At last week’s PMQs, David Cameron branded Ed Miliband a “one trick pony”, suggesting that the Labour leader had nothing to offer beyond a pledge to freeze energy prices (although as Cameron tacitly acknowledged, that “trick” is a potent one). But that’s not a line he’ll be able to repeat this week. In the next stage of Labour’s cost of living offensive, Miliband has turned his attention from rising prices to falling wages. To coincide with Living Wage Week, he will make a speech on the subject tomorrow (as The Staggers revealed last week), providing further details of his plan to offer one-year tax rebates of up to £1,000 per worker to firms that pay employees the higher rate.
The cost of the policy will be met through the increased tax revenues and lower benefit payments that result from companies paying the living wage. For every £1 that employers pay to raise salaries to living wage-level, the Treasury saves 49p. The chunk of this accounted for by higher tax revenues (32p) will be paid back to firms that sign up to Labour’s Make Work Pay contracts (a deft appropriation of one of the Tories’ favourite slogans), while the Exchequer banks the remainder (another chance for Labour to demonstrate its commitment to fiscal responsibility).
All three party leaders have praised the living wage (David Cameron described it as “an idea whose time has come” in a speech to Citizens UK in May 2010), but Miliband is the first to make a concrete offer. In response, the Tories have dismissed the plan as one that would require higher borrowing or tax rises, based on a line used by Ed Balls (not a source they’re usually keen to cite) during the Labour leadership election. Balls said of Miliband’s living wage proposal in 2010: “It seems to me that there would be a substantial extra cost either to the exchequer or to business”.
In reference to these comments, Grant Shapps declared: “Even Labour’s own Shadow Chancellor Ed Balls says Ed Miliband’s latest unworkable policy would have a substantial extra cost to the Exchequer. Labour got us into a mess with too much borrowing and too much debt. And now they’re calling for yet more borrowing and more debt.
“That would mean higher taxes and higher mortgage rates for hardworking people, hitting their living standards. It would make working Britain worse off, not better off – it’s the same old Labour.”
But even were that the case (and it’s important to note that Miliband’s original plan, based on corporation tax breaks, differed from Labour’s), it’s not a line of attack that will do much to aid the Tories. Few voters, after all, are going to disagree with the idea of higher wages (a poll earlier this year found that 60% support a universal living wage even if it costs jobs). To the Tories’ rhetorical assault, their response will be, but what would you do?
Before the Conservatives’ conference last month, there were rumours that they would promise a significant increase in the minimum wage as a means of shedding their image as “the party of the rich”, but no announcement, or even a hint of future action, followed. After Labour’s success in shifting the debate towards living standards, the party still gives every impression of wanting to change the subject. Cameron and other Tories regularly berate Miliband and Balls for “not wanting to talk about the economy”, boasting that the UK is now forecast to grow faster than any other major western nation. But they would do well to remember that to most voters, living standards are the economy. Rising GDP and falling government borrowing mean little to them if they do not no share in the gains. The Tories remain confident that higher growth will translate into higher wages and that Labour’s warnings of a “cost of living crisis” will soon appear as misplaced as past warnings of a triple-dip recession and unemployment of three million.
But rather than merely relying on the economy to deliver the goods (as it may fail to do in an era when growth has become decoupled from living standards), the Tories need to demonstrate that they have their own ideas to raise voters’ incomes. Right now, on the defining issue of low pay, Miliband has the pitch all to himself.