Bad news for Labour: Voters are getting behind coalition’s cuts

 
Allister Heath

ED BALLS and the Labour party have a big problem. The British economy is recovering, despite the coalition’s relatively modest cuts, and the public is increasingly supportive of reducing public spending. This is a devastating blow for Labour’s entire narrative, which was predicated on the view that “cutting too far and too fast” would not just be self-evidently unpopular but would also cripple the economy.

Regardless of counter-factuals and of the sustainability of the recovery (about which more later), fewer and fewer people believe in Labour’s story, which is why the party will soon face a serious crisis despite still being ahead in the polls and thus seemingly on course for victory in 2015.

A YouGov poll for the Sun found that 41 per cent of the public believe the cuts are good for the economy, exactly the same share that believe that they are bad. This is first time since December 2010 that there isn’t a plurality against the cuts, a major breakthrough for the coalition and for supporters of austerity. The data also shows that 58 per cent of those polled think the spending cuts are necessary, against 28 per cent who don’t; that 36 per cent blame Labour for the need to cut, just 24 per cent the coalition and 27 per cent both. These are all dire findings for the opposition. The only bad news for David Cameron is that 54 per cent think the cuts are unfair, against 30 per cent who believe them to be fair, presumably partly reflecting the view that the Tories are toffs who tend not to care about “people like us” (and partly because pensioners and some areas are being protected while other groups are not).

Support for the cuts tends to move in tandem with overall levels of confidence in the economy; and surveys and indicators from YouGov and other pollsters have been showing that not only has this been gradually increasing but that it has recently reached something of a tipping point.

But the coalition also has two problems: real incomes are still falling, for a variety of reasons, partly reflecting the fact that GDP per capita remains substantially lower than it was at peak and that inflation is permanently high. Even worse, the recovery is in part at least a mirage, based on rock bottom interest rates, increased consumer debt and still excessively high public spending as a share of GDP. The public is well aware of the first point, and most voters believe that they are not benefiting from the recovery and are dissatisfied with its overall performance (even though they also believe it is improving); but it remains oblivious to the second.

Labour is on strong grounds politically when it emphasises the cost of living crisis and highlights that many families are still seeing their wages go up much less quickly than inflation; but it has no useful ideas about how to deal with this, or with the imbalances and bubbles that are disfiguring the economy.

This ought therefore to be a good time for the coalition to seize the initiative, accelerate its public spending cuts and public sector reforms and take the opportunity to be radical in other ways, perhaps on tax. It could also embrace a real market-based cost of living campaign, removing the regulations and restrictions that hinder competition in some sectors of the economy (such as banking, rail or childcare) and the costs that add to consumers’ bills (such as in the energy market). This would be the right thing to do, and it would also neuter one of Labour’s last remaining attack lines.

Instead, however, it seems that the coalition will now rest on its laurels, basking in the glory of a growth spurt based on consumer spending, a reversal of private sector deleveraging, subsidised mortgages and reduced savings, and fail to push through the sorts of reforms that could actually deliver a truly sustainable recovery. The fact that Labour would be even worse is no excuse.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath