Ed Miliband delivers his speech on banking reform in London on January 17, 2014. Photograph: Getty Images.
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Why Miliband is right to keep banging on about living standards

Voters will still be worse off in 2015 than in 2010 - Labour's "cost-of-living" strategy remains its best hope of victory.

Ed Miliband needs to find a new script - that has been the response of most of Fleet Street to the Labour's leader Budget reply. Eight months after Miliband made the "cost-of-living" his party's defining theme (and years after he first used the phrase), commentators are desperate for him to change the subject. In part, this reflects the natural journalistic desire for novelty but it also reflects the belief that, with the economy recovering, this attack line has run its course. Yet for at least two reasons, Miliband (to invert David Cameron on Europe) is right to keep "banging on" about living standards. 

First, while the gap between average wages and prices has narrowed in recent months, real incomes are still declining. As the ONS figures published yesterday show, average weekly earnings rose by 1.4 per cent from November 2013 to January 2014, 0.5 per cent below the current rate of inflation. For most people, in other words, there is still no recovery at all. And in an economy as unequal as Britain's, the headline average (hugely inflated by high pay at the top) is an imperfect guide to living standards. Even after wages finally creep above inflation (as they are forecast to do this year), there will be no rise in real incomes for the millions of public sector workers who have had their salary increases capped at 1 per cent and for those most reliant on benefits. 

For the rest, after five years of falling living standards, it will take more than a few months of growth to make up the ground lost since the crisis. In 2015, as the IFS has repeatedly pointed out, real incomes will still be far below their 2010 level, with voters currently an average of £1,600 a year worse off. As Ed Balls noted at his post-Budget briefing yesterday, this will be the first time that living standards have ever been lower at the end of a parliament than at the start (paving the way for Miliband's "Reagan moment"). Indeed, based on the RPI measure of inflation, the OBR forecasts that wages will be flat until 2019; there will be plenty of people who feel no better off in the next decade, let alone in the next year. 

This leads to the second reason why Miliband is right to maintain his "cost-of-living" focus: voters believe Labour is most likely to make a difference. While the Tories enjoy a large lead as the best party to manage the economy and the deficit, Labour continues to lead as the party best-placed to improve living standards (with a five-point advantage in the most recent YouGov poll).

The key for Miliband is to shift political debate towards the latter and away from the former (as he did in his conference speech). It was this strategy that Barack Obama successfully deployed during his 2012 campaign. In meetings with the Labour team in London and Washington DC, Obama aides including his pollster Joel Benenson emphasised how important the president’s stance on living standards had been to victory in tough times. A report on the election by the veteran Democrat Stan Greenberg for Miliband pointed to polls showing that while Mitt Romney had led on "handling the economy"(51-44%) and "reducing the federal budget deficit" (51-37%), Obama had led on understanding "the economic problems ordinary people in this country are having" (51-43%) and on "looking out for the middle class" (51-40%). That Obama triumphed should not be surprising. As one Labour strategist told me, "for most voters, living standards are the economy". The Tories would like nothing more than for the opposition to stop talking about how voters are worse off than they were in 2010, which is precisely why it would be madness for Miliband to do so. 

If Labour is to win the election, it won't be enough to convince voters that they're poorer under the Conservatives. It will also need to convince them that they'd be better off under Labour. In the 2012 US election, Mitt Romney similarly resurrected Ronald Reagan's famous line - "Are you better off now than you were four years ago?" - but the electorate stuck with Obama because the numbers were moving in the right direction and they doubted Romney could do any better. The Tories hope and expect UK voters will take the same view of Labour in 2015. 

But the challenge for Miliband is continue to develop his party's offering on wages, jobs, housing and energy, not tear up the script entirely. Labour's "cost-of-living" strategy still represents his best hope of victory in 2015. 

George Eaton is political editor of the New Statesman.

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Arsène Wenger: how can an intelligent manager preside over such a hollowed-out team?

The Arsenal manager faces a frustrating legacy.

Sport is obviously not all about winning, but it is about justified hope. That ­distinction has provided, until recently, a serious defence of Arsène Wenger’s Act II – the losing part. Arsenal haven’t won anything big for 13 years. But they have been close enough (and this is a personal view) to sustain the experience of investing emotionally in the story. Hope turning to disappointment is fine. It’s when the hope goes, that’s the problem.

Defeat takes many forms. In both 2010 and 2011, Arsenal lost over two legs to Barcelona in the Champions League. Yet these were rich and rewarding sporting experiences. In the two London fixtures of those ties, Arsenal drew 2-2 and won 2-1 against the most dazzling team in the world. Those nights reinvigorated my pride in sport. The Emirates Stadium had the best show in town. Defeat, when it arrived in Barcelona, was softened by gratitude. We’d been entertained, more than entertained.

Arsenal’s 5-1 surrender to Bayern Munich on 15 February was very different. In this capitulation by instalments, the fascination was macabre rather than dramatic. Having long given up on discerning signs of life, we began the post-mortem mid-match. As we pored over the entrails, the curiosity lay in the extent of the malady that had brought down the body. The same question, over and over: how could such an intelligent, deep-thinking manager preside over a hollowed-out team? How could failings so obvious to outsiders, the absence of steel and resilience, evade the judgement of the boss?

There is a saying in rugby union that forwards (the hard men) determine who wins, and the backs (the glamour boys) decide by how much. Here is a footballing equivalent: midfielders define matches, attacking players adorn them and defenders get the blame. Yet Arsenal’s players as good as vacated the midfield. It is hard to judge how well Bayern’s playmakers performed because they were operating in a vacuum; it looked like a morale-boosting training-ground drill, free from the annoying presence of opponents.

I have always been suspicious of the ­default English critique which posits that mentally fragile teams can be turned around by licensed on-field violence – a good kicking, basically. Sporting “character” takes many forms; physical assertiveness is only one dimension.

Still, it remains baffling, Wenger’s blind spot. He indulges artistry, especially the mercurial Mesut Özil, beyond the point where it serves the player. Yet he won’t protect the magicians by surrounding them with effective but down-to-earth talents. It has become a diet of collapsing soufflés.

What held back Wenger from buying the linchpin midfielder he has lacked for many years? Money is only part of the explanation. All added up, Arsenal do spend: their collective wage bill is the fourth-highest in the League. But Wenger has always been reluctant to lavish cash on a single star player, let alone a steely one. Rather two nice players than one great one.

The power of habit has become debilitating. Like a wealthy but conservative shopper who keeps going back to the same clothes shop, Wenger habituates the same strata of the transfer market. When he can’t get what he needs, he’s happy to come back home with something he’s already got, ­usually an elegant midfielder, tidy passer, gets bounced in big games, prone to going missing. Another button-down blue shirt for a drawer that is well stuffed.

It is almost universally accepted that, as a business, Arsenal are England’s leading club. Where their rivals rely on bailouts from oligarchs or highly leveraged debt, Arsenal took tough choices early and now appear financially secure – helped by their manager’s ability to engineer qualification for the Champions League every season while avoiding excessive transfer costs. Does that count for anything?

After the financial crisis, I had a revealing conversation with the owner of a private bank that had sailed through the turmoil. Being cautious and Swiss, he explained, he had always kept more capital reserves than the norm. As a result, the bank had made less money in boom years. “If I’d been a normal chief executive, I’d have been fired by the board,” he said. Instead, when the economic winds turned, he was much better placed than more bullish rivals. As a competitive strategy, his winning hand was only laid bare by the arrival of harder times.

In football, however, the crash never came. We all wrote that football’s insane spending couldn’t go on but the pace has only quickened. Even the Premier League’s bosses confessed to being surprised by the last extravagant round of television deals – the cash that eventually flows into the hands of managers and then the pockets of players and their agents.

By refusing to splash out on the players he needed, whatever the cost, Wenger was hedged for a downturn that never arrived.

What an irony it would be if football’s bust comes after he has departed. Imagine the scenario. The oligarchs move on, finding fresh ways of achieving fame, respectability and the protection achieved by entering the English establishment. The clubs loaded with debt are forced to cut their spending. Arsenal, benefiting from their solid business model, sail into an outright lead, mopping up star talent and trophies all round.

It’s often said that Wenger – early to invest in data analytics and worldwide scouts; a pioneer of player fitness and lifestyle – was overtaken by imitators. There is a second dimension to the question of time and circumstance. He helped to create and build Arsenal’s off-field robustness, even though football’s crazy economics haven’t yet proved its underlying value.

If the wind turns, Arsène Wenger may face a frustrating legacy: yesterday’s man and yet twice ahead of his time. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit