As The Guardian reported last night:
The bosses of Britain's “big five” retail banks have been summoned to a meeting with the chancellor, Rachel Reeves, this week to discuss how to limit the economic impact of the crisis in the Middle East triggered by the US and Israel's attacks on Iran.
The chief executives of HSBC, Barclays, Lloyds, NatWest and Santander have been asked to attend an emergency summit on Wednesday, amid increasing acceptance that a major economic hit from the Iran war is unavoidable.
The penny is dropping. Reeves' denial of reality is no longer sustainable. As I have been saying for weeks, Trump and Netanyahu's war is likely to deliver an outcome requiring a response at least as great as that required after WWII.
We face shortages of gas, oil, other raw materials, and components for many manufacturing processes. The impact will already last for years, given that no immediate end to this conflict is now in sight.
Hardship, poverty, potential famine, business and personal bankruptcy, recession, and a resulting collapse in government revenues, and more, are very likely to result.
We need rationing, much more progressive taxation to balance enhanced social security payments, and major institutional reform to create resilience as a core element of defence policy to achieve the outcomes we need.
And we need major reform of our economic thinking and of our international institutions, most of which have clearly failed, and a new economic model that rejects the long, tortured, climate-unsustainable, and carbon-dependent supply chains neoliberalism promoted.
Quite why bank consent is required to deliver any of these outcomes is very hard to imagine: none of this is their business, but it seems Reeves thinks it might be. This implies that, as yet, she neither understands any of the issues we are facing nor that they create a need for her to act, rather than outsourcing action to third parties. The time for such neoliberal responses has long passed, yet Rachel Reeves still misses that point. Maybe she'll never get it. That's why her career as a politician looks to be decidedly limited now.
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Surely she would be ousted with Starmer, when that happens. Good riddance. Does anyone in the PLP and any potential successors understand economics sufficiently, and preferably in the way that Richard describes, to meet the challenges that face us?
No
But some leaders are willing to listen to advice and would in effect have a team of experts under them providing good input. Zack will rightfully admit he’s no economist, but he’s gathering and listening to experts. And Gordon Brown had a strong sense of social justice and would be more worried about the impact on our poorest then just bond prices.
Rishi Reeves is a neoliberal supplicant; it’s the essential criteria of her job description.
Surely as happened in WW2 The Government doesnt have ‘talks’ with the banks etc it tells them what they are going to do
Agreed
Do you think we should declare a State of Emergency and put the nation on a war footing and impose rationing on essential goods immediately? That way we could steal a march on the rest of the world as they remain ” complacent” ??
There is an emeregency
So, yes
Slightly off-message:
“British children during WW2 rationing were the healthiest British children of the twentieth century. The government, trying to stretch food supplies across a country at war, cut sugar to 8oz per person per week. Banned white bread and mandated fortified national wholemeal. Kept butter, dripping, and lard in the ration. Prioritised whole milk for children and expectant mothers. Encouraged backyard allotments. Pushed offal, because it was unrationed. Made oily fish compulsory in school meals. Enforced free orange juice and cod liver oil for pregnant women and children. This was also a decade before industrial seed oils displaced animal fats in the British kitchen, and thirty years before high-fructose corn syrup arrived in the food supply at all. The pantry contained no margarine worth mentioning, no vegetable oil, and no processed breakfast cereal sweetened to within an inch of its life. British children in 1944 had better teeth than any generation before or since. Average height increased. Rickets rates fell. Infant mortality fell. The cohort measured at the end of the war was, by every anthropometric measure the Ministry of Health was taking at the time, the most robust population of British children ever recorded. Then the rationing ended in 1954. The processed food returned. The seed oils arrived through the 60s and 70s. The corn syrup arrived through the 80s. Whole milk was skimmed and its cream sold separately to the food industry. Sugar consumption doubled within ten years. Offal dropped out of the British diet within twenty. Type 2 diabetes, a medical rarity in 1945, became endemic. The government of a country at war had, by accident, fed its children better than any peacetime policy has managed since. The result was sitting in the records. Nobody picked it up.”
Much to agree with
Sadly having seen how Covid was handled I can’t see this outcome. But we do need sensible fuel rationing to ensure our food change delivered and essential staff can get to work. I’m in the South West, and over Easter visitor numbers have been significantly down. People are clearly either already struggling or worried about what is to come.
Yes, indeed. “Free Markets & Unfettered Competition” is literally killing us.
Agreed
“We need rationing, much more progressive taxation to balance enhanced social security payments, and major institutional reform to create resilience as a core element of defence policy to achieve the outcomes we need.”
So in the face of recession we increase taxes.. brilliant idea
So you would rather poverty, whilst having no awareness of multipliers.
“So in the face of recession we increase taxes.. brilliant idea”
Yes in fact it is. Tax money withdrawn from companies, give tax relief for money invested in increasing productivity. Give incentives to companies to be more productive. What is wrong with that.
The major banks now are overwhelmingly focused on property (using created money) and trading . They contribute little to the real economy or to the SMEs on which so much of the economy and employment depend.
Time for a major rethink to get them supporting the wider economy, especially outside the SE where they are now concentrated. Change the terms of their licences and split off trading. And regulate them hard
Much to agree with
What we do need I suggest is Taxation to control ‘excessive consumption’ of certain products and services.
Its been noticeable how quiet the roads are in the evening – the Economics of Driving Around.
What I suggest is needed is for a Government statement that they are looking at how to maintain essential services and supplies in the event of disruption as a result of the fighting in the Gulf.
I suggest as a start this should include reduced speed limits to save fuel and the prohibition on the sale of some ‘high energy’ products such as patio heaters, hot tubs etc
Noted
And I agree – that is a first step to rationing
‘We face shortages of . . . components for many manufacturing processes. The impact will already last for years, given that no immediate end to this conflict is now in sight.’
Absolutely. And worse.
I’ve just finished listening to a fascinating – and spine-chilling – Substack conversation with Robert Pape, Professor of Political Science at the University of Chicago and specialist in several areas utterly relevant to this war.
He points out that a lot of the critical infrastructure damaged or destroyed in this war is so specialised, and built to last for so long (decades, for some things), that spare parts for it are not manufactured, let alone stocked – for example, the oil pipelines and valves that Iran struck (the fittings for these are unique). And, while replacements can be manufactured, the process is enormously complicated and won’t start any time soon because nobody knows when the war will finally end.
Source: <https://thelefthook.substack.com/p/trump-escalates-the-iran-war-crisis?publication_id=2686450&post_id=194716226&r=ot52n&triedRedirect=true>, beginning at 38 minutes.
Agreed
This is my understanding too
Presumably Reeves is chatting to the banks to increase money supply by increasing private sector borrowing. What could possibly go wrong?
Back to your point, Richard… “The time for such neoliberal responses has long passed, yet Rachel Reeves still misses that point. Maybe she’ll never get it. That’s why her career as a politician looks to be decidedly limited now.”
Couldn’t agree more. When you have pieces like Philip Inman’s Guardian article on Saturday past it just highlights how deeply embedded flawed neoliberal dogma is. Certainly Reeves seems to believe it and continues to make decisions that are – at best – seriously flawed if not downright insane (particularly if taken in the context of what might be seem as a traditional Labour Party view). https://www.theguardian.com/business/2026/apr/18/reeves-rightly-fears-the-bond-market-but-she-can-afford-to-ditch-one-unhelpful-rule?CMP=Share_iOSApp_Other
We cannot afford people to be in positions of power / influence that are so hopelessly out of their depth.