The announcement of the National Living Wage was the George Osborne’s Mortal Kombat moment – at the end of a bout in the classic game, the voiceover declares “Finish him!” and the victorious player deals the killing blow. The Chancellor swung, and the Opposition crumbled. It was great theatre, and even better politics – Tory MPs roared while Labour scrabbled to revise Harriet Harman’s response (unsuccessfully – she opened with a scripted line that the Chancellor offered nothing for low-paid workers).
As Paul observed yesterday, this was Osborne in full Disraeli mode – every change, every announcement and every tweak is artfully tuned to cause the most exquisite pain to the other side. There can be little doubt that on that measure he succeeded.
But was it good policy? Or good economics?
A rampaging Chancellor at the height of his powers – and clearly aiming to become the next Prime Minister – is a fearsome creature. People don’t necessarily like to rock the boat, for fear of seeming to spoil the moment of triumph. And yet over the last two and a half days a backlash of sorts has developed on the National Living Wage.
Let’s leave aside Labour’s criticisms – they have to be seen to make a criticism of one sort or another, so they will take any argument they can find. Rather, look at the voices on the Right expressing concern about the measure. On Wednesday, the Adam Smith institute and the Institute of Economic Affairs objected in very clear terms. Yesterday, the IEA’s Ryan Bourne took to the Telegraph to pick apart what he called an “intellectually bankrupt” policy. Today they are joined by Allister Heath and Fraser Nelson, both of whom take a typically fact-based approach to building their case. The Financial Times – not, despite its City brand, always the home of the red-in-tooth-and-claw free market right – devoted its leader column this morning to expressing concerns about the plan.
There is no scientific method to gauge the oft-complex private opinion of the Tory backbenches, but there are certainly mutterings behind the scenes that this may not be all that it is cracked up to be. The impact of Osborne’s rejection of Brown’s failed tax credits scheme clearly needed to be softened in some way, but there are reasonable questions to ask whether super-charging another Labour project, the National Minimum Wage, was the right way to do it, or whether it lends the left-wing campaigners who championed a Living Wage a new authority to sit in judgement on the Chancellor’s wage decisions. There are also attendant risks in a Chancellor bypassing the Low Pay Commission to decide pay levels himself – namely, that you can win plaudits when you raise it, but you no longer have anywhere to hide if you or your successors are unwilling to do so in future. If, God forbid, another economic crisis was to strike, would Osborne have the political freedom to take the necessary action to save low-paid jobs by cutting the Living Wage? I doubt it – and jobs would be lost as a result.
While they are happy about a range of strong announcements in the Budget (not least the moves on Inheritance Tax, defence spending and raising tax thresholds), more than a few Conservatives fear that the cost of this particular policy later on may come to outweigh the benefits the Government felt in Thursday’s headlines – and an eye for the long term is as much a core principle of our party as stuffing the Opposition. As Walpole, one of Osborne’s predecessors, put it, “they now ring the bells, but they soon will wring their hands.”
For ConservativeHome’s part, our view is that higher wages are clearly desirable, but there are other, better ways to secure them. Cutting taxes on employers who choose to pay the Living Wage would be a practical alternative, and would directly shift the responsibility for providing a decent income from the state to employers.
Stealing the Opposition’s clothes is a traditional Tory hobby – politically, it can work wonders. But while the initial prank can succeed, that doesn’t necessarily mean the outfit you end up wearing either fits well or suits you.