While Boris Johnson disgraces his office, Keir Starmer has distinguished himself with progress made and poll leads. But one key challenge looms large: Labour’s support amongst the older voters is still too weak.
The biggest single fact in British politics is that Labour currently loses amongst the over 65’s by over 3 million votes. That huge margin guarantees the Tories power. The latest poll shift has cut the Tory lead but Labour is still way behind. In fact, we’re still two points behind amongst the 50-64’s and a whopping 16% behind amongst the over 65’s.
The Tory lead is no accident. As the great Greg McClymont once observed, the Tories are past masters of building a political economy of winners and losers – and associating themselves with the winners. And over the last ten years, the Tories have ruthlessly built a political economy based on fuelling older voters’ spending power – and wealth.
Key has been the triple lock; the ‘guarantee’ that ensures pension are uprated by the higher of the rise in earnings, inflation or 2.5%.
Mrs Thatcher infamously broke the link between pension rises and earnings. The result was massive pensioner poverty that took years for Labour to fix.
David Cameron wasn’t going to make the same mistake. While Labour declared it would restore the earnings link in the Pensions Act 2007, the measure was not brought into effect until April 2011. The Coalition’s triple lock went further. That was worth a lot of money. Over the last decade, the triple lock routed £48 billion extra to pensioners over and above what would have happened if pension uprating unfolded in line with earnings.
This massive transfer has helped boost pensioners’ consumption over the last ten years by more than anyone else. In fact, average weekly consumption amongst the over 75’s has risen by 48% since 2010. That’s way ahead of the rise enjoyed by the under 30’s (average consumption up by 32%), the 30-49’s (consumption up just 16%), and the 50-64’s (consumption up by 28%). Bluntly, the oldest have seen their weekly spending power rise most.
This strategy has actually changed the structure of our economy. A few years ago, Lucio Baccaro and Jonas Pontusson of the University of Geneva developed a way to understand varieties of capitalism by looking at differences in the components of aggregate demand. What they reported for Britain was stark;
Over the period 1994–2007, the United Kingdom relied on household consumption as the main driver of economic growth, spurring household consumption through a combination of real wage growth and the accumulation of household debt. In marked contrast, Germany came to rely on export-led growth, repressing wages and consumption to boost the competitiveness of the export sector.
As the great Prof Nick Pearce and his colleagues then flagged, the Tories’ consumption-driven economy of the last decade has been powered in large part by older people. In fact, it’s as close as the Tories have come to any sort of growth strategy. The combined effect of both growing numbers of older households and their rise in spending power – which has risen by an incredible £74 billion – now means older voters account for almost a quarter (22%) of UK consumption, up from 17% back in 2010.
Alongside, the triple lock on pensions, the great boon for older voters has been a decade of low interest rates that has helped power up house prices. That has helped transform the wealth of older voters who own their own homes. In fact, over half of older households now boast wealth worth over half a million pounds – and the proportion of households headed by someone over 65 with wealth of £1 million or over, has almost tripled. A quarter of the over 65’s are now technically millionaires.
Labour can’t win without a plan to consolidate new support amongst older voters, not least because 35 of the 77 of the seats most easy to win from the Tories are home to a higher than average percentage of pensioners.
However, Keir’s progress and the Tories’ mistakes create an opportunity. The Tories’ model is now beginning to fall apart. This year’s pension rise will be less than inflation for the first time in a decade. The social care levy proposed to fix the social care system is nothing of the sort. Older voters are the biggest users of the NHS. They are acutely unhappy about record backlogs for operations and the impossibility of getting to see a GP. Traditionally, older voters have been more sceptical of Labour’s handling of the economy and were of course far more inclined to vote for Brexit.
Even if Labour doesn’t win a majority amongst older voters, it needs to hold down the Tory lead – and not make mistakes. So loose talk about weslth taxes might be risky – it may make a lot more sense to target the wealthy with huge capital incomes (the top 10% of Britain’s richest take home 45% of capital income in Britain). Equally we need to reconfirm our social care offer and explain how to pay for it. And, of course we’ll need to get our policy straight on the triple lock.
While governments tend to lose elections, noone wins by default. And the path to power for Keir Starmer will be much easier with lots of ‘silver voters’ in his corner.