Official numbers for economic growth published last week show the UK economy already starting to slow and even decline in the first months of 2022, as soaring prices hit spending. The Bank of England believes that inflation will peak at 10 per cent (though it could potentially be more) later this year and the chances of a recession are high. Yet these bleak headline figures don’t convey just how much worse things will get for millions of people. Food banks are “at risk of being overrun” by surging demand. Citizens Advice says demand for its advice on fuel debts has more than doubled. Pensioners are reportedly skipping meals so they can afford heating. Schoolchildren are going hungry. We are approaching what the chief executive of Scottish Power has called a “horrific” crisis in the autumn, as further scheduled energy price rises coincide with the colder weather.
The cost-of-living crisis demands a clear intervention from government: whether that is inflation-breaking rises in benefits and pensions and the minimum wage, or freezes in gas price rises. But the Conservative government appears unlikely to rise to the challenge. The permanent war between a Downing Street operation favouring a government response and a Treasury unable to shake its commitment to free-market dogma continues. The result has been a series of half-cocked proposals mostly designed around the Treasury insistence on spending as little as possible: less frequent MOTs, overworking childminders, and – this one actually implemented – a £200 loan to cushion a near-£700 energy bill hike.
This should be Labour’s moment. Yet if the Conservatives are paralysed by their residual ideological commitments, Labour appears gripped by its own terrified inability to act. The bright spot has been the proposed windfall tax on energy. Initially opposed by some in the leader’s office, it has 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 oil and gas producers enjoying record-breaking profits as a result of the energy crisis that could plunge a staggering 40 per cent of households into fuel poverty – and proposing some protection, however limited, against soaring prices. Without the proposed windfall tax, Labour’s woeful performance in the local elections, gaining fewer seats in England than the Green Party, would have been even worse.
But other than this one-off tax on energy giants, the party has little to nothing to propose to alleviate the brutal squeeze of living standards, retreating to the leadership’s managerial safe space, perhaps in the hope it will all blow over soon. The result has been a convergence of inadequacy. Echoing the opening line of the Conservatives’ lacklustre Queen’s Speech, which committed the government to “grow and strengthen the economy” to defuse the cost-of-living crisis, Keir Starmer’s response claimed the “great challenge” was to “get Britain growing again”. And how would this happen? “A stronger partnership between government and businesses,” Starmer suggested. “That combination of public and private sector [working] together,” offered the Prime Minister in his rejoinder. Not only are both sides agreed on the solution – more economic growth – they even agree on how to get there.
It’s important to understand just how bad this is for Labour. It’s obvious why the leadership has defaulted to promoting “growth” as the panacea to the contemporary malaise: the term, associated with economic dynamism and political competence, plays into the bigger story the leadership wants to build about its economic shrewdness and managerial talents.
More broadly, invoking “growth” plays the role for Labour that it always has for social democrats: it evades or postpones hard political questions about distribution, because if the economic “pie” is growing, then the proportional size of the slices matters less. Starmer talked up Labour’s record on growth in office, and it is true that, up until the 2008 crash, real wages rose under New Labour: people were paid more in 2008 than they were in 1998. But the share of the national income going to workers actually fell during this time. It was economic growth – based unsustainably on debt – that delivered living standards improvements and concealed the widening inequality between capital and labour.
Over the past decade, however, wages and salaries have grown less than the economy as a whole. The promise of rising GDP – that it would translate to improved living standards – has broken down. The primary economic question, under these circumstances, was not how to deliver more of something that did little for most people. The glaring lesson of the period since the end of 2019 – which has featured 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 Labour has, for the first time since it left office, taken a consistent lead in polling on economic competence over the Conservatives, understanding how this has happened requires a deeper dive into the figures. Public concern with government debt and deficits, which strongly favoured the Tories throughout the 2010s, has faded. Instead, Ipsos polling shows that the cost of living is now easily (and understandably) at the forefront of people’s minds: for 61 per cent, it is above all inflation that drives perceptions of the state of the economy, compared with just 23 per cent of people who are concerned about debt or the deficit – a striking contrast with the 2010s. Economic growth, meanwhile, is cited by 26 per cent of people as important to their perceptions.
The Tories are the most trusted party on growth and debt and the deficit. For as long as these are viewed as the dominant issues, Labour is at a disadvantage. Tackling the cost-of-living crisis, by contrast, is terrain on which Labour is most trusted. This means Labour has benefited politically from the shift in the public’s perception of our paramount economic problems – from government debt to rising prices.
The party should be doubling down on this gain: the more Labour talks about the cost-of-living crisis, the more it reinforces an economic story that plays to its existing strengths in the public mind – as the party that is about looking after the many, not the few, to quote both Tony Blair and Jeremy Corbyn. The more that Labour’s front bench remains fixated with delivering growth – ground on which the party is persistently perceived as weak, however unfairly – the more it is unwittingly buttressing a narrative about the economy that favours the Conservatives. (The same goes for talk about the government’s debt and deficit, which the shadow chancellor Rachel Reeves has sensibly retreated from.)
Jettisoning rhetoric about kickstarting growth, the party must address immediate needs with clear, simple solutions: promising to increase wages and benefits, freeze fuel-price increases, and, building on the success of the windfall tax, proposing to tax pandemic super-profits to pay for it all.
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