Chancellor Sunak delivered a sticking plaster to save Boris Johnson with measures to tackle the cost of living crisis today. He did not deliver what was required. Sunak had at least five things to do to tackle inflation. He very largely failed to deliver.
First, he had to cut the rate of inflation. This was essential. Partly that was to reduce the pressure on wage rises. It was also essential to stop the contagion from fuel costs into the rest of the economy. This would help ex-students facing exorbitant interest demands; commuters facing eye-watering inflationary price increases and it would help struggling businesses and so help maintain employment. It would also reduce the cost of living. This demanded that he cut gas and road fuel prices by cutting the rates of duty and VAT on them to cap his tax take at 2020 levels. For electricity he could have changed the OFGEM pricing structure which requires that all electricity be sold to distributors at the marginal cost of producing the most expensive component in the electricity mix, and instead have required sale at the overall average cost of production, with each producer being paid their own reasonable costs including a fair profit, so avoiding the need for a windfall tax on them. He didn't do either of these things. In other words, he failed to address the problem of inflation.
Second, he should have tackled all companies exploiting the current shortages. Energy companies are, of course, some of them. But so too are banks, who are profiting extraordinarily from rising interest rates. He did not do that. Instead, he introduced a token gesture windfall tax that actually encourages oil exploration during a climate crisis. This was a gesture that so missed the target very badly indeed.
Third, he had to take the heat out of demand by increasing taxes on the rich. That is how to tackle the demand-pull element of inflation that they alone are driving. If he had done so he could also have, fourthly, instructed the Bank of England to stop its wholly misplaced interest rate rises. But he did neither of these things.
Fifth, he pretended that this issue is temporary, which it probably won't be since he has failed to actually address the issue of inflation today. That means his package of support, which does little more than make good the benefit cuts introduced at the supposed end of the Covid era for many, will not remove the stress that this crisis is creating. And for those not on benefits but who are not well off - and there are many of them - this package does not work, repeating his inability to target help last seen during the Covid crisis.
As in 2020, Sunak will be back again soon to have another go at getting this right, because he failed badly today.
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https://www.gov.uk/government/speeches/cost-of-living-support
But yes, I agree and would add we need some sort of plan for food, to late now for 2022 but what about the 2023 harvest?
Oh I don’t know Richard, judging by the coverage on BBC radio, (at least in the morning) , it achieved, for a time at least, it’s principal objective, or should I say it’s only real objective.
To distract attenton, yet again/as ever/as always with Johnson (take your pick really) from the Sue Gray report. Reports of ‘hundreds of pounds a year to consumers’ miraculously crowded out yesterday’s news.
As for making much of a difference to the cost of living crisis? No, but that wasn’t the intention. Effective thought through policies done to actually get anything done or benefit anybody other than tory backers and cronies? Forget it.
No one I know today felt that what was on offer is going to help the poorest at all even though it will slightly reduce the negative impact on us.
Woeful. To be a fly on the wall when that idiot is taking instruction form his advisors.
You are right
Nor do they much help anyone else
I was saddened by the way Labour seemed to be taking credit for Sunak’s measures rather than pointing out how woefully inadequate they are;
you lot really should form your own Marxist political party. You are perfect for each other and no good for anyone else..
Maybe you should read some Marx
I have
It’s how I know I am not a Marxist
There are several friends I have not seen since the massacre, in June 4th 1989, of democracy activists outside the Gate of Heavenly Peace by troops who entered the square via the Avenue of Eternal Peace. Since that time I have always taken considerable umbrage at being accused of being a Marxist. I really think you ought to apologise.
Me, I’m more of a Groucho Marxist and Dao not Mao
Pretty good piece by James Meadway in the Guardian – focussing on getting rid of the rigged ‘market’ altogether
https://www.theguardian.com/commentisfree/2022/may/26/rishi-sunak-package-uk-inflation-price-cap-energy-bills
Labour as expected – not looking at fundamentals – they darent try to get the public to begin to understand whats really going on
There is no doubt that this is a minority British Government being ran on behalf of the minority of rich people behind it.
This is about digging in and no going back.
What’s worse though is now they are playing with us – particularly the poor who they are still keeping poor so that they can be manipulated at will.
We can now see how the trolls work. Richard Murphy is now a Marxist because he threatens the establishment. Corbyn a Social Democrat vilified because he threatened the establishment and so on for any dissent or alternative vision. I do not always agree with Richard Murphy and I am a Marxist, however he offers solutions that are realistic and workable. His voice is amongst the few who have a vision for this country that is based on equality, fairness and compassion. It’s a voice that should be heard and given credence. Marxist he is not.
Marx wasn’t a Marxist in the way the trite insult that trips off the tongue so emptily now means. But since it is enough to stop anyone finding out what Marx actually thought and wrote, it serves its turn.
I broadly agree with the points in this post.
Though where is the evidence that higher-earners are directly helping to drive the core cost of living crisis eg that not only are they bidding up Balenciaga but also buying extra Tesco butter?
And if you say higher spending on luxuries helps push up other prices by competing for supply (energy/raw materials), where’s the evidence for those extra amounts making a dent in the mass market? Cheers
Inflation is measured over a basket of goods
Some, E.g. second hand cars and some building services, have increased considerably in price, which is my concern.
I am not saying there is necessarily a spillover to Tesco margarine. But they are creating an excessively inflationary environment, and that itself should be tackled to reduce inflationary pressures
Stop thinking micro. Think macro
There are two key points I am surprised discussion is not focused on exploring. First, the protests of the oil and gas industry still being made that investment in energy is under threat because of the windfall tax. Why have they been given 91% tax relief on new investment? It isn’t just because they wouldn’t invest because of the windfall tax, but because the fact is that they haven’t been keenly investing in all new energy projects.
Indeed, so lacking in entrepreneurial drive, so adverse to risk, so dependent on rentierism have the major UK-global oil giants become that both the UK majors, BP and Shell have been in retreat: “About £9.5billion in share buybacks are expected to be done by energy supermajors BP and Shell, which have both seen their fortunes rebound significantly in the past year following a surge in oil and gas prices.” (This is Money, 9th May, 2022). They prefer to eat themselves than invest in the UK. They have to be offered special tax-free incentives just to rise from their bed and pretend they have any entrpreneurial spirit at all.
This behaviour has become the conventional wisdom in UK so-called “Markets”. The ‘This is Money’ article points out this sobering insight into the triumph of rentierism in the UK: “Online investment platform AJ Bell found that companies on the FTSE 100 Index are planning to acquire £37billion of their own shares this year, compared to a peak of £34.9billion four years ago.” That is a lot of buyback activity in recent years.
This carries me to the second point. Neoliberalism, unchecked and unregulated will always lead to blatant, complacent rentierism, and raise the risk of monopolism and cartelism. Sunak’s measures yesterday, including the energy company tax relief is meraly a demonstration of the complete collapse of neoliberal ideology. Markets only function in the easy times. Markets are essentially soft, weak organisms and only work in environments which operate within very limited oscillations in the market environment. Neoliberalism is a fragile flower, an orchid that does not survive the turbulence of the real – hot and cold – economic world, unless smothered in support from the public purse. This is the basic fact not just for our times, but all times since commercial society first rose out of feudalism.
You are right John
I should have added that the other side of the same coin is Minsky’s central point, the financlal instability hypothesis (and Mehrling’s modern development of ‘the Money View’): still being kept at bay in the foundation of conventional economics, which depends on wholly on the existence on the unseen operation of ‘equilibrium’.
Nobody has ever observed ‘Equilibrium’ (it defies Occam’s Razor), or proved that it is a real economic entity, rather than a mere assumption holding up a clumsy theory. In the real world ‘Equilibrium’ is seen rather only as a transient phenomena (which is merely interpreted as permanent, through the use of highly selective timeframes or the manipulation of data); or is maintained as a fragile, or even illusory phenomena reinforced by artificial and exogenous support (usually half-hidden from view by the priests of the equilibrium religion).
I loathe the idea of equilibrium because it is a falsehood that suggests we are but a short distance from optimal behaviour at any point in time, which appears to me very obviously untrue
‘Phenomena’ is, of course, plural. My overhasty fingers on a malicious keyboard catches me out – again.
I am always amazed that some commentators equate Marxism with authoritarian regimes like China, Russia etc presumably because they know little about what Marx actually said. Neither do they counteract their views by equating states like Pinochet’s Chile, apartheid South Africa, the Generalissimo’s Argentina, Erdogan’s Turkey and Orban’s Hungary with capitalism. These commentators rights in the UK are seriously threatened by the Policing, Crime, Sentencing and Courts Act 2022 on a par with any authoritarian regime mentioned above but they seem oblivious to the consequences. I suppose they think they will be OK because they support the incumbent powers but these powers can be used by anyone who takes power and it could backfire on those agreeing to allow such powers to be enacted.