25 October 2013

The Tories shouldn’t celebrate until there is growth for all, not just for some

If this is a recovery, the voters will ask, why aren't we feeling it? Cameron and Osborne need to offer answers.

It was just six months ago that many economists feared the UK would suffer a triple-dip recession. Now, after estimated growth of 0.8% in the third quarter, the economy is growing at its fastest rate since 2010. Output is still 2.5% below its pre-recession peak (in the US, by contrast, it is 4.6% above) and the recovery has come three years later than promised, but George Osborne has been the beneficiary of low expectations.

Yet as Labour will repeatedly point out today, for most of the public this is no recovery at all. In the most recent month, average weekly earnings grew by just 0.7%, a real-terms cut of 2% and the lowest figure on record. Incomes are not expected to rise until 2015 and and will not return to their pre-crash levels until 2023. The minimum wage is worth no more than it was in 2004 and 4.8 million workers are paid less than the living wage. If there is growth, the voters will ask, why aren’t we feeling it?

The charge that this is a recovery for the few, not the many, is one the Tories are particularly vulnerable to. It was Osborne who chose to cut the top rate of tax at the same time as presiding over the longest fall in living standards since 1870. The Conservative response to Labour’s cost of living offensive is to deride it as a distraction from the primary task of fixing the economy, but this message is ill suited to a time when 11 million people have had no increase in their real earnings since 2003. Rising GDP is no longer a guarantee of rising wages. By successfully framing the debate since the conference season, Labour has positioned itself to take advantage of this trend.

The Conservative hope remains that higher growth will feed into higher wages in time for the election, but before then they need emblematic policies to convince voters that they are on their side. On the fringes of the party, there is much good thinking taking place. The Conservative campaign group Renewal, which aims to broaden the party’s appeal among northern, working-class and ethnic-minority voters, recently published a pledge card calling for the building of a million new homes over the course of the next parliament, a significant increase in the minimum wage, a “cost of living test” for all legislation and action against “rip-off companies”.

But by deriding intervention in the market as “Marxist”, the Tories risk positioning themselves as the defenders of a failing system. When Margaret Thatcher assailed her left-wing opponents in the 1980s, she did so in the confidence that her free-market policies retained popular support and were delivering rising living standards. Cameron does not enjoy that luxury. To avoid being repeatedly trumped by Labour, the Tories will need to replace dogma with action.