder for the Tories to oppose a more radical offer from Labour. Many on the left would like Miliband to respond by pledging to introduce a universal living wage, which would see the minimum wage rise from £6.31 to £7.65 in the UK and £8.80 in London. But with respected forecasters such as NIESR estimating that such a move would reduce labour demand by 160,000 jobs, the equivalent of a 0.5% rise in unemployment, this remains unlikely (although a poll last year found that 60% support a universal living wage even if it costs jobs).

It's worth remembering, however, that Labour has already gone further than any of the other main parties by suggesting that it should become compulsory for all public sector contractors and government departments to pay the living wage and by promising tax incentives for private sector employers to do so. When Miliband announced his plan last November, the Tories responded by claiming, with no accompanying evidence, that the policy was "unworkable" and would have "a substantial extra cost to the Exchequer". But after Osborne's embrace of higher wages, such stock lines will be less convincing than ever. If Labour outlines a plan that is both credible and radical, and that the Tories, for ideological reasons, are unable to support, the Chancellor may well regret playing on Miliband's pitch. 

George Osborne delivering his speech on EU reform in London on Wednesday. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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What Jeremy Corbyn gets right about the single market

Technically, you can be outside the EU but inside the single market. Philosophically, you're still in the EU. 

I’ve been trying to work out what bothers me about the response to Jeremy Corbyn’s interview on the Andrew Marr programme.

What bothers me about Corbyn’s interview is obvious: the use of the phrase “wholesale importation” to describe people coming from Eastern Europe to the United Kingdom makes them sound like boxes of sugar rather than people. Adding to that, by suggesting that this “importation” had “destroy[ed] conditions”, rather than laying the blame on Britain’s under-enforced and under-regulated labour market, his words were more appropriate to a politician who believes that immigrants are objects to be scapegoated, not people to be served. (Though perhaps that is appropriate for the leader of the Labour Party if recent history is any guide.)

But I’m bothered, too, by the reaction to another part of his interview, in which the Labour leader said that Britain must leave the single market as it leaves the European Union. The response to this, which is technically correct, has been to attack Corbyn as Liechtenstein, Switzerland, Norway and Iceland are members of the single market but not the European Union.

In my view, leaving the single market will make Britain poorer in the short and long term, will immediately render much of Labour’s 2017 manifesto moot and will, in the long run, be a far bigger victory for right-wing politics than any mere election. Corbyn’s view, that the benefits of freeing a British government from the rules of the single market will outweigh the costs, doesn’t seem very likely to me. So why do I feel so uneasy about the claim that you can be a member of the single market and not the European Union?

I think it’s because the difficult truth is that these countries are, de facto, in the European Union in any meaningful sense. By any estimation, the three pillars of Britain’s “Out” vote were, firstly, control over Britain’s borders, aka the end of the free movement of people, secondly, more money for the public realm aka £350m a week for the NHS, and thirdly control over Britain’s own laws. It’s hard to see how, if the United Kingdom continues to be subject to the free movement of people, continues to pay large sums towards the European Union, and continues to have its laws set elsewhere, we have “honoured the referendum result”.

None of which changes my view that leaving the single market would be a catastrophe for the United Kingdom. But retaining Britain’s single market membership starts with making the argument for single market membership, not hiding behind rhetorical tricks about whether or not single market membership was on the ballot last June, when it quite clearly was. 

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