On Monday night, the Institute of Economic Affairs hosted a panel discussion on “Labour and the economy: addressing the cost of living.”It was chaired by Mark Littlewood (Director General of the IEA) and featured Dan Hodges (Telegraph blogger and columnist), Paul Ormerod (economist, author and entrepreneur), John Rentoul (chief political commentator for the Independent on Sunday) and Gisela Stuart (Labour MP for Birmingham Edgbaston). Prospect was the media partner.
We have also published blogs on the subject by Gisela Stuart, Mark Littlewood and Paul Ormerod
When I see the “cost of living” presented as a subject on which the Labour party can have a policy, I bristle. When Ed Miliband talks of a “cost of living crisis,” I feel queasy. And when the Institute of Economic Affairs and Prospect decide to take this seriously as a political debate, I feel I have to take part so that I can point out that it is meaningless drivel.
This is the politics of pointing at things and saying how expensive they are. Petrol? Gosh that’s expensive. Train fares? Goodness me, they ought to be cheaper. Electricity and gas prices? It’s a cartel, innit?
This is the politics of the “forgotten middle class” imported from 1992 America to 2013 Britain. It is the Resolution Foundation’s “squeezed middle”: the implausible claim that a hard-working family on median earnings has not seen an increase in take-home pay since the Middle Ages.
It’s moonshine. What has happened is that pretty much everyone in Britain became a lot better off in the 16 years to 2008. Then there was a recession. What happens in recessions is that people tend to become worse off. Fortunately, because Gordon Brown saved the world—I mean, saved the banks and pumped money into the economy—job losses were kept lower than would have been expected in previous recessions, and the economy started to bounce back. Since then it has all been a bit bumpy, but job creation has been surprisingly strong and disposable income per head has fallen back only to where it was in 2003.
So “the cost of living crisis” is just a way of saying “the recession.” Politically, its significance is which party gets the blame for it and whether the voters will trust the guys who drove the economy into the ditch to get behind the wheel again, in the inaccurate but potent Tory formulation. And, to quote my brief for this blog post, the “challenge of rising living costs,” which is indeed “likely to be a key issue at the next election,” is just a way of saying that people will vote for the party that they think is most likely to manage the economy well.
That is a rather larger question than micro-measures to shift the burden from the most unpopular taxes, such as on petrol, which have to be paid for elsewhere, or to storm fake barricades around the train and energy companies.
The IEA’s prescription of “cutting taxes, deregulating and tackling vested interests” is not wrong—although the first is sky pie—but it is what governments ought to do anyway, all the time, regardless of party. The argument at the next election will be about the right fiscal stance for the following five years, and about other important questions such as our relations with the rest of the European Union. It is not going to be about which party can cut the price of petrol.
We have also published blogs on the subject by Gisela Stuart, Mark Littlewood and Paul Ormerod
When I see the “cost of living” presented as a subject on which the Labour party can have a policy, I bristle. When Ed Miliband talks of a “cost of living crisis,” I feel queasy. And when the Institute of Economic Affairs and Prospect decide to take this seriously as a political debate, I feel I have to take part so that I can point out that it is meaningless drivel.
This is the politics of pointing at things and saying how expensive they are. Petrol? Gosh that’s expensive. Train fares? Goodness me, they ought to be cheaper. Electricity and gas prices? It’s a cartel, innit?
This is the politics of the “forgotten middle class” imported from 1992 America to 2013 Britain. It is the Resolution Foundation’s “squeezed middle”: the implausible claim that a hard-working family on median earnings has not seen an increase in take-home pay since the Middle Ages.
It’s moonshine. What has happened is that pretty much everyone in Britain became a lot better off in the 16 years to 2008. Then there was a recession. What happens in recessions is that people tend to become worse off. Fortunately, because Gordon Brown saved the world—I mean, saved the banks and pumped money into the economy—job losses were kept lower than would have been expected in previous recessions, and the economy started to bounce back. Since then it has all been a bit bumpy, but job creation has been surprisingly strong and disposable income per head has fallen back only to where it was in 2003.
So “the cost of living crisis” is just a way of saying “the recession.” Politically, its significance is which party gets the blame for it and whether the voters will trust the guys who drove the economy into the ditch to get behind the wheel again, in the inaccurate but potent Tory formulation. And, to quote my brief for this blog post, the “challenge of rising living costs,” which is indeed “likely to be a key issue at the next election,” is just a way of saying that people will vote for the party that they think is most likely to manage the economy well.
That is a rather larger question than micro-measures to shift the burden from the most unpopular taxes, such as on petrol, which have to be paid for elsewhere, or to storm fake barricades around the train and energy companies.
The IEA’s prescription of “cutting taxes, deregulating and tackling vested interests” is not wrong—although the first is sky pie—but it is what governments ought to do anyway, all the time, regardless of party. The argument at the next election will be about the right fiscal stance for the following five years, and about other important questions such as our relations with the rest of the European Union. It is not going to be about which party can cut the price of petrol.
