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Ed Miliband: Middle Britain has been hollowed out and cut off from the benefits of growth

Only Labour will take on vested interests in business and end cost-of-living crisis

It was back in 1944 that the great challenge for post-war Britain was defined as eradicating the scourge of unemployment.

Now even George Osborne seems to have heard the news that full employment is an essential aim of any government, although nearly a million young people out of work will be rightly sceptical about his government’s ability to deliver.

But the Chancellor is not only 70 years too late; he is also at least a decade out-of-date. Today, full employment – and getting people back to work – remains an absolutely necessary ambition but one that has become insufficient.

People know that work no longer guarantees the better future for their families they used to expect. They are asking: what kind of work, what kind of wages – and what kind of prospects?

Until the 1990s, for every percentage point increase in economic growth, wages for middle-income Britain grew by an almost identical amount. That no longer holds true because the link between growth and the living standards of middle Britain has been broken.

Office for Budget Responsibility forecasts for the next four years published at the Budget predict that real earnings will on average increase at only half the level of economic growth in 2015 and will still lag behind, even in 2018.

And even these figures mask the truth of what is happening to middle-income Britain. It is expected that wage rises will disproportionately benefit those at the top while some major costs, such as housing, which hits working families hardest, are not included in the official statistics. So any gains middle-income Britain gets as the economy picks up will be nothing compared with the scale of the crisis that remains or the assault on family finances of recent years.

When ministers claim the cost-of-living crisis is over, it serves only to demonstrate they understand neither the reality faced by millions of hard-working people nor the scale of the generational challenge. The middle class, once the solid centre of our economy, is being hollowed out with growing insecurity and the prospect, for the first time since the war, that their children will be worse off than they were.

Millions of families are caught in the crosshairs of a cost-of-living crisis: a few people at the top scoop more and more of the rewards; markets  such as energy have become uncompetitive, allowing huge prices to be imposed on consumers; and many of the new jobs being created require fewer skills, pay lower wages and offer less security.

This Government cannot deal with these problems because lying beneath its claims of being converted to full employment is an economic ideology built on low pay, low skills, low prospects and  low productivity.

We can and must do better than this. Labour knows that if Britain stays in this race to the bottom, the cost-of-living crisis will continue – unaddressed and unsolved – for the five years of the next Parliament too. Wages for most people will continue to lag far behind the wealth being created and middle-income families will still be locked out of the benefits of growth.

A Labour government will make the big changes needed in our economy to  tackle this cost-of-living crisis.

We know that in 2014 it is no longer enough just to get people back into work but we must also have more decent jobs and rebuild the middle class. Labour will ensure all the wealth creators are rewarded in our economy by making work pay while balancing the books in a fairer way during the next Parliament.

We will take on the vested interests that hold businesses and families in our country back. And we will create the conditions for the high-wage, high-skill economy that tackles Britain’s productivity gap, helps businesses succeed and allows people to fulfil their potential.

Our policy review has already set out how we would get young people back to work and raise skills; tackle the abuse of zero-hours contracts and encourage the living wage; cut business rates; and reform banks that do not lend. In the months to come, we will be publishing more proposals on low pay, housing and Andrew Adonis’s plan for enabling Britain’s great cities and towns once again to become engines of growth – creating the quality jobs they need with power devolved from Whitehall.

So there is now a clear divide emerging ahead of the election: on one side, the Conservative Party boasting how it has solved the cost-of-living crisis; and, on the other side, the vast majority of the British people who know that it has not.

Solutions will take time because of the deep-seated problems that need to be addressed. But the party I lead is building a One Nation agenda to tackle the cost-of-living crisis: the greatest challenge of our age.