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If living standards keep falling, get ready for Ed’s Reagan moment

The charge that the Tory-led coalition has no plan to protect living standards is slowly gaining tra

Come the 2015 general election, and the inevitable television debates, Ed Miliband might consider borrowing a line from Ronald Reagan. "Are you better off now than you were four years ago?" he asked in October 1980, during the closing remarks of the final presidential debate against the Democratic incumbent, Jimmy Carter. It was a simple yet devastating question that resonated with a disgruntled American public, ground down by a recession at home and an energy crisis abroad. The hapless Carter suffered a landslide defeat.

Here in the UK, three decades on, the fallout from the recession continues to blight the economy. Growth has gone negative, unemployment stands at almost 2.5 million, wages are stagnating and inflation has risen to 4 per cent - double the target rate - as global oil and commodity prices soar. Worse still, the "age of austerity" has yet to begin: fiscal consolidation starts in earnest on 1 April. Conservative and progressive politicians obsess over spending cuts and the Budget deficit; meanwhile, low-and middle-income households witness their living standards decline at an increasing pace.

Young and reckless

Writing in the New Statesman on 10 January, Gavin Kelly, chief executive of the Resolution Foundation think tank and a former aide to Gordon Brown, pointed out that "Britain is in the midst of the biggest squeeze on living standards since the 1970s". Mervyn King, the coalition-friendly governor of the Bank of England, went further. "In 2011, real wages are likely to be no higher than they were in 2005," he said in a speech on 25 January. "One has to go back to the 1920s to find a time when real wages fell over a period of six years." Are you paying attention, Lord Young of Graffham? Young is the Tory peer and former enterprise adviser to David Cameron who told the Telegraph last November that the majority of Britons had "never had it so good ever since this recession - this so-called recession - started".

Cameron, an ex-PR man, promptly dismissed Young for his embarrassing comments. But sacking a 78-year-old, gaffe-prone peer is easy: combating the rise in living costs and consequent squeeze on household incomes is much more difficult. And it isn't helped by regressive austerity measures such as the VAT rise, the cuts to the childcare element of Working Tax Credit, a three-year freeze of child benefit and a two-year freeze in public sector pay for those earning over £21,000.

The charge that the Tory-led coalition has no plan to protect living standards is slowly gaining traction, inside and outside Westminster. On 27 February, Ed Balls used an interview to call for the abolition of the recent VAT rise on fuel, which he argued would save three pence per litre of petrol. The shadow chancellor said that the subsequent £700m loss to the Treasury could be covered by the extra £800m raised by the government's recently revised bank levy. His clever proposal prompted a panicked George Osborne - recalling the September 2000 petrol protests against Tony Blair - to publish a newspaper article in response to Balls. The Chancellor was bombastic and self-righteously indignant, but lacked any specific proposals on how to tackle rising petrol prices.

Then, On 28 February, Ed Miliband used a speech to the Resolution Foundation in London to warn of a "cost-of-living crisis for ordinary families . . . squeezed wages, squeezed prospects, squeezed aspirations". Such speeches are often spun in advance by aides of a party leader as "the most important speech of his/her leadership", but this one perhaps merited the hype. Miliband spoke of his mission as being to combat inequality - "It's why I am in politics" - and a desire to build a "fairer" and "more prosperous" capitalism.

In doing so, he distanced today's Labour Party from the ultra-Blairite indifference to income inequality, as exemplified by Peter Mandelson's notorious comment about being "intensely relaxed about people getting filthy rich". But the Labour leader acknowledged, too, the limits of Brownite redistribution by stealth and the party's over-reliance on benefits and tax credits.

“We were wrong not to focus more on the type of economy we were building," he said. He spoke impressively of the need to "break out of the low-pay, low-skill cycle" and the importance of creating not just jobs but "high-quality jobs" - through, for example, giving incentives to employers to invest in vocational training for their employees, as in Germany, as well as an active British industrial policy. With real wages in decline since 2003, he reiterated his support for the introduction of a "living wage", over and above the minimum wage, and even suggested that UK companies could be offered tax breaks to encourage them to pay such a wage to their workers.

Cost crisis

It has become fashionable among the well-paid and metropolitan members of our political and media elites to dismiss Miliband's idea of a "squeezed middle" - those 11 million adults in middle-income households, who, according to the Resolution Foundation, are neither "benefit-reliant" nor "high earners" - since his supposedly confused interview on the issue on Radio 4's Today programme last November. In his comment piece, Osborne mocked the Labour leader for his "failure" to "define" the phrase - and this from a government that has given us such vacuities as "muscular liberalism" (Cameron), "alarm-clock Britain" (Nick Clegg) and, lest we forget, the "big society".

The reality is that the "squeezed middle" is a phrase that resonates with voters - so, too, does talk of a "cost-of-living crisis". "Labour winning over 'squeezed middle' voters," proclaimed the headline in the Independent on 1 March, reporting on a ComRes poll showing Miliband's party leading the Tories among unskilled workers, skilled manual workers and the lower-middle class.

An earlier ComRes poll, on 17 February, found that only 23 per cent of voters believe the coalition understands the concerns of those on low incomes while 67 per cent think it doesn't.

“Living standards were a massive issue out there in the real world last May," says a former Labour Party strategist, "but inside the Westminster bubble it was massively underestimated." Not any more. If, in four years time, Cameron and Osborne have failed to reverse the rise in prices, decline in real wages and fall in living standards, Ed Miliband will be doing his best impression of Reagan.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 07 March 2011 issue of the New Statesman, The great property swindle

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How can Labour break the Osborne supremacy?

The Conservative hegemony is deeply embedded - but it can be broken, says Ken Spours.

The Conservative Party commands a majority not just in the House of Commons, but also in the wider political landscape. It holds the political loyalty of expanding and powerful voting constituencies, such as the retired population and private sector businesses and their workers. It is dominant in English politics outside the largest urban centres, and it has ambitions to consolidate its position in the South West and to move into the “Northern Powerhouse”. Most ambitiously, it aims to detach irreversibly the skilled working classes from allegiance to the Labour Party, something that was attempted by Thatcher in the 1980s. Its goal is the building of new political hegemonic bloc that might be termed the Osborne supremacy, after its chief strategist.

The new Conservative hegemony is not simply based on stealing Labour’s political clothes or co-opting the odd political figure, such as Andrew Adonis; it runs much deeper and has been more than a decade the making. While leading conservative thinkers have not seriously engaged with the work of Antonio Gramsci, they act as if they have done. They do this instinctively, although they also work hard at enacting political domination.

 Adaptiveness through a conservative ‘double shuffle’

A major source of the new Conservative hegemony has been its fundamental intellectual political thinking and its adaptive nature. The intellectual foundations were laid in the decades of Keysianism when free market thinkers, notably Hayak and Friedman, pioneered neo-liberal thinking that would burst onto the political scene in Reagan/Thatcher era.  Despite setbacks, following the exhaustion of the Thatcherite political project in the 1990s, it has sprung back to life again in a more malleable form. Its strengths lie not only in its roots in a neo-liberal economy and state, but in a conservative ‘double shuffle’: the combining of neo-Thatcherite economics and social and civil liberalism, represented by a highly flexible and cordial relationship between Osborne and Cameron.  

 Right intellectual and political resources

The Conservative Party has also mobilised an integrated set of highly effective political and intellectual resources that are constantly seeking new avenues of economic, technological, political and social development, able to appropriate the language of the Left and to summon and frame popular common sense. These include well-resourced Right think tanks such as Policy Exchange; campaigning attack organisations, notably, the Taxpayers Alliance; a stratum of websites (e.g. ConservativeHome) and bloggers linked to the more established rightwing press that provide easy outlets for key ideas and stories. Moreover, a modernized Conservative Parliamentary Party provides essential political leadership and is highly receptive to new ideas.

 Very Machiavellian - conservative coercion and consensus

No longer restrained by the Liberal Democrats, the Conservatives have also opted for a strategy of coercion to erode the remaining political bastions of the Left with proposed legislation against trade unions, attacks on charities with social missions, reform of the Human Rights Act, and measures to make it more difficult for trade unionists to affiliate to the Labour Party. Coupled with proposed boundary changes and English Votes for English Laws (Evel) in the House of Commons, these are aimed at crippling the organisational capacity of Labour and the wider Left.  It is these twin strategies of consensus and coercion that they anticipate will cohere and expand the Conservative political bloc – a set of economic, political and social alliances underpinned by new institutional ‘facts on the ground’ that aims to irrevocably shift the centre of political gravity.

The strengths and limits of the Conservative political bloc

In 2015 the conservative political bloc constitutes an extensive and well-organised array of ‘ramparts and earthworks’ geared to fighting successful political and ideological ‘wars of position’ and occasional “wars of manoeuvre”. This contrasts sharply with the ramshackle political and ideological trenches of Labour and the Left, which could be characterised as fragmented and in a state of serious disrepair.

The terrain of the Conservative bloc is not impregnable, however, having potential fault lines and weaknesses that might be exploited by a committed and skillful adversary. These include an ideological approach to austerity and shrinking the state that will hit their voting blocs; Europe; a social ‘holding pattern’ and dependence on the older voter that fails to tap into the dynamism of a younger and increasingly estranged generation and, crucially, vulnerability to a new economic crisis because the underlying systemic issues remain unresolved.

 Is the Left capable of building an alternative political bloc?

The answer is not straightforward.  On the one hand, Corbynism is focused on building and energizing a committed core and historically may be recognized as having saved the Labour Party from collapse after a catastrophic defeat in May. The Core may be the foundation of an effective counter bloc, but cannot represent it.  A counter-hegemony will need to be built by reaching out around new vision of a productive economy; a more democratic state that balances national leadership and local discretion (a more democratic version of the Northern Powerhouse); a new social alliance that really articulates the idea of ‘one nation’ and an ability to represent these ideas and visions in everyday, common-sense language. 

 If the Conservatives instinctively understand political hegemony Labour politicians, with one or two notable exceptions, behave as though they have little or no understanding of what is actually going on.  If they hope to win in future this has to change and a good start would be a collective sober analysis of the Conservative’s political and ideological achievements.

This is an extract from The Osborne Supremacy, a new pamphlet by Compass.

Ken Spours is a Professor at the IoE and was Convener of the Compass Education Inquiry. The final report of the Compass Education Inquiry, Big Education can be downloaded here.