Today's speech by Chancellor George Osborne laid down some tough new austerity challenges that go well beyond the next election. 2014 will be a defining year for all three parties
2013 drew to a close with, finally, some good economic news for the government. The Office of Budget Responsibility revised its growth estimate for the year upward to 1.4% and it also now estimates the economy will grow by as much as 2.4% in 2014. If things go to plan, the economy could even return to its pre-2008 peak this year, two years earlier than previously expected.
This economic news has begun to move the political debate on and away from questions over the rights and wrongs of the austerity package the chancellor announced in 2010. However, the mixed messages emanating from the government already this year have demonstrated the difficulty that even good economic news will have for the coalition’s messaging.
David Cameron started the year in a gleeful mood as he began to discuss making long term spending commitments. In particular, he was quick to suggest money would be available to protect pensions spending. But the message coming from the chancellor was much more cautious, with a speech today committing to further austerity measures including £12 billion of further cuts to welfare alone over the first two years of the next Parliament.
Notably, the Government now also plans to put its deficit reduction proposals to a vote in the Commons as part of a 'Charter for Budget Responsibility', possibly committing both coalition parties to a series of cuts, and to creating a budget surplus, ahead of the next election. However, commitments such as this are as much a political trap for Labour as they are a firm policy commitment to austerity and a smaller state.
One way or another then, the economy looks set to dominate the political debate as much as ever in 2014. In a year with a series of elections, including European and local elections and the hugely important Scottish independence referendum, all the political parties will be eager to turn the ongoing economic debate to their advantage.
The Labour party will continue to press the advantage they gained last year framing the economic debate as a question of the ‘cost of living crisis’. Economic growth may look like good news for the coalition on paper, but Ed Miliband and Ed Balls will be quick to point out areas where working families are not feeling the benefits of this new optimism. Industries such as utilities will continue to face criticisms from the Labour Party in 2014, as will any rumblings from Conservative backbenchers to lower the 45p tax bracket.
As set out in Insight's 2014 political preview, the economy will not be the only battleground this year though. With 2014 being the last full year of this Parliament, there is plenty to be done on both sides of the House to lay the groundwork ahead of the next General Election.
Cameron, Clegg and Miliband are likely to reshuffle their teams again to both reward talent (and loyalty) and to put media-savvy potential vote-winners on the front line. But the best laid plans of any leader can get derailed by events and there are potential time bombs facing both parties in the NHS, the new Universal Credit System, and at the Home Office as rules change around EU migration. The government and Opposition will both have to lay their cards on the table on issues of long term importance, such as HS2 and adult social care, as well.
2014 may not be the definitive year of this Parliament. The first three years of the coalition, which introduced austerity and saw the reorganisation of the NHS, may be what the public remembers in years to come. But the year will certainly define the next election and the decisions made this year, by both parties, will shape whatever government is to come next.
John Lehal is managing director of Insight Public Affairs
