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  1. Business
  2. Economics
30 September 2013

Osborne ducks the living standards challenge

The Chancellor insists that his economic plan is a plan for living standards. But the pre-crash years showed that growth is no guarantee of rising incomes.

By George Eaton

After Ed Miliband’s pledge to freeze energy prices until 2017 won Labour a notable poll bounce, there is increasing pressure on the Tories from inside and outside of the party to come up with their own emblematic policies to ease the living standards crisis. But in his speech to the Conservative conference today, George Osborne will announce no specific proposals to do so, dismissing what he calls “fiddly gimmicks”.

Instead, Osborne will maintain the Tories’ focus on welfare reform by pledging to end the “something for nothing” culture. He will announce plans to force 200,000 long-term unemployed benefit claimants to either undertake community work (such as cooking meals for the elderly, cleaning up graffiti and picking up litter), visit a jobcentre every day to look for work, or attend mandatory training and therapy sessions to address underlying problems such as illiteracy, alcoholism and mental illness.

On living standards, he will argue that the best way to help families is to secure the economic recovery and will present Labour as having no plan to do so. “If you don’t have a credible economic plan, you simply don’t have a living standards plan. For we understand that there can be no recovery for all – if there is no recovery at all.” After Miliband quipped in his conference speech, “They used to say a rising tide lifts all boats. Now the rising tide just seems to lift the yachts”, Osborne responded that people would be worse off with a “retreating tide”.

The Chancellor might be right to argue that a strong macroeconomic strategy is central to raising living standards (although with his continued commitment to austerity, this is precisely what he lacks) but he is wrong to imply that growth alone will be enough to boost incomes. As has been well documented by the Resolution Foundation and others, wages began to stagnate long before the crash, with 11 million people seeing no rise in their earnings since 2003. Growth may now have returned (with output expected to reach around 1% this quarter) but real wages are not forecast to increase until 2015 at the earliest and will not return to their pre-crash levels until 2023. The minimum wage is now worth no more than it was in 2004 and 4.8 million workers are paid less than the living wage.

In response, the government could introduce above-inflation increases in the minimum wage, or spread use of the living wage by making its payment a condition of public sector contracts, or creating living wage zones. But on this, it seems that Osborne will remain silent. For now, he assumes what he has to prove: that the benefits of growth will be fairly shared. Recent history shows that can no longer be taken for granted.

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