Andrew Grice: Perhaps Labour is working after all

Amid the winter gloom, a few rays of hope for Labour. The opinion poll gap seems to be closing. The Conservatives have lost five seats in council by-elections this month. Gordon Brown played the world statesman in Copenhagen. And the number of people claiming jobseeker's allowance fell for the first since February 2008.

Ministers are not getting carried away, though. The better measure of unemployment, based on the labour market survey, is still edging towards 2.5 million. The record 20 per cent jobless rate among 18- to 24-year-olds, one of the highest in Europe, is a terrible scar on the record of a Labour Government which once claimed to have abolished youth unemployment.

Yet cabinet ministers are cautiously optimistic on the jobs front. In a White Paper on Tuesday, Yvette Cooper, the Work and Pensions Secretary, felt able to revive Labour's goal of creating "full employment", ie jobs for 80 per cent of people of working age.

Some ministers hope that unemployment might be falling by next May, which is still the most likely date for a general election. I can't see much prospect of a March poll, which the Tories seem to be talking up so that they can accuse Gordon Brown of bottling it (again) if he doesn't call one. The prospect of falling unemployment is another reason for him to delay until May.

You can detect a story for Labour to tell at the election: we have steered the ship through the storm and the alternative crew would have hit the rocks.

In the April Budget, the official estimate was that the number claiming jobseeker's allowance would reach 2.09 million by the end of this year (and 2.44 million by the end of next year). It is now 1.63 million.

Naturally enough, Labour ministers claim their £5bn package to ease unemployment is responsible for the lower-than-expected figures. No doubt it has played a part. But Whitehall officials say the other story of this recession is that the labour market has proved remarkably flexible. Companies and workers have been doing it by themselves: agreeing pay freezes, pay cuts and short-time working to avoid job cuts. Union power is much less strong than in the last two recessions. There has been an outbreak of good old-fashioned common sense. More than one million people are working part-time because they could not find a full-time job (up 281,000 on a year ago). Many women have taken part-time jobs; and there is anecdotal evidence that lots have started their own firms, often "making things" at home.

The downside to this new flexibility is that officials fear a jobless, or at least a "job-lite", recovery as firms put people back on full-time before they start to recruit. That could be bad news for the 18- to 24-year-olds still struggling to get their first "real" job. Many have prolonged their studies or are relying on unpaid work placements.

Labour doesn't get much credit but its actions in the recession are a good advertisement for the "active government" it proclaims as a middle way between an Old Labour "big brother" approach and the Tories' leaner, smaller state. Intervention by ministers has ensured fewer house repossessions than in the last two downturns; predictions for this year have been revised downwards from 65,000 to 48,000. The Government claims it has helped 300,000 families. None of this is making headlines.

It is not right, as Labour claims, that a Tory government would have "done nothing" in the recession. The Tories were the first to say that job guarantees for young people should kick in after six months on the dole. But a Tory government would surely have intervened less. It would have cut public spending earlier, adding to the unemployment figures. A day of reckoning for public sector jobs will come whoever wins the election, but high state spending has helped to slow the rise in joblessness. The number of people employed by the NHS rose by 23,000 in the third quarter of this year.

Some Labour folk cling to the hope that the election will be "more like 1992 than 1997", recalling that John Major won respect for steering the country through the recession. They are rewriting history. The 1992 election was lost by Labour rather than won by the Tories. Labour's tax-raising plans worried voters; and Neil Kinnock, although he dragged the party into the modern world, failed the "can you imagine him on the steps of No 10?" test. David Cameron almost certainly passes that test. And although the Tories might raise taxes such as VAT after the election, they're not going to tell us their proposals beforehand.

Labour's problem is that voters rarely say "thank you," even if they have a grudging respect for the way Mr Brown has taken the country through hard times. The bigger threat to the Tories on the economy is that they may have overdone the austerity. Mr Cameron went from Mr Sunshine to Mr Gloom to combat Mr Brown's declaration that this was "no time for a novice". But, with the economy growing and unemployment falling, the Tory leader somehow needs to paint the voters a more rosy picture than cuts, cuts and more cuts.