Labour’s economic policy in opposition has been through two phases so far. In the first Labour attacked the Coalition for cutting too far too fast. They predicted that the UK economy could not recover given this policy. In the second Labour switched their attack to the “cost of living crisis” saying that the recovery was not delivering any rise in living standards.
Labour’s “too far too fast” critique was not based on the numbers. The figures showed the Coalition increasing current spending slightly in real terms in the first three years, relying on rising tax revenues to cut the deficit. Labour have never accepted the figures in the official statistics, but decided to drop the erroneous too far too fast campaign when it became clear the economy was growing again despite their predictions.
They have adopted their cost of living critique close to the time when real wages at last start rising. Some Labour figures are warning their leaders to drop this campaign now before the numbers improve further. I will not offer advice on this. I wish instead to ask what policies is Labour proposing that will alter the situation on living standards?
They have come up with two main policies to tackle the “crisis”. The first is a two year price freeze to be imposed on the energy companies. It looks as if we might get this anyway. Global energy prices have been falling, which makes this easier. If by any chance Labour were in office and world energy prices took off again, it is difficult to see how they could sustain the two year freeze.
The second is to promise action on rail fares. This presumably means lesser increases, financed by larger taxpayer subsidies. What they give with one hand to rail travellers, they will take with another hand from taxpayers.
More worrying is discussion on a higher National Insurance tax. This tax on jobs would make it a bit more difficult to sustain current high rates of jobs growth. As the best way to raise people’s living standards is to get them into work it is difficult to see why Labour are proposing this backwards step.
Labour’s proposals amount to more interference with big companies supplying essential services, allied to more subsidy for a nationalised industry. None of this will make a lot of difference to living standards in the short term, and in the longer term these policies could b e damaging to future investment and job creation. It is one thing to identify the real wish of people to enjoy higher living standards, another thing to know how to raise them. What you need to do that is successful enterprises, more investment, and more growth. How do Labour propose to achieve those?