A lost decade for the British economy is coming to a suitably downbeat end. The latest snapshots of business activity point to stagnant growth in the final three months of the year and it could be even worse than that. If the economy decides elections, the Conservatives should be heading for a thumping defeat next week. They have been in power for nine years, their record is unimpressive, confidence is low, and they are offering little in the way of tax cuts and spending increases.
In the circumstances, the idea that the Conservatives might win seats next week rather than suffer a heavy defeat takes some explaining.
It may have something to do with the fact that the actual state of the economy has played little part in the election. The Conservatives are ahead in the polls despite their dire record. Wages adjusted for inflation are lower than they were when the financial crisis erupted; businesses have not invested; productivity growth has been nugatory. The prime minister’s pledge to unleash the potential of the British people is a slogan not a policy.
The notion that once Brexit is done everything will be all right is staggeringly complacent. Fundamental defects in the economy were exposed a decade ago and have not been tackled. The Conservative manifesto offers only tinkering when more radical action is needed to lift the UK out of its low wage, low growth rut and to prepare it for the challenges – from the climate emergency to paying for the costs of an ageing population – that lie ahead. The focus on Brexit has been relentless: clearly a decision has been taken not to make the economy a campaign issue.
Boris Johnson’s poll lead is all the more extraordinary given that the Conservatives have abandoned austerity – the policy that got them into power in 2010 and helped win them an overall majority in 2015. The Tory manifesto accepts the argument that it makes sense for the government to borrow to invest in public infrastructure at a time when private sector investment is weak and the state can take advantage of historically low borrowing costs. Funnily enough, this is what the critics of austerity have said all along.
The Conservatives seem reluctant to take advantage of the opportunity to borrow cheaply. By the end of a five-year parliament they would be investing £8bn more than currently planned. By comparison, Labour’s plans involve an extra £55bn in borrowing – and that does not include what might be needed to compensate the so-called “Waspi women” over the changes to the female retirement age.
If the polls are right, though, the Conservatives are more in tune with the public mood than Labour. Focus group after focus group has thrown up the same response to Jeremy Corbyn’s goodie-laden manifesto: how will it all be paid for?
Politicians have moved, but the public – or at least a large part of it – is still stuck in 2010 when David Cameron and George Osborne made political headway with the notion that if companies and individuals were cutting their borrowing it made sense for the government to do the same. The idea that everybody should be retrenching at the same time was superficially attractive yet profoundly stupid, but it has proved hard to dislodge.
The public’s suspicion of borrowing has been fanned by two factors: the increase in personal debt over the past decade and the scale of Labour’s ambition. If you are proposing to increase the size of the state to the levels seen in a continental European country such as Germany, then you have to take the public with you. That means banging away – as remorselessly as the Conservatives have over Brexit – that government borrowing can be like taking out a cheap mortgage to buy a house at a knockdown price.
If Labour goes down to a fourth successive defeat next week it won’t be because people think the economy is poised for sustainable growth. It won’t be because they think the Tories have done a great job. It won’t be because every other issue has been crowded out by Brexit. It isn’t, they haven’t and it hasn’t been. It will be because Labour has not done the dull but essential groundwork needed to convince enough voters that its plans stack up.
The result is that it has the same problem it always has: convincing voters that it has its head screwed on as well as its heart in the right place. That mattered even when Tony Blair was proposing merely to tinker in 1997; it matters even more when you are promising to rewrite the rules of the economy.
Unlike the Tories, Labour is not complacent about the state of the economy and its strategy has a logic to it. Stage one involves offering lots of free stuff – from broadband to dental checkups – to get into power. Stage two involves quick early wins – raising the minimum wage to £10 an hour and a redistributive budget. Stage three involves longer-term changes to the economy using the tools of nationalisation and state-driven investment. Stage four involves telling Middle Britain that it will have to pay higher taxes to pay for a bigger state, but only after the changes made in stages one, two and three have delivered higher living standards.
For now, voters are merely picking up on stage one, the ever-increasing list of freebies. Corbyn’s chances of becoming prime minister would be massively boosted if the campaign’s last days were used to order what looks like a scattergun approach into a coherent list of priorities and a plan for action.
• Larry Elliott is the Guardian’s economics editor
