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  1. Politics
3 October 2013

Labour leads on living standards, the Tories lead on the economy. Who will break the deadlock?

The party that triumphs in 2015 will be that which seeks to address its weaknesses, rather than merely playing to its strengths.

By George Eaton

According to David Cameron, you can’t trust Labour on living standards because you can’t trust it on the economy. According to Ed Miliband, you can’t trust the Tories on the economy because you can’t trust them on living standards. Cameron remarked in his speech, “I see that Labour have stopped talking about the debt crisis and now they talk about the cost of living crisis. As if one wasn’t directly related to the other.” Miliband argued in his, “The cost of living crisis isn’t an accident of David Cameron’s economic policy; it is his economic policy.”

The polls show that voters agree with both. A ComRes survey published on Monday found that voters think the Tories are more likely to maintain economic growth (42-33%) and to keep public spending under control (47-28%), but also that they believe their own family would be better off under Labour (41-31%). After Miliband’s pledge to freeze energy prices until 2017, 48% think his party is more likely to keep prices down than Cameron’s, with only 21% opting for the Tories. If one party takes a decisive advantage before 2015, it is likely to be that which wins the trust of the public on both issues.

At their conference, the Tories made the error of too readily dismissing the living standards crisis as a temporary ailment that would pass with the return of growth. The most unintentionally revealing moment came when George Osborne rebuked Miliband for suggesting that “the cost of living was somehow detached from the performance of the economy”. It was a remark that betrayed his failure to appreciate that the crisis is not merely cyclical (a problem exacerbated by his strategy of austerity) but structural. It was in 2003, long before the crash, that wages for 11 million low and middle income earners began to stagnate. The golden link that once existed between rising growth and rising incomes has been severed and shows no sign of being repaired. 

Growth may finally have returned but 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. Despite this, with the exception of a hurriedly-announced freeze on fuel duty, the Tories offered no concrete measures to address the crisis. Pre-conference rumours that they would commit to a major increase in the minimum wage, or to spreading use of the living wage, came to naught. 

But confronted by demands from their MPs for doorstep policies to counter Labour’s energy price freeze, the Tories are planning a fightback. Today’s Times reports that, ahead of the Autumn Statement, Osborne “has identified water bills, rail fares and bank fees as areas where the government can act to help with household bills.” Possible measures include a reduction in the cost of season tickets, new checks on bank fees and a crackdown on rogue letting agents. Ministers are also considering “relaxing an obligation on energy firms to pay for insulation in the homes of pensioners and benefit claimants.” 

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The Times piece is a reminder of the advantage that the coalition enjoys over Labour. While Miliband can only complain about the “cost of living crisis”, Cameron and Osborne can act now. With higher-than-expected growth, the Chancellor will have additional revenue to play with, which he is likely to use to fund pre-election giveaways, rather than return to his original deficit reduction timetable.

For Labour, the challenge is to continue to devise more imaginative centre-left solutions to the living standards crisis, while also convincing voters that it can be trusted with the public finances. The party’’s alleged fiscal profligacy is perhaps the biggest obstacle to its election but Miliband mentioned the deficit just once in his speech. Until Labour wins back economic trust, the danger is that voters will doubt its ability to deliver its ambitious and, in some cases, expensive policies without once again imperilling stability.

Ed Balls’s request for the Office for Budget Responsibility to audit the party’s spending plans was a good start (hence its immediate rejection by the Tories) but fiscal responsibility must continue to be at the heart of Labour’s message, rather than merely an afterthought. Some in Labour argue that this will require a gesture far greater than pledging to remove Winter Fuel Payments from wealthy pensioners, such as the abandonment of HS2, and Balls will be considering all options. 

The party that triumphs in 2015 will likely be that which seeks to address its weaknesses, rather than merely playing to its strengths. For the Tories, that means convincing voters that they can be interested to govern in the interests of all, rather than a privileged few, and that they have a plan to increase living standards, rather than merely GDP. For Labour, it means proving beyond doubt that it has learned from its perceived recklessness and can once again be entrusted with the nation’s finances. The battle to break this political stalemate begins now.