Heath points to what will cause the coalition problems: the soaring cost of living. He has uncovered the ‘misery index’ which shows that low wages, smaller hours and RPI inflation of 4.8 percent have combined to make the cost of living higher than any point since 1982. Osborne et al will, of course, be oblivious to this - they’re sucked into the weird world of the IFS decile charts and are worrying how best to manipulate them. They’re looking in one area, where the real story is happening in another: the Average Joe is bearing an extraordinary burden, getting heavier at a rate undetected by any official economic metric.
Osborne doesn’t quite realise, I suspect, that his proposed VAT increase in January will be compounding this misery. Perhaps more importantly, he’ll end up being blamed for rising prices. Britain has the highest inflation in Western Europe right now (Ireland is in deflation). As Heath says, prosperity - real or illusory - was the Teflon coating which protected New Labour. Folk felt rich, their house was going up, their living room was full of stuff bought on credit. Now, folk feel poorer, their house price is falling and the world is becoming tougher by the day. Under such conditions, people tend to blame the government. It’s a new trend - but ask any shopper. The average orange is a third more expensive than last year. Salmon is up by 25 percent, butter by 22 percent. These tiny sums - rather than the billions in the deficit forecast - is what might destabilise Osborne.
Morten Morland illustrated this beautifully for us on this week’s cover: a guy worried about the axe coming down on his wee toe, when the real threat is coming from behind him. I think we’ll be hearing more about this theme in coming weeks and months.