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Matthew Hancock MP: Why Labour has zero credibility on living standards. And what Conservatives are doing to raise them.

Matthew Hancock is the Member of Parliament for West Suffolk and Minister for Skills in the Departments of Business and of Education. Follow Matthew on Twitter.

Screen shot 2013-08-05 at 17.03.20So, the economy is growing. Recent surveys of activity are solid. Confidence is rising. Our crucial task is to make sure everyone who wants to work hard  – in all parts of the country, in all sectors of our economy, have the chance to be part of the recovery.

We hear too that Labour, having lost the argument on deficit reduction, have a newfound interest in living standards. It’s a vital subject. So let’s look at the debate on living standards, past present and future.

Labour’s record is shocking. Even before the crash, real wage growth had begun to stagnate. Between 2003 and 2008 median hourly pay grew by 0.3 per cent a year, even while the economy grew by 1.4 per cent. Over the same period, median pay growth never outpaced inflation, and gross disposable income fell by 1.1 per cent per head. If real wage growth had continued along its historic trend, rather than tailing off in 2003, the typical middle earner would have entered the crash with £2000 a year more in earnings. The crash and its aftermath made a bad situation worse.

Rather than tackle the difficult structural questions about how we earn our keep in a global race, Labour took the easy options: mass immigration to fill the UK skills gap, and mass public borrowing to make up for feeble wage growth. Everyone knows the squeeze in living standards is because we’re still cleaning up the mess.

And today, Labour haven't changed. If the argument is about living standards, do you trust the Government which has capped fuel duty, frozen council tax, raised the amount you can earn tax-free, and even cut beer duty for the first time in 54 years...or do you trust the people who’ve spent their whole time in Opposition trying to invent more ways to spend your money? In spite of all the talk of ‘iron discipline’ this year’s ‘Alternative Queen’s Speech’ contained billions worth of unfunded spending commitments, meaning more borrowing and more debt - exactly the same old Labour policy that got us into this mess in the first place.
And what of the future? Instead of new ideas from Labour, all we have are proposals for more spending, that would be paid for by already hard-pressed taxpayers. There are the commitments they’ve already made, and the commitments foisted  on them by their trade tnion paymasters.
The end result? Hardworking people paying the price with higher mortgage rates and higher bills. They would be worse off under Labour.

Driving up living standards is the bread and butter of Conservative politics. For many of us, it’s why we got into politics in the first place - because we know that the real driver of mass prosperity is not state redistribution, but the hard work, opportunity and the ingenuity of people.

So what must we do to support living standards?

First, get the tax burden as low as possible in a sustainable way. Taking 2.7 million out of income tax, and cutting income tax for millions more is a good start, because keeping more of what you earn is a sure-fire way of increasing living standards. And benefit reform to ensure work always pays helps incentivise everyone into work.

Second, we must continue to strengthen the minimum wage. A stronger minimum wage enhances welfare reform by creating better incentives to get off welfare and into work.

And third, increase people’s productivity. That’s the only long term way sustainably to increase living standards. Of course that means freeing businesses to compete and create jobs, but also improving education and skills. Here our record is strong: with over a million new Apprenticeships, and radical school reforms to improve standards and the ability of school leavers to get on in life.

Above all, we must remember that far from being an alternative to the macroeconomic debate, the debate on living standards is the other side of the coin. Sustainable, balanced, economic growth and broadly-based rising incomes are the goal of any decent economic policy. But much more importantly, they are delivered by realising the potential of every British citizen.


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