In the run-up to conference season we have been treated to economic policy speeches from all three major parties. These speeches, and those at this year’s conferences, will frame the battleground for the next general election.
After a period of time in which it looked like the 2015 battleground might be ‘shirkers vs workers’ with Labour being painted into a welfarist corner, the parties now each have a distinct story to tell on the economy.
The Tories will argue that Plan A has worked, the economy is turning the corner, and that we can’t turn back now. Labour’s economic team has hit on the snag in this: that the decline in living standards caused by stagnating wages proves the recovery is not a recovery shared by all. Meanwhile Vince Cable, speaking as a Lib Dem politician rather than as business secretary, set out the Lib Dem stall, expressing concern that the recovery was fragile and would not be made less so if it was based on rising house prices and private credit. In questioning Conservative economic policy so boldly, Vince is placing the Lib Dems firmly in the centre-ground, open to doing business with a Labour government. If a non-Tory consensus can be created on key economic issues, the pressure on the chancellor may become too much to bear. It is particularly interesting to see the business secretary admonishing the Tories for scapegoating unions, benefit claimants, and immigrants in his conference speech.
George Osborne is, of course, right that economic growth is needed, and no one would suggest it should not be welcomed. But it is not sufficient. Many ordinary working people will think that, in saying that living standards critics ‘miss the wood for the trees’, Osborne has dismissed too quickly their concerns. Living standards can and should be an election issue. They are plainly not following the recovery in growth, and the threats that Ed Balls, Rachel Reeves, and Vince Cable point to are very real. Real wages are still nine per cent lower than the 2007 peak, and falling. Young people are having a particularly hard time of it: In my region, the north-east, a quarter of 18-24-year-olds are unemployed. It is true that this recession has not resulted in the unemployment levels of previous recessions, but low wages and zero-hours contracts have proliferated in its stead. We in the Labour party need to consider where economic growth is not providing benefits to the economy as a whole and constantly point this out. What, for example, is happening to household disposable income?
Meanwhile, Osborne’s flagship policy is to encourage high (95 per cent) loan-to-value mortgages. He must realise the dangers. He complains that household debt masked underlying problems in the economy before the crash. So why does the business secretary say that the chancellor’s Help to Buy Scheme may have to be scrapped for fear of this same? One does not need to be either a genius or a reactionary socialist to be worried. The Economist leader a fortnight ago questioned how a recovery could be sustainable if it is built on house price rises and high leverage. Hardly an opinion-former of the fringe. Rightmove this week predicted a six per cent house price rise nationwide for 2013 – that is above the five per cent that the Royal Institute of Chartered Surveyors recommended as the maximum the Bank of England should allow on its watch. Again, this is not fringe opinion, but that of sensible experts.
We also need to tell a positive story about the future under Labour. That is now happening. The media criticised Ed Miliband’s TUC speech for not setting up a fight with the trade unions. But they miss the positivity in his message. In iterating his backing for a stronger state-backed Business Investment Bank and a regional banking system, Ed is at least looking to improve our poor levels of investment (our investment-to-GDP ratio is now 159th in the world). This will be the foundation for sustained recovery, and the chancellor seems strangely complacent on the issue. Over the coming months the business community will want to see Chuka Umunna outline exactly how a One Nation Labour regional bank system would support small and medium businesses. It’s a system I’ve always been very supportive of. And as far as economic models go, we could do worse than Germany’s.
At the same time Labour is still best placed to ensure effective public service reform. We regularly poll higher than the other parties when voters are asked whom they trust with public services. The NHS vision that Andy Burnham has outlined represents sensible reform in keeping with our values centring on fairness – values that mean we will always be the home of an NHS that we founded. As we look to create a fuller reform agenda, we must maintain clear blue water between us and the Tories on public services.
What we don’t want to do is get into a ‘growth vs living standards’ argument. The two are not in contrast or exclusive, and the debate would be about as useless as that of ‘worker vs shirkers’. So the question is this: is Osborne’s growth going to be a fair growth, or a hollow growth excluding the hard-working majority?
If Labour can forge a coherent argument based on the simple ‘are you better off now than you were four years ago?’ argument of Ronald Reagan, the electorate is bound to respond. It’s time for Ed to spell out exactly what a fairer society under a Labour government would look like. This year’s conference is a perfect occasion.
———————————————————
Alan Donnelly is a former Labour MEP and leader of Labour in the European parliament. He tweets @AlanDonnelly57