As Politico notes this morning:
Boris Johnson will hold a Cabinet meeting this morning where he will order his senior ministers to get to grips with the cost of living crisis squeezing the nation ahead of the local elections.
As they add:
The summit represents Downing Street's attempt to assert some sort of control over the news agenda and move it away from the Partygate woes of the past few weeks, back onto the “things that matter.”
Contextually they note:
[This] could be seen as a tacit admission that the government's previous efforts on the cost of living — so far summed up by the rough landing for Chancellor Rishi Sunak's spring statement — have not been sufficient.
What's the goal?:
Downing Street will be hoping for broadcast bulletins this morning talking about how the government is working hard to see what else can be done.
There is a catch. Apparently:
Crucially [ministers] must “ease living costs without solely relying on new government spend.” Perhaps the key line of the briefing is that ministers will be urged to look for more “non-fiscal measures” to help.
Why is that? Because:
Sunak is still winning the spending battle judging by this statement: “High levels of public debt following the unprecedented support provided during the pandemic, together with rising inflation and interest rates, mean we must maintain control of the public finances rather than burden future generations with higher debt.”
The contrast with the policy that Danny Blanchflower and I laid out at the weekend could not be starker. We saidthat the government must:
- Admit we have a crisis. Face up to the reality of this in other words, and stop saying this is just a cost-of-living issue but call it what it is: a full-blown economic meltdown.
- Cut bank interest rates. The Bank of England needs to reverse its disastrous policy now. They are making things much worse than they need be.
- Cut taxes - especially those on the lowest paid. NI should be cut more. Income tax for the lowest paid could be cut (the rate, and not the allowance) and VAT cuts are required.
- Raise benefits - and not just universal credit, but all in line with current inflation.
- Create jobs - which is where green issues come into play as they are easy to create and the payback is high. We are going to need those jobs very urgently soon unless action is taken now.
- Align UK rules on goods with the single market to save business money and to stop the excessive costs that are fuelling inflation. Poverty is a price not worth paying for rule non-alignment and the chaos they are causing.
- Pay for this with tax increases on the best off and especially on capital where inflation is a real issue and where nothing else can work; by changing tax rules to redirect savings to investment; by using QE which has never so far created inflation, and by letting the deficit grow, because having a deficit is vastly better than having people in need.
The government is going to go nowhere near that.
Now, will Labour?
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Typo, should it read ‘Crucially [monsters]…’, whereas you wrote ‘Crucially monisters’ ? 🙂
Great stuff Richard, thank you to you and your contributers.
Thanks. Corrected
Denial everywhere within government. This morning alone LSE confirming this morning that 30% of UK companies no longer trading with EU, a report on farming emphasising the complete shambles of the new support programme, update on Passport Office showing a further service worsening, an insight into the terrible provision of mental health, and the cost over-run of Bulb administration.
And on and on…. All showing the failing state.
I was walking my dog yesterday and I passed a field where two farmers were chatting by a tractor. I heard one say, “I am going vote Labour this time” (we have an election for the new Somerset county council next month). The popular opinion is that they always vote Tory.
Last general election the Conservatives won the seat with 62 %. Things are shifting.
More promises and, to repeat, a Johnson promise is a lie that hasn’t happened yet.
Read the article that was in the Mirror – simply explained both the situation and how to deal with. Thank you and hope it has the desire effect.
Craig
Reading your new book. As you the ‘burden future generations’ is not correct.
Does he really think this? I have mused on it and I think he probably does. Economics is in some ways a bit like theology or schools of psychotherapy. They are all based on assumptions for which there is some evidence or argument but there are other perspectives and the implications of the theory don’t always apply. I suppose this is pragmatism v idealism.
The ‘banker view’ of balancing the budget in the 1930s was proven to be wrong . I have a 1960s school text book which explains why it was so.
Alan Greenspan told Congress he didn’t understand why the financial crisis of 2008 happened.
The austerity doctrine of Osborne and the Troika which dealt with the Greek euro crisis all failed in their predictions.
But despite that they surge ahead with the doctrine. To not do so would undercut the power of the bond markets, the City or whatever term we chose to use. Self defence will overcome reason at all levels.
The one concern that I would have with IR cuts is that historically this has always resulted in irrational house price inflation. We need to get to grips in this country that we have an housing crisis. When covid came along one of the first things the Tories did was to remove the tax from house purchases. End result? House prices are now 20% higher and still defying economic gravity, despite covid, Brexit and Putin’s war. I think this is madness, but typical of Tory thinking. Heaven help us if we got low IR at next to nothing with no plan in place to address the effect on house prices.
The bottom line is that there is now no cheap housing option anymore. Waiting lists for what remains of council housing or any low cost alternative are now at horrendous levels. Private sector rents are on the up. This is a cost of living crisis that is worse for everyone that rents and who is now at the mercy of landlords. Renters have no choice but to pay – or be homeless. As property prices go higher, BTL landlords will want higher rents, if only to pay for their purchases.
I fear Tories will do nothing about this, they don’t care. Labour are afraid to say boo to a goose on this issue. Even now the housing crisis is way at the back of the agenda behind energy, food and other issues despite the fact that for many people it is their biggest expenditure of need.
Time to get real on this issue, but I have no faith in any of the parties to do what is necessary.
So,. we need social housing….
Yes – and not at 80% market rents either.
Once again all this ‘concern’ is window dressing.
They’re hoping that it looks as though something is being done and that the social networks ‘amplify’ the message like they know endlessly repeating Angela Rayner’s alleged behaviour will work for her – convincing people that something is or did happen.
There is no way – as you say – that they can deal with this crises without doing what you & Danny have suggested – unless of course, they are going do more robbing of Peter to pay Paul within their frankly perverted view of the public finances. Which means that someone somewhere else might suffer.
The question is who and where? Everything is so pared down to the bone.
Printing money might help to “fix” the problems temporarily caused by inflation but it does not solve inflation in fact it makes it worse…
No, it does not
Tell me how excess money supply caused supply chain issues caused by war?
“Tell me how excess money supply caused supply chain issues caused by war?”
well inflation is not just caused by the war. The first notable inflation came in the US second hand car car market post covid helicopter money.
As i said to you yesterday on a different thread i work in the building industry and raw materials are up around 40% compared to 18months ago. I believe this should/ probably will slow down building work as vendors and house builders defer doing certain projects… but if interest rates are zero and easy credit is on tap then people just pay the higher prices and inflation is embedded. So the money supply is very much part of the inflationary picture.
Car price issues were supply chain disruption due to Covid
That is also your building cost inflation
Now there is war
None of this is due to money supply
And you may have noticed, petiole can’t pay because there isn’t money supply for most
You are making your causation up
“You are making your causation up”
So 30yrs in the building industry and 20yrs running my own company, speaking everyday to both sides.. suppliers of raw materials and the end customer.. that’s every day and i make it up!!!! …listen i want easy credit, i want the money supply to increase exponentially each year, like it has, because it makes my job easier!!!.. anyway you think know the industry better than me.. but believe me you don’t…
You sound very much like the proverbial boke down the pub who knows the answer to everything…
I think we can do without your wisdom here
“You sound very much like the proverbial boke down the pub who knows the answer to everything…”
Haha.. that was you wasn’t it..well until you got banned from all the pubs in Downham Market !!
And now you reveal yourself as a troll – as I thought you would
a) I can’t recall ever going to a pub in Downham Market
b) You have read Wikipedia and think I live there. I don’t.
c) So everything else you said is pure nonsense too
You are banned now
Tony
It’s not just about money. Calm down and think about it a bit will you.
The market prices by rarity or abundance. Why do you think a Maserati costs more than a Fiesta 1.4?
You must have heard of the economies of scale – manufacturing loads of widgets makes ’em cheaper. But if they’re stuck at the dock, or suppliers can’t be arsed to send them to you because there are easier markets to sell to, what happens is that the widgets get more expensive because there are less of them to sell to you, no matter how many are made at the factory.
Whether it is Wickes or Amazon, cars or widgets when the supply of a good is plentiful, the price will come down; when there are a few left, the price goes up. Mass produced goods tend to be cheaper; the Maserati is hand built and more expensive.
This is what BREXIT and Covid supply side disruption has caused to an industry like yours and mine. You know very well that that 40% has to be passed onto the home buyer somehow or at onto least the project and its business case.
Well, how can it if their income has not gone up 40%? The only people who can really afford the 40% mark up are investor landlords who have the spare cash to spend. not many first time buyers on increasingly crap wages.
But the other side of the equation is the domestic side, where wages/incomes have been declining for some time and then things like supply side disruption through BREXIT and Covid collide and war cause misery like the Cost of Living Crisis.
You have a mixture of high prices and low wages for a large percentage of the population and that can only lead to a recession in the household sector as people cut back to afford essentials. With money in short supply, the supply is then weakened even more as sellers don’t sense profit and withdraw and a downward spiral sets in.
The only relief that can be offered for ordinary people is to tax them less and then offer higher benefits – not higher national insurance costs or raised caps on energy prices!!
I think you are getting the domestic side and the industrial side of the economy all mixed up.
And it is not the case that industry just pays the prices asked: it resorts to other tactics. Last year to combat the shortage of certain building materials we had to buy in bulk which we’ve never done before and find somewhere in the yard to store it which as a problem in itself as we are set up to order ‘just in time’ from suppliers.
But buying bulk just exacerbates the supply problem doesn’t it? And that it also what some of the gas suppliers have done too – bought new supplies of gas upfront – brought forward tomorrow’s supplies and in doing so creating a shortage which leads to – guess what? – inflation!
There is a time as even you say when the printing of money would have to stop because it would cause inflation . But the problem being expressed here Tony is that there is no plan to print any AT ALL. Because there is not enough – particularly in the domestic/household sector – for a large portion of the population to cope with that inflation.
And that’s the problem.
And on another issue:
Second hand car prices went up because car production and new car orders was disrupted or stopped. So the second hand market bore the brunt of demand – not because of the ‘helicopter money’ as you call it, but because of production and export gaps in new vehicles. The USA imports lots of cars from abroad.
And there was never any ‘helicopter money’ BTW. This did not happen. If you are referring to quantitative easing after 2008, the Government bail out went into the banking system – not into people’s bank accounts.
That money was used for more speculation and boosted the prices of assets like housing and other high end stuff. It made the rich richer that’s for sure.
Wages have still been depressed since 2008 – they have risen but are still short of what they were.
And the best way to curb money inflation in a decent wage economy ? Tax.
Think about it.
What about the dysfunctional electricity market where the highest cost generators end up setting the prices?
That could be tackled
Also some sort of ‘cost recovery’ for companies with large numbers of low paid staff, or salary & dividend controls?
This is true of course
But it will not solve all the problem