Official economic growth figures released last week show the UK economy is already starting to slow and even decline in the early months of 2022 as soaring prices hit spending. The Bank of England estimates that inflation will peak at 10% (although it could potentially be higher) later this year and that recession risks are high. Yet these grim numbers don’t show just how much worse things are going to get for millions of people. Food banks “are at risk of being overwhelmed” by the increase in demand. Citizens Advice says demand for its fuel debt advice has more than doubled. Pensioners would skip meals to keep warm. School children are hungry. We are approaching what Scottish Power’s chief executive has called a ‘horrible’ crisis in the autumn as further expected energy price hikes coincide with colder weather.
The cost of living crisis demands clear government action: whether it is anti-inflationary increases in benefits, pensions and the minimum wage, or a freeze on gasoline. But the Conservative government seems unlikely to rise to the challenge. The ongoing war between a Downing Street operation favoring a government response and a Treasury unable to shake off its commitment to free market dogma continues. The result was a series of half-designed proposals mainly around the Treasury’s insistence on spending as little as possible: less frequent MOTs, overworked childminders and – this one was effectively implemented – a loan of 200 £ to cushion an energy of nearly £700. bill increase.
It should be Labor time. Yet if the Tories are paralyzed by their residual ideological commitments, Labor seems gripped by their own terrified inability to act. The bright spot was the one-off energy tax proposal. Initially opposed by some members of the leader’s office, it proved to be a political lifeline for the party leadership, giving it something meaningful to say in response to the dire situation: targeting a clear political enemy – the producers oil and gas companies benefiting from record profits following the energy crisis which could plunge 40% of households into fuel poverty – and offer some protection, even if limited, against soaring prices. Without the proposed windfall tax, Labour’s poor performance in local elections, winning fewer seats in England than the Green Party, would have been even worse.
But other than this one-off tax on the energy giants, the party has nothing to offer to ease the brutal pressure of living standards, retreating into the managerial security space of the leadership, perhaps into the hope that everything will explode soon. The result was a convergence of mismatch. Echoing the first line of the Tories’ lackluster Queen’s Speech, which committed the government to “developing and strengthening the economy” to defuse the cost of living crisis, Keir Starmer’s response claimed that the “great challenge was to “make Britain grow again”. ”. And how would that be? “A stronger partnership between government and business,” suggested Starmer. “This combination of the public sector and the private sector [working] together,” the Prime Minister offered in his reply. Not only do the two sides agree on the solution – more economic growth – but they even agree on how to get there.
It is important to understand how bad this is for Labour. The reason leaders have failed to promote “growth” as the panacea to contemporary malaise is obvious: the term, coupled with economic dynamism and political competence, plays a role in the larger story that leaders want to build. on their economic acumen and management skills.
More broadly, invoking “growth” plays for Labor the role it always has for social democrats: it evades or postpones the difficult political questions of distribution, because if the economic “cake” grows, then the proportional size of the slices matters less. Starmer spoke of Labor’s record for growth in office, and it is true that until the crash of 2008 real wages rose under New Labour: people were paid more in 2008 than they they were in 1998. But the share of national income going to workers actually fell during this period. It is economic growth – unsustainably based on debt – that has raised living standards and masked the growing inequality between capital and labour.
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Over the past decade, however, wages and salaries have grown less than the economy as a whole. The promise of higher GDP – which would translate into higher living standards – has crumbled. The main economic question, in these circumstances, was not how to offer more of something that did not bring much to most people. The glaring lesson of the period since late 2019 – which has characterized a traumatic public health emergency and temporary economic shutdown, erratic growth spurts and, now, a cost of living crisis combined with an incipient recession – is that redistribution, rather than growth, is the central issue today.
While Labor has, for the first time since leaving office, taken a steady lead in polls on the Conservatives’ economic competence, understanding how that happened requires digging into the numbers. Public concerns about government debt and deficits, which strongly favored the conservatives throughout the 2010s, have faded. Instead, Ipsos poll shows that the cost of living is now easily (and understandably) at the forefront of concerns: for 61%, it is above all inflation that determines the perception of the state of the economy, against only 23 % of people who are concerned about debt or deficit – a stark contrast to the 2010s. Economic growth, meanwhile, is cited by 26% of people as important to their perceptions.
The Conservatives are the most trusted party when it comes to growth, debt and deficit. As long as these are seen as the dominant issues, Labor is at a disadvantage. Tackling the cost of living crisis, on the other hand, is ground on which Work is the most reliable. This means that Labor has benefited politically from the change in public perception of our overarching economic problems – from public debt to rising prices.
The party should double that gain: the more Labor talks about the cost-of-living crisis, the more it reinforces an economic story that plays to its existing strengths in the public’s mind – as a party that deals with the crisis of the cost of living. many, not a few, to quote both Tony Blair and Jeremy Corbyn. The longer Labor’s front seat remains obsessed with growth – a ground on which the party is consistently seen as weak, albeit unfairly – the more it unwittingly reinforces a discourse on the economy that favors the Conservatives. (The same goes for discussions of the government’s debt and deficit, which Shadow Chancellor Rachel Reeves reasonably backed off from.)
Abandoning rhetoric about reviving growth, the party must meet immediate needs with clear and simple solutions: promise to raise wages and benefits, freeze rising fuel prices and, building on the success of the exceptional tax, proposing to tax the pandemic superprofits to pay for everything.