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.

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

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

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