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.

Getty
Show Hide image

How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

0800 7318496