The next general election will be about living standards. That is bad news for Theresa May. She said all the right things when she became Prime Minister in July. To show she had got the EU referendum message, she promised to govern for the “just about managing” classes (Jams) rather than “the privileged few”. That was the easy bit; the reality is already proving much harder.
While the Autumn Statement looked thin, it told us a lot about the May Government. To meet the huge challenge of Brexit, it will adopt a different approach to the Cameron-Osborne regime on borrowing, infrastructure projects and housing – all welcome changes.
But there is a hole at the heart of the new strategy. Philip Hammond did very little to alleviate the pain that is coming on living standards, as inflation rises faster than wages. The bleak forecasts from the Institute for Fiscal Studies and Resolution Foundation think tanks should worry May, as they show how hard the “Jams” will be squeezed. She will not meet the great expectations she aroused in July without a major change of course.
Hammond showed he is a fiscal hawk who will invest in building projects that provide a return for the economy, but who is reluctant to invest in people by redistributing wealth. “He will be tough-minded on welfare,” said David Willetts, who sat alongside Hammond in the Cabinet in the last parliament and now chairs the Resolution Foundation. Its analysis shows that the £2.9bn the Treasury will pocket from the four-year freeze in working age benefits dwarfs the £1.2bn it is giving back in Universal Credit wage top-ups.
The Tories are already trying to repeat their old trick of blaming Labour – this time for the wage stagnation since the 2008 crash. A revealing pre-emptive strike was made by David Gauke, the Treasury Chief Secretary, as he responded to the think tank reports. “The last Labour Government presided over a Great Recession which made our country poorer, cost jobs and squeezed living standards. It set our country back and hurt the livelihoods of ordinary working people,” he said, in what might prove the first draft of the Tories’ next election campaign.
We can hardly blame them: pinning a deficit caused by a global recession on Labour worked a treat. But it won’t wash this time. The Tories argue that the think tanks’ numbers do not take account of the higher personal tax allowance and claim that “real household disposable income” is rising by 2.8 per cent, the highest ever increase. But this won’t cut any ice with the “Jams” if they are worse off overall, as they surely will be.
The next election will be fought amid a “feel-bad factor”, the opposite of what any governing party wants. The decline in living standards will have happened on the Tories’ watch. Labour is off the public’s radar, a bad place for an opposition, but making it harder for the Tories to blame Labour for voters’ current dissatisfaction. If the election is held in 2020, the lost decade will be all theirs.
Even if voters blamed the income squeeze on Brexit, that would not necessarily spare May. Labour is already attacking what it calls a “shambolic Tory Brexit”.
The Tories might deserve to reap such a whirlwind. But would Labour reap the benefit? One does not follow the other in such unpredictable times. Some Tories think they could withstand public anger because Labour offers no credible alternative. They trot out the old cliché that people will “hang on to nurse for fear of something worse”.
But do the old rules apply in the new politics? I doubt it.
Although Labour still trails the Tories on economic competence, the Tories’ ratings could be hit by the coming squeeze. There would probably be a tiny window for Labour when disillusioned voters took a second look. Labour shows little sign of being ready for that moment, but still has time. Just.
The 6 most important issues Theresa May needs to address
The 6 most important issues Theresa May needs to address
The big one. Theresa May has spoken publicly three times since declaring her intent to stand in the Tory Leadership race, and each time she has said, ‘Brexit means Brexit.’ It sounds resolute, but it is helpful to her that Brexit is a made up word with no real meaning. She has said there will be ‘no second referendum’ and no re-entry in to the EU via the back door. But she, like the Leave campaign of which she was not a member, has pointedly not said with any precision what she thinks Brexit means
2/6 General election
This is very much one to keep off the to do list. She said last week there would be ‘no general election’ at this time of great instability. But there have already been calls for one from opposition parties. The Fixed Term Parliaments Act of 2010 makes it far more difficult to call a snap general election, a difficulty she will be in no rush to overcome. In the event of a victory for Leadsom, who was not popular with her own parliamentary colleagues, an election might have been required, but May has the overwhelming backing of the parliamentary party
Macbeth has been quoted far too much in recent weeks, but it will be up to May to decide whether, with regard to the new high speed train link between London, Birmingham, the East Midlands and the north, ‘returning were as tedious as go o’er.’ Billions have already been spent. But the £55bn it will cost, at a bare minimum, must now be considered against the grim reality of significantly diminished public finances in the short to medium term at least. It is not scheduled to be completed until 2033, by which point it is not completely unreasonable to imagine a massive, driverless car-led transport revolution having rendered it redundant
4/6 Heathrow expansion
Or indeed Gatwick expansion. Or Boris Island, though that option is seems as finished as the man himself. The decision on where to expand aviation capacity in the south east has been delayed to the point of becoming a national embarrassment. A final decision was due in autumn. Whatever is decided, there will be vast opprobrium
5/6 Trident renewal
David Cameron indicated two days ago that there will be a Commons vote on renewing Britain’s nuclear deterrent on July 18th, by which point we now know, Ms May will be Prime Minister. The Labour Party is, to put it mildly, divided on the issue. This will be an early opportunity to maximise their embarrassment, and return to Tory business as usual
6/6 Scottish Independence
Nicola Sturgeon and the SNP are in no doubt that the Brexit vote provides the opportunity for a second independence referendum, in which they can emerge victorious. The Scottish Parliament at Holyrood has the authority to call a second referendum, but Ms May and the British Parliament are by no means automatically compelled to accept the result. She could argue it was settled in 2014
Even if Labour fails the test – as Jeremy Corbyn’s critics think it will – the Tories cannot assume that we are a one-party state in which they will be re-elected whatever they do. Despite the straitjacket of our first-past-the-post voting system, people would find a way to vent their anger at the Tories, just as they delivered a hung parliament in 2010. If Labour didn’t benefit, someone else would – whether Ukip, another populist movement yet to be born or even the Liberal Democrats.
Perhaps Hammond will use the £27bn of headroom he gave himself in the Autumn Statement as a pre-election war chest, go against his instincts and redistribute wealth. But he doesn’t look like a man who wants to do that; May would have to call the shots.
Coming on top of nightmarish Brexit negotiations, the looming economic pain is another reason why May might call an election before 2020 – while voters still give her the benefit of the doubt, and before they judge that she too is governing for “the privileged few”.Reuse content