Would you want to be in No 10 for the next parliament? Photo: Getty
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What’s in store for the 2015 victor: winner’s curse or a steady recovery?

Even in these fragile political times, May 2015 may not be as unattractive an election to win as it first appears.

One of the laziest lines in politics is that there are good elections to lose: five years in opposition are rarely rewarding. But it’s certainly true that there are less attractive elections to win and for many 2015 falls into this category. As others have said: beware of the winner’s curse.  

This pessimism is increasingly hard-set. To even raise the prospect of there being any upside in the next parliament is to risk ridicule. This week at the Liberal Democrat conference I was chastised for having the audacity to host an event called sharing the pain and the gain of the next parliament. “Don’t you know it’s only going to be pain?”

You can see the point. Regardless of who wins the election, we are likely to see fragile political leadership, quite possibly in the form of a minority government or an unhappy coalition, being buffeted by strong economic and fiscal headwinds while grappling with the pressures of resurgent English and Scottish nationalism.

Above all, the gloom is rooted in the economic outlook for Britain’s households. Three grey clouds hang over the next parliament, the darkest of which concerns the public finances. Whether it is George Osborne’s £25bn or the £37bn of tightening that organisations like the Resolution Foundation and the IFS have pointed to (and that’s not including the £9bn cuts already pencilled in for 2015/16, nor the £7bn of tax-cuts promised by the Conservatives last week), there is an awful lot of misery still to dish out. All the more so when we are told the NHS needs £30bn of extra resources by 2021 to sustain itself. There is no version of the next Parliament that doesn’t involve severe fiscal pain.  

The second challenge, a family relative of the first, is wage stagnation. Six years of falling pay remains the central economic fact of our times and there is no shared sense of when it will end. Actually, there is: it’s always next year. Most economists are still dazed by what’s happened in part because they didn’t think seriously about the deteriorating wage slow-down that occurred in the years before the crash and thus didn’t reflect on what it might imply for what arose afterwards. Falling pay is not just hurting families, it’s hobbling the exchequer too (due to what the OBR has termed ‘reverse fiscal drag’). A wage–poor recovery will mean a revenue-poor one too.

Add to this the third challenge – the inevitably of higher interest rates bearing down on debt-laden households – and the grounds for anxiety grow. Even if typical mortgage rates only go up by 1.5 per cent by 2018 – which many would say is optimistic - it would add £1500 to the annual costs of a £150,000 mortgage. If interest rates spiked for whatever reason then things could get truly nasty.

So far, so scary – and that’s before we even contemplate what a deflationary spiral in the Eurozone, or a hard-landing for the Chinese economy, might mean.  Yet to imply that any of this is pre-ordained is to over-claim. We shouldn’t get stuck in a doomy-gloomy way of thinking. A counter case for cautious optimism, or at the very least pessimism-lite, should also be entertained.    

The performance of our jobs-market has massively surpassed expectation. Assuming this continues, at some point wage growth will resume at least for a while (a few prescient voices have long maintained this would occur when unemployment falls to 4-5 per cent). Just because the economic establishment was wrong about the point at which wages would grow it doesn’t mean it’s never going to happen. And there are now, very belatedly, signs that a solid recovery is underway in business investment which should eventually feed through into productivity.   

Wage growth will eventually help improve the fiscal outlook; but before then the Treasury may well get a boost when, later this autumn, the OBR’s forecasts of potential output are updated. Even a fairly modest upgrading, to nudge it into line with those of the IMF, could dent the size of future austerity. And let’s not forget that fiscal timetables tend to be malleable. Regardless of anything that gets pledged pre-election, don’t be surprised if greater pragmatism emerges afterwards. A bit of extra time creates quite a bit of wriggle room.

As for interest rates and the so-called debt time-bomb, judging how long interest rates can remain on the floor is always going to be a high-wire act but to date the Bank has shown itself willing to face down calls for a precipitous rise. And to a significant degree the wage challenge and the monetary one offset each other: until wages grow interest rates are unlikely to shift much. 

All of which means it’s possible to sketch out a picture of the next Parliament that is less gruesome than we might think. Steady, job-rich GDP growth. The eventual resumption of pay rises as unemployment continues to fall. A very slow and gradual path of interest rate increases following rises in living standards, assisted by stable inflation and a housing market tamed by tougher regulation rather than the need for higher mortgage rates. And a timetable for chipping away at the deficit that extends over the parliament.

Sure, that’s a very rosy scenario. Any number of things could derail it. It would require plenty of good policy judgement, not to mention luck, for it to arise. Even then it would be a bruising and enervating parliament that would severely test the most robust of governments. But steady growth is a salve to most problems, and to be in power is always to have real choices. Don’t rule out the possibility that the 2015 election winner might not necessarily be as cursed as the current zeitgeist would have us believe.

Gavin Kelly is chief executive of Resolution Foundation

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.