Conservative Cost of Living Inertia – Byline Times

The absence of credible solutions to the economic crisis is one of the most infuriating features of the Tory leadership race, says James Meadway

On September 5, the Conservative Party plans to announce its new leader and the new British Prime Minister. A few weeks later, Ofgem, the regulator of the privatized internal energy market, is expected to impose a 64% increase in the price of gas and electricity bills, taking the average household bill to £3,200. This extraordinary increase, which comes just as the summer is fading and the days are getting colder, comes on top of successive hikes in the prices of essential food and fuel that millions of people depend on for transportation.

The pressure on living standards this year has been relentless – greater than anything known in living memory. Even the 1970s, marked by high inflation, actually raised real incomes, as stronger unions and collective bargaining consistently ensured wage increases that outpaced inflation.

The closest parallel for a compression of household purchasing power of this kind is the early years of the Industrial Revolution – in the so-called Engels pause. And while price suppression is apparent across the world, sparking riots and even the overthrow of the Sri Lankan government, among major developed economies Britain is one of the hardest hit, as wages historically down and Brexit chaos add to the misery.

Consistently – and understandably – voters think this cost of living crisis is the most important issue facing them. There “terror/furyparticipants in a Rother Valley focus group asked about their immediate economic future, reported by the BBC Newsnightby Lewis Goodall, is reflected across the country.

The closest parallel to such a compression of household purchasing power is the early years of the Industrial Revolution.

None of this is expected to improve: the Bank of England is cautiously estimating inflation of 11% or possibly higher before the end of the year. New rounds of sanctions against Russian oil, scheduled for January, could cause further price spikes. Extreme weather conditions around the world are damaging crops and threatening supply chains.

Inflation may start to ease somewhat as we enter the new year. Yet he is unlikely to quickly return to the (currently rather laughable) 2% target that the Bank of England claims to be aiming for. And the Bank’s only weapon against this price spike – rising UK interest rates – is, as even Governor Andrew Bailey admits, useless at best against price rises from the rest of the world. . At worst, it is only another tightening of the screw for households, threatening an economic slowdown.

A recession was narrowly avoided this month, thanks to a 15% increase in visits to GPs, which contributed positively to what the Office for National Statistics records as national output.

Sasha Lavin

Whoever emerges from the knife fight of the Tory leadership campaign will find their triumph incredibly fleeting. Before even having had the chance to choose the wallpaper, the new occupant of number 10 will be faced with a series of difficult economic decisions: on the financing of the winter crisis of the NHS, on the shortage of teachers and, above all, on the dramatic loss of purchasing power which is already causing strikes and demonstrations.

Yet the scale of the crisis barely registers among the conservative contenders. From outside Westminster, the unreality of the contest is like looking at the world through a fish-eye lens. Distant concerns, issues that hardly register with most voters, such as the so-called problem of “trans orthodoxy,” are brought together warily. Immediate and dramatic issues such as the cost of living crisis and climate change are in the meantime pushed off the radar.

The only candidates to directly tackle rising energy prices have been eliminated. Sajid Javid, who was removed from office before the vote even started, has offered £5billion to ‘cut energy bills’. That’s a far cry from the £28billion the predicted price hike will cost households, but it’s, at least, more than nothing. Suella Braverman, meanwhile, hinted at a ‘VAT reduction’ for ‘energy costs’, presumably photocopying Labor policy, although she was not troubled by the details or the costs. . She too has now left the contest.

Otherwise, the problem of high and rising prices of basic necessities has been turned by all the candidates into a problem of fuel taxes. At least that’s a real problem, with gas prices up 70% since last summer. Penny Mordaunt has the biggest single pledge, arguing for a 50% reduction in VAT on petrol and diesel, or around 12p on a liter of petrol. This won him the support of Howard Cox, tax protesters from FairFuelUK. But because oil prices have risen so much, that equates to just three weeks of price increases this year. And with world prices set to rise further, it’s likely to be wiped out by the end of the year.

The elephant in the room

BBut the real culprit for rising fuel prices are the profits of the oil giants, with BP and Shell making between them £40billion in profits over the past year. As a result, reductions in taxes due on petrol and diesel act as little more than a government subsidy for these benefits. Of course, none of these changes in obligation have an impact on the (usually the poorest) person in five who lives in a household without a car.

These excess profits were of course never mentioned by the leadership candidates. Much more common have been promises to put more money back in the hands of shareholders and top executives, with various candidates also in the running trying to outbid the biggest promised cut – a contest won by Jeremy Hunt, who promised to cut the headline corporate tax rate from a projected level of 25% to 15%, at a likely cost of around £26 billion.

Notably, however, the candidates with the biggest explicit promises of corporate tax cuts – Hunt, Braverman, Javid, Nadhim Zahawi and Grant Shapps – are no longer in the running. Those who remain have been much quieter, while pledging, as all senior Tories must, to cut taxes in the future – but perhaps not yet. The shadow of Boris Johnson’s bigger state, higher tax ethic still hangs over the party and will for some time to come.

Bright Sam

Curiously, although of all the remaining candidates she was perhaps the least associated with Johnson, it is Penny Mordaunt who comes closest to maintaining her economic legacy. His launch article in The Telegraph was careful to distance himself from the competition currently howling at the moon over tax cuts, stressing that “economic reform” is more important. Mordaunt (like all of the other remaining candidates except Kemi Badenoch) pledged to maintain his commitment to Net Zero, pointing to the potential for three million green jobs by the end of the decade. She promises more investment in infrastructure and science – key promises from Johnson, somewhat kept.

There is a difficult political calculation behind this, and it is a calculation consistently underestimated in the accounts of Johnson’s government, which tend to focus on the personality of its leader, his personal weaknesses and his many and varied shortcomings. . But the Johnson coalition came together in 2019, focused (of course) on delivering Brexit but – above all – loudly promising both an end to austerity and what he called “leveling up” investment. the top” – centered on the big opportunities created by falling renewable energy costs and a global push for decarbonization.

In the North East of England in particular, where the Tories have spent significant political and real capital, this strategy is paying off, returning an overwhelming majority in the Darlington by-election and an astonishing 85% vote for the mayor of Teesside, Ben Houchen.

A conservative leader who managed to hold together this fragile coalition of 2019, offering just enough culture warfare to keep UK News happy, just enough higher tax cuts for conservative hearts, and just enough jobs and decentralization for the “Red Wall,” might just make it to the next general election in reasonable shape.

But the election is now set to take place in two years. We have a miserable winter ahead and the likelihood of a limited respite from inflation next year. Johnson’s grand plans amounted to very little in reality. It’s not clear that his replacement, plunged into a deep and worsening economic crisis, unwilling or unwilling to challenge super-profits and price-driving vested interests, most likely faces to genuine social unrest, will do better.

James Meadway is a former adviser to former Shadow Chancellor John McDonnell Member of Parliament and former Chief Economist at the New Economics Foundation


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