British Conservatives in Paris Blog

Having decided that it has lost the argument to the governing Coalition on competence in managing the British economy as it returns to growth, the opposition Labour party has switched its attack to the cost of living crisis for the ?many? who, unlike the rich in society, are not sharing the benefits of growth. The opposition leader?s charge is that the link is broken between growth and living standards in what he described as a Wonga (payday loan) economy, symbolizing a cost of living crisis for poorer families. This has received popular support and represents dangerous ground for the government which, in wanting to be seen to be doing something, is moving into an area where Labour is currently strong.

The government under opposition pressure had to respond to the freeze on energy (electricity) prices proposed by Labour e.g. by a planned review of ?green? energy subsidies included in the price to the consumer as well as the overall competitiveness of the energy market. The water companies have also been asked to review any price increases they might have been planning to implement.

Overall public perception that something is really being done about the cost of living remains important, however, and this is where the popularity of the charismatic Mayor of London Boris Johnson can play a major role e.g. in demonstrating his practical support for paying the living wage. It is appropriate that London which is experiencing first and disproportionately the benefits of growth in the economy, should be taking the lead (as demonstrated by the Mayor) in encouraging more and more employers to pay the living wage rate and help households cope with rising bills. Quoting Boris Johnson, paying the living wage makes ?pure economic common sense? (less staff turnover and more productive) although he does not think it should be compulsory.

Comparing the additional peer and customer pressures on employers to voluntarily pay the living wage when their business allows, with the more prescriptive policy of Labour to legislate through a tax credit, the latter would place an additional administrative burden on HMRC to ensure compliance. This Labour approach also brings to mind the tax credits of Labour Chancellor Gordon Brown which boost the wages of the lower paid but again effectively provide a subsidy for employers via the tax payer. Finally, making the payment of the living wage compulsory through legislation (as for the minimum wage) could lead to layoffs of workers by firms still not able to absorb the additional wage costs.