The economy: hurting, yes. Working, maybe - but for whom?

Growth that doesn't fix the squeeze on living standards poses a challenge to all parties.

Ken Clarke, the cabinet minister with responsibility for giving mildly revealing interviews, has given a mildly revealing interview to the Daily Telegraph. The item that has grabbed most headlines is the acknowledgement that the government is unlikely to legislate to create a tax break for married couples this parliament. That is disappointing to the Conservative right but not entirely surprising. Tax cuts are a very precious political commodity; the Lib Dems are opposed to this particular one and would demand something juicy in return. The Tory leadership is happy to do those sorts of deals in theory but is not wedded enough [sorry, no pun intended] to the idea of a marriage allowance to squander coalition negotiating capital on it.

Also interesting is Clarke’s line on the economy:

If we are back to strong growth by the next election, we probably won’t need to campaign. If at the next election, the economy is in strong normal growth, George Osborne will be given the Companion of Honour or something and we will all get safe back.

Clarke adds, of course, that such a scenario is supremely unlikely and that a more plausible campaign for the Tories in 2015 is one that advertises them as having a “safe hand on the tiller.” That, along with dark warnings against prematurely handing responsibility for the economy back to Labour – and especially Ed Balls - is bound to be the outline of the Conservative pitch at the next election.  

The news last Thursday that the economy has formally exited recession has opened up a whole new school of political speculation – how does the return of growth change things? This is peculiar in a way because no-one expected the economy to shrink forever. Some recovery was always in prospect. What matters in economic terms is how robust it is. Some pessimists are forecasting a slump back into negative territory – a “triple dip” – most analysts expect weak growth whose benefits will not be widely felt.

Yet politically, Thursday’s positive number has made a difference. There are two reasons for that.

First, Labour MPs and shadow ministers – as I noted in my column last week – were already fretting about their apparent lack of a “fair weather” strategy. The previous week’s relatively buoyant employment figures provoked an attack of nerves, with some anxious consideration of the prospect that the Tory plan might really be working – or be superficially yet plausibly presentable as working. That is really a subset of anxiety about Ed Balls’s handling of the role of shadow chancellor. Broadly speaking he has called the macro-economics of the past two years right. For that he gets a lot of credit in Labour ranks – and among some non-partisan economists. He forecast a double dip and there was one.

But politically he has failed to stick the blame for that recession firmly on the coalition. Opinion polls show a gradual shift on the question of who is more trusted to run the economy – away from the Tories and towards Labour. But given the predictable mid-term dip experienced by any administration and the empirical fact that George Osborne inherited a growing economy and promptly shrank it, the Conservative ratings on the economy are – from Labour’s point of view – shockingly, depressingly good.

The whispering against Balls in the Labour ranks is that he has gambled too much on being vindicated by economics and has misplayed the politics. No-one wants the opposition to be ghoulishly willing the economy to fail. And if, come 2015, it is growing, no-one will be much impressed by a retrospective and unprovable claim that it might have grown sooner and better had the Tories not cut too far too fast in the early stages of the parliament.

That leads to the second obstacle facing Labour, which is psychological as much as political. It is the problem of cognitive dissonance. This is the phenomenon that leads people to unconsciously ignore or reject evidence that challenges a prejudice, because doing so is less painful than recognising and owning up to a fault. In this case, the Liberal Democrats, the Tory-inclined media and quite a few people who voted Conservative all have a profound emotional investment in Ed Balls having been wrong all along. That need will, in most cases, far outweigh the reasonable argument that – in a purely dispassionate account of the economic evidence – he was right. More generally, swing voters who backed coalition parties will be marginally predisposed to give Osborne some economic benefit of the doubt because they don’t want to think – or be told – that ejecting  Labour was an error and that the problems we now face are, to some extent, their own fault.

All of that means that Labour needs to be relentlessly focused on the future. To be fair, Ed Miliband seems to understand this. A crucial point – and an area of great danger for the Tories – is that a return to growth will not end the squeeze on living standards for people in middle of the income scale and below. This recovery will be unlike the bounce back from past recessions. Real wages and the purchasing power of many voters will still feel as if they are shrinking.

Later this week, the Resolution Foundation - the politically neutral think tank that has done more than any institution in Britain to define and highlight the “squeezed middle”  phenomenon – publishes the final report of its Commission on Living Standards. This is an epic piece of work that has drawn testimony and data from a wider range of expert individuals and institutions over the past 18 months. The report will look at various scenarios that might evolve over the next few years and the policy priorities implied by those outcomes. It will be a big mid-week story and makes, from what I have heard, uncomfortable reading in various ways for all political parties.

One thing we already know from past analysis by Resolution and others, such as the IFS, is that many people who consider themselves middle class and who generally expect a growing economy to make them feel more prosperous will reach the next election feeling discernibly poorer than they were in 2010. The political hazard for the Tories is that, even if they try to avoid triumphalism, they will be addressing the electorate with a message that says, in essence, “it hurt but it’s working” and the public will respond by saying “you say it, but it sure as hell doesn’t feel that way to us.” Or, worse, they will think “working for whom, exactly? You and your rich mates, perhaps, but not for us.”

Understanding that feeling and turning it into support for a different, fairer account of the future under Labour is Ed Miliband’s goal. The question for him and his shadow chancellor is whether or not the pursuit of that target means moving on from the big macro-economic argument of the past two years. It is a painful proposition, especially for Ed Balls. Perhaps he was right all along; perhaps no-one cares.

Good economic news puts the Labour under pressure. Source: Getty

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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