Compared to the end of last week, I had a quiet weekend. I had little choice. The antibiotics for post-Covid sinusitis ended, and the sinusitis and the fatigue returned. So I tried to rest. However, some themes emerged over the weekend, albeit not nearly strongly enough.
I wrote these on Twitter:
John Harris had a good article in the Guardian on a not dissimilar theme.
A lot of fuss was made by the Guardian about Gordon Brown saying we needed an emergency budget. The trouble was, he did not say what needed to be in it.
Rachel Reeves didn't either:
Process is not the same as action. Danny Blanchflower noticed:
As he also noted:
He added:
That is the aim.
Stephanie Kelton noted this. As she asked in her substack column (behind a paywall, but recommended):
Her key argument was on interest rates:
Why note all this? Because being a Cassandra feels like being in an uncomfortable place right now. As I also noted on Twitter:
We are heading for a meltdown. You would not know it from the government's actions, and the Opposition is not demanding specific actions from it. Of course I am worried.
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Currently the best source of hope (for action) comes directly from the populace itself in the forms of unions and spontaneous, unaffiliated groups.
Few will have missed the assertive and eloquent delivery of the various union heads over the last months and not simply when voicing the demands of their members but also as they clearly and succinctly teach the public about the flaws in our accepted economic orthodoxy. The format is very different but it reminds me of a century ago when unions would hold free seminars to their membership and relatives. By staying on-message; detailing the most significant issues being faced by working people and suggesting sensible solutions to these problems the unions are proving to be significantly more relevant than many supposed representatives sitting in the HoC.
The non-partisan groups and movements arising from the population (Don’t Pay UK campaign, Best for Britain, etc.) to address the coming economic storm will, I think, prove very potent. In some respects, these campaigns carry even more potential to force the hands of political leaders than the unions. Politicians, like the gods, have feet made of clay. Admittedly, Starmer and most of his shadow cabinet appear to be blissfully unaware of this small matter but the Tories, despite all of their arrogance and elitism, still appear to retain some semblance of political survival instinct. Recent commentary on Novara Media was that when (don’t think there’s much ‘if’ in this situation) Truss takes up the role as PM she will likely announce an emergency budget and keeping in mind that she does not regard the national debt as the major concern that Sunak and many other neoliberals have claimed it to be, she would be well served by giving the proverbial ‘magic money tree’ a damned good shake. Of course, Truss is already proving to be as changeable as British springtime weather on policy so even counting on widely publicised pledges might prove unfounded.
Western governments, economists and voters are all caught in the same deadly trap. We are stuck in a 20th century colonial mindset which seeks to somehow perpetuate the economy of our parents era, even though this is clearly impossible. The emotional power of this retro-economic obsession was clearly demonstrated by the phrase “Take Back Control” used to get Brexit over the line, by dangling the prospect that we could somehow turn back the clock to a time when Britain’s economy ruled the World.
The truth is far more stark. For decades G20 countries have been living beyond our means (consuming far more than we produce). Till very recently 1 billion people in Europe, North America and Japan consumed most of the planets resources (energy, food, materials, and labour) whist the rest of the World lived in relative poverty. This situation was never sustainable, but we might have expected it to unwind more slowly. Instead two Global crises have suddenly squeezed supply in the Global economy (the bounce back from Covid, and an unexpected war in Ukraine) which has now compressed 20 years of future adjustment into 6 months.
Economists and politicians are both clueless because they refuse to see the reality of the UK in a new Global economy, where resources must be shared more equitably.
The good news is there are things we can do. The bad news is that we must now do them very quickly, or have the change forced on us by recession and widespread poverty to shrink UK consumption in line with the new Global economy.
1) Invest in energy efficiency and renewablews to make the UK self sufficient in energy. (We can no longer afford to import oil from Saudi Arabia and gas from Norway)
2) Change our diet and create new economic models to grow much more of our food in the UK. Basic income would help this transition as most UK food production was killed off by high labour costs. Community cooperative farms and new technologies such as growing under led lighting outside the summer season could help.
3) Learn to consume a lot less. Realistically we cannot rebuild a manufacturing base in UK (which used to export all over the World). Instead we will have to pay for manufactured imports by creating exports in high value services (including financial services) and new technology such as bio sciences, renewable energy, and Global entertainment.
Adjusting to our new place in the Global economy will be painful. But the pain can be managed. We must start by abandoning delusions of a return to a colonial economy which was built on exploitation of others and selfish over-consumption of the Worlds scarce resources.
Absent a plan, of course this future will be forced on us anyway. As China and India begin to claim their rightful share of Global resources, imports to the UK will simply become unaffordable, as we are seeing now, and poverty will become the new normal for most of the UK.
Robert P Bruce’s comment reminded me of two worrying “bits of stuff” I have stored away.
Firstly, Earth Overshoot Day was 28 July this year. Every renewable resource we consume between then and the end of 2022 is building up an overdraft, as we use up next year’s bounty. Apparently we worry about the money “debt” but not about the resources debt.
Secondly, the head of the Brexit economists, Patrick Minford, wrote a whole paper on the projections for the UK’s economy after Leaving. No manufacturing industry, no agricultural industry, just a service industry: financial services, hospitality, personal services. So here we go, then.
Cassandra’s problem wasn’t about speaking gloom and doom, nor even that she wasn’t believed. No, Cassandra’s fate was to know that the weight she carried was **the truth**.
Quite so
‘We are heading for a meltdown’
If there are too many more attacks, accidental or otherwise, on the Zaporizhzhia nuclear power station we may well be in meltdown possibly triggering a flood of refugees across Europe coupled with a new crisis of a type only just supressed in 1986. ‘It’s not 3 Roentgen it’s 15000’.
There can only have been in my opinion a huge transference of blame onto those facing difficulty by those who who can cope.
After all, the market cannot be wrong can it?! Oh no!
Not so much ‘Atlas shrugged’, as ‘Atlas turned his away and wallowed in his superiority’ instead.
The obvious sentiment from Tories is that if people can’t afford these rises it is their fault for not working hard enough or making the wrong decisions.
But how else can you kid yourself that you are not responsible?
Both Truss and Sunak have been having a go at benefit claimants. The people *least* able to handle the fuel price rises and inflation. This tells me that whoever gets the top job, they will ensure that claimants – including pensioners for a second year running – will NOT get the full increase based on September’s inflation rate. Maybe a quarter to a third? And that rate, like last years’, will be way out of date by January ’23.
My gas and elec will go from 8.7% of income (after housing costs) before April ’21 to 28% of income by January. The rate of inflation i am experiencing on my strictly food and household essentials shopping is around 17%.
I stuffed my oldstyle prepay meters to the max in March (thanks for that advice to Martin Lewis) so have been using at pre increase prices. I do my utmost to be extremely financially disciplined, so there’s no ‘lifestyle’, just squirreling away every last £ ready for when i have to take the fuel hit. Over 18 weeks in and neither meter is even halfway down. I calculate they could last until christmas/new year at this rate. I will have every penny the gov is handing out (and quite a bit more) on standby to cope.
Most people on very low incomes – especially families – were already in no position to do what i did. Sunak and Truss’s (probable) plans are unconscionable. The gov appears to be making intense efforts to vastly *increase* inequality in everything they do!
Good luck
@ Carole
I hate to be the bearer of bad news but you have not saved yourself a penny by pre-loading your pre-payment (PP) meters. In fact, you are getting yourself into debt, possibly quite serious debt if you carry on till your ‘credit’ runs out.
Many people, Martin Lewis included, labour under the misapprehension that what your PP meter tells you on its display at any given time is factually present and correct. It rarely is. It is an indication only, for many reasons, and not legally binding.
Why is this?
By law, all power companies must provide their PP meter users with a statement bill once a year. It is this bill that is factually present and correct NOT the pre-payment meter.
This annual statement will include any price changes just like a normal bill. So you can wallop on as much credit as you can muster on to your PP meter prior to price increases, but you will still be charged at the new prices, via that annual bill. All you’ve actually done is handed over in one fell swoop a wodge of cash you can ill afford for the privilege of saving not one penny off your bill… and getting into debt with your power company to boot! You are NOT buying leccy/gas in advance at the old prices. You are simply loading it with credit for future use; not the same thing at all.
If you don’t believe me, then do the following. Make a note of the date, time, your meter readings, what your meter is charging you per KWH and the standing charge, plus whatever credit your meter ‘says’ you have.
Immediately afterwards, ring your power company, give them your readings and request an up-to-date bill/s to be sent out ASAP. It is your legal right to demand an up-to-date bill at any time from your power company.
When your bill/s turn up (probably a couple of weeks’ later), compare what credit you noted down with what your up-to-date bill says it is (both your notes and the bill will have the same end date.) I can 100% predict that your credit will be a lot less than what your meter stated, and what you’ve been erroneously led to believe it is.
Here’s why. With old style PP meters when there are any price changes, those price changes will only register on the PP meter from the day of the price changes the next time you insert your key to download credit. If you insert your key on the day of the price change it will change the display to show the new prices, and you will be bang up to date on being charged the new prices. Insert it a week/month/6 months after the price changes, and your meter would’ve continued to display the old prices during this time, and deducting those old prices from your credit, giving you a false impression of how much credit you actually have.
BUT… and here’s the rub…. You will still be charged with the new price on your annual statement bill. When the power company catches up with you, If you do not pay the difference separately, the power company will simply place that debt on your PP meter to be paid weekly. If you’re on benefits, the max they can deduct is currently £3.70 pw, but I’ve know those in work (not particularly well payed work either) being charged £16+ pw. So if you normally insert £10 a week, you’ll now have to insert between £13.70 pw – £26+ pw for the same electricity usage, until the debt is cleared.
You stated that you expect your credit to last you until Christmas. That’s only going to compound the debt you are building up, as there’s going to more increases from 1st October, plus your usage will increase as autumn/winter sets in.
You will also have gotten out of the habit of budgeting for small but often credit top –ups, and it will come as a shock to start doing that again when your credit runs out. Also, and this is only human nature, you may well be using more leccy/gas than normal PRECISELY because you haven’t been toping-up regularly since March. Toping-up regularly forces you to keep the eye on the ball. That’s one of the main functions of a PP meter, after all.
All in all, that advice by Martin Lewis for PP meter users was wrong on so many levels that I don’t know where to begin. I’m sure it was well-meaning, but he should’ve done a bit more research before coming out with such damaging advice.
I have no idea how much leccy you use or what power company you’re with. But assuming you are a low-user of say 4kwhs average per day, then between 1st April- 8th August inclusive (130 days), you’ve accrued a debt of approximately £40 on leccy plus £32 on the Standing Charge (SC.) If you use less, then your debt will be less for the leccy, but not the SC. If you use more than 4KWH per day, then it will obviously increase. I don’t have the figures for gas to hand, but the gas standing Charges barely changed, whereas leccy S/Cs near doubled. Assuming you use 6kwhs of gas (approx. half a cubic meter summer usage) per day average, with an increase of 3p per gas kwh (my increase), then you’ve accrued approx. £23 debt on your gas. So, I estimate about £100 debt in total to date. Obviously, you will have to do your own calculations to work out precisely how much debt you have accrued to date. My figures apply to me and my usage, IF I’d pre-loaded my PP meters in March, which I didn’t. I included them to give you an idea of what debt you are probably accruing IF you are a low user like me.
My advice to you is to bite the bullet, load up your leccy/gas key/card with the minimum your power company allows and insert it ASAP. Make a note of what your meter is charging you before you insert your minimum payment, and make a note of what it’s charging you after inserting. Most meters will register the new prices immediately, but some require up to 3 insertions on consecutive days to display the new charges. At least this way you’ll stop that debt before it spirals out of control, which it will do if you carry on as you are till Christmas. Fortunately, all this has happened during late spring/summer months when both leccy and gas usage tend to be lower. It could be so much worse if all this advice to pre-load PP meters had happened prior to last October’s increase…. With winter usage!!!!! AAARGHHH!
How do I know all this? I’ve been fighting power companies since 2010, on and off when required, on a voluntary basis, on behalf of the tenants on my estate. I’ve managed to claw back over £36,000 in rebates for all sorts of reasons. I know more about PP meters, and how they operate, than the power company’s customer service personnel; I’ve often had to educate them when fighting on behalf of a customer. That’s not a boast, it’s a fact.
P.S. I predict that the S/C for leccy will barely shift from 1st Oct, but the S/C for gas will near double this time round.
Thank you
Richard
Surprisingly, Gordon Brown made an appearance at the Edinburgh Fringe last week, and outwith the pressure of either the office of Chancellor or PM he was able to give a much more charismatic and personal reflection on where we were and where we are now – and where we need to be. So, so interesting.
https://podcasts.apple.com/gb/podcast/the-political-party/id595312938?i=1000575384930
As with Major, it is so frustrating that it feels that the era of serious and honest politicians, rather than grifters, is behind us. Unless some new selfless, rather than self serving, politicians emerge we are in deep, deep trouble.
Hi Richard, sorry to bother you because I know you are really busy. I normally read all your posts through my email account but I haven’t had any through since Sunday 24 July. Are you still using this method to disseminate your blog? Many thanks and keep up the good work. I have learned so much about economics and politics since following your blog, and I am trying to educate those around me.
Hi
The Google mail you get is coming to an end
Might you re-register on the new system that is now available on the blog? The box is on the right hand side
Thanks
Richard