So, Liz Truss and Rishi Sunak finally talked about something other than tax cuts. I want to be generous and say that both did try to answer questions posed at the hustings in Darlington this week about the cost-of-living crisis. But let’s be honest, they didn’t.
Truss ducked the question and suggested that “some of the media” are trying to “talk our country down” and then dug herself a hole by suggesting that the host journalist Tom Newton Dunn was framing questions in a “left-wing way”. In contrast, Sunak did say “what we need to do is target our support for the most vulnerable”, but he failed to mention that in fact at least half the country is vulnerable. So good luck with that.
Cost-of-living tsunami
More than anything it exposes how little they understand, or possibly even care, about the cost-of-living tsunami that is about to hit this country. The rest of the Cabinet are complicit – caught like rabbits in a headlight with the race to the bottom that this leadership contest has become.
So just how bad is it? And what is this tsunami?
Uswitch, a comparison website for home services, suggests that household energy debt is at an all-time high, nearly three times higher than it was in September last year. Drawing on research conducted online by Opinium from 19 to 22 July 2022, Uswitch estimate that six million households owe an average £206 to providers with a further eight million households having no credit balances at all.
Justina Miltienyte, head of policy at Uswitch, said:
“Our data shows that while a similar proportion of people are in debt as in April – people now owe approximately 10% more than just four months ago to their energy suppliers. This is an alarming situation, as summer is traditionally a time when households are using less power for heating, which helps bill payers to build up energy credit ahead of the winter.”
But it gets worse.
Energy price caps set to rise further
On 26 August the energy regulator Ofgem will announce the new price cap due to come into force on 1 October. When Ofgem reviewed pricing in April it resulted in a price increase of 54%.
MoneySavingExpert is predicting a rise of up to 70% – based on the latest prediction (as of 2 August) from analysts at Cornwall Insight. They estimate that households will be paying £3,359 a year on typical use and that this will rise to £4,266 a year for the three months to March 2023.
To put it into perspective, a state pensioner with no other financial means will be facing the prospect of seeing 50% of their income going on gas and electricity.
So bad is it, that some places are now thinking of not just having food banks but warm banks – places for people to go to give them some respite from freezing.
On 11 July Martin Lewis tweeted:
Bristol and Aberdeen already have warm bank measures in place. Other cities will follow. The Hull Food Inequality Alliance has drawn up an emergency community food aid plan for the city to try and maximize the help that will be needed this winter.
Fuel poverty
Fuel poverty has traditionally been defined as when energy costs exceed 10% of a household’s net income. According to the Child Poverty Action Group, in the financial year 2019–2020 just under 20% of households were in that category; by January 2023 over half of households in the UK (15 million) will be in fuel poverty. Their research shows this is not evenly spread, ranging from 47.5% in London to 71.7% in Northern Ireland. It will soon affect nearly 90% of single parents with two children or more.
Factor all this in with the general cost-of-living rises.
Inflation is expected to rise further and peak at just over 13% at the back end of this year (much higher than forecast in May) according to the Bank of England. We will be experiencing both a recession and high inflation. This means that by next spring, prices could be rising even faster.
But it won’t affect all of us in the same way.
City of London professionals such as lawyers and bankers received double-digit wage rises in the last year, while people on the lowest incomes were paid annual increases of just 1%. With inflation at 9.4%, this means they are losing out big time. The Centre for Economics and Business Research describe it as “tale of two labour markets” where the “highest earners now enjoy annual pay growth of 10%, while lowest earners see just a 1% rise”.
The latest Labour Force Survey estimates for March to May 2022 showed that growth in employees’ average total pay in real terms (adjusted for inflation) over the year fell by 0.9%. Regular pay (excluding any bonuses) fell by 2.8%.
Gordon Brown tries to awaken the zombie government
The response from Number 10 is nothing short of shameful.
“By convention it is not for this prime minister to make major fiscal interventions during this period,” said Downing Street. “It will be for a future prime minister.”
Labour have been saying for months that an emergency budget and a windfall tax is needed. But more is needed from them, as Shadow Education Secretary Bridget Philiipson said on Sky News yesterday.
It’s been left to former prime minister Gordon Brown to lead the charge on the government. He told Sky News he was seeing poverty in his hometown in Fife, “that I did not expect to see ever again in my lifetime”. On Wednesday he called for the energy price cap to be scrapped, writing in the Guardian that “time and tide wait for no one. Neither do crises”.
Brown is right. This is an emergency, and we need emergency measures to address it. The woeful lack of acknowledgement, never mind action, from this government and those wishing to lead it, tells you all you need to know. Anyone with any sense of justice or care for their communities should not be giving this shower the time of day.
