Labour needs to get ahead of the economic argument
Labour spent the decade prior to the crash in 2008 boasting about ‘an end to boom and bust’. This presumed to have overcome the cyclical dynamics that have always characterised capitalism. At the general election in 2010, the party failed to convince the public that Conservative spending plans went too far, because it failed to convince them that Labour’s went far enough. Then Labour bemoaned the ‘too far, too fast’ plans introduced by the Conservatives in government. This failed to appreciate that cyclical dynamics kick in on the downside, as well as the up. The economy was bound to turn the corner eventually.
Labour’s core economic arguments have consistently been outpaced by economic and political reality. Given that the economy will be central to the next election, this is a state of affairs that Labour has to break out of. It may be that the recent focus by Ed Miliband on the cost of living and energy prices can achieve this.
There are reasons to fear, however, that this spell will break before May 2015. These are: the potential for wage growth over the next year irrespective of government policy changes; the possibility of such policy changes; the inseparability of the cost of living debate (which Labour seems to be winning) from the wider economic debate (where Labour appears less ascendant); and how these factors will play out in different parts of the electorate, especially key marginal seats in the south-east.
It is preferable to think through these possibilities now and their likely political impact, rather than wait for them to happen and recalibrate Labour’s line after events overtake us. Let us work through them in turn.
John Rentoul, chief political commentator for the Independent on Sunday, recently reported an economist saying to him that: ‘Wages would start to grow faster than prices at some point in the first half of 2014.’ If this were to happen, a central Labour claim of wage growth failing to keep pace with prices would collapse 12 months before the election.
The legs may be further cut from under Labour’s attack if the Conservatives were to intelligently tweak theirs. They might, for example, commit to uprate the minimum wage in line with GDP growth. Certainly, they must be eager to find means of heeding John Major’s promptings to look out for ‘ordinary people’.
At this stage, wages are not keeping up with prices and the Conservatives remain disorientated by Labour’s commitment to an energy price freeze. Both of these things may change. But even in their absence, Labour’s poll lead over the Conservatives seems to be closing. Analysis by YouGov has shown a clear tightening over 2013.
It is worth considering why this narrowing is occurring. One possibility is that the Conservatives are winning the argument on those issues that do most to determine voting intention, which may be different from the cost of living issues that Labour appears stronger on. Another is that the interplay between the economy and politics is playing out differently in different parts of the country, in ways that sustain a national recovery in Conservative support alongside entrenched economic gloom in more Labour-inclined parts of the country.
In polling conducted for the website Labour Uncut by YouGov prior to this year’s Labour party conference, a Conservative party led by David Cameron enjoyed a lead over a Labour party led by Ed Miliband on being more likely to keep crime, immigration and inflation low. While Miliband enjoyed a lead over Cameron on other issues – including keeping energy prices low, which he may have since extended his lead on – it may be that Labour holds a lead on issues that voters find it harder to believe politicians will be able to deliver on, meaning that they place less weight on these factors when deciding how to vote.
Securing economic growth is an issue that voters tend to hold governments accountable for. There are increasing signs of growth in the economy. But the beneficiaries of this growth may be less likely to be found in northern Labour constituencies and more likely in marginal seats feeling the economic warmth of a reheating London.
Roughly once a week YouGov ask voters whether they think the state of the British economy is good, bad or neither. Until 25 July, never more than 10 per cent of the electorate answered ‘good’ in 2013. Since then, never less than 10 per cent have done so. I ran a regression that indicates that for every one per cent increase in those saying ‘good’, Labour’s poll lead over the Conservatives narrows by 0.6 per cent. This suggests the Conservatives need around a quarter of the electorate to feel good about the economy to overhaul Labour’s poll lead.
Labour should not look at rising economic confidence and feel politically downbeat. But it does mean retuning our arguments accordingly: being the party that can not only share the pie more fairly but grow the pie more effectively; being best for growth, as well as on the cost of living; winning people over in the economically brighter south-east, not just racking up votes in the Labour heartlands of the north.
The Conservatives now say that Britain has turned a corner after the mess that Labour left. Sometimes we focus on saying it was not a mess; usually we focus on contesting whether the corner has really been turned. If both GDP and wages were to grow robustly this approach risks making the Conservatives the optimists and Labour the pessimists. We must plan now for how we would have it be the other way around in such a context.
Jonathan Todd is a contributing editor to Progress and deputy editor of Labour Uncut
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