When Keir Starmer delivered his final speech outside Downing Street, he claimed to be going with “good grace and a smile”. This claim might not withstand too much examination, but we can probably all agree to accept it with “good grace and a smile”. Our sixth prime minister in the last 10 years also claimed to be leaving the country “stronger and fairer” than it was two years ago. Since that claim will be relevant to what comes next, this is an assertion we might want to subject to more rigorous scrutiny.
Having been born and raised in England before spending over four decades living and working in Africa, I will confess the British attitude towards home ownership has always been somewhat baffling.
As a native who went substantially native, I do find myself ‘Watching the English’ in a manner not dissimilar to the social anthropologist Kate Fox in her wildly entertaining and entirely convincing 2004 book. One of the many things I find fascinating about ‘the English’ is just how much we appear to measure our sense of financial wellbeing based on the perceived state of the housing market. For those of us lucky enough to have clambered onto the housing ladder, there is an undeniable link between the value of our house and our nominal net worth. The logic follows that in a rising housing market we are technically wealthier than we would be if the reported value of our property were falling.
But in order to unlock the fungible value of that increase we have to sell that property and, in so doing, subject ourselves to that same rising tide as buyers. Either we buy less and smaller and trouser the balance, or we buy like for like and derive no liquid benefit from the sale. All of which appears to make that rising market mostly irrelevant to our day-to-day financial health.
The first thing people stop buying is sandwiches
Having relocated my young family to the UK in 2005, I invested in a small pâtisserie in a tree-lined area in the south of England. When the financial crisis roiled the local and global economy in 2008, it very much appeared that the first thing people stopped buying was their lunchtime Ham & Cheese. Had I not still been working as an economic migrant in Southern Africa, that sudden unwillingness to indulge in the small luxuries might have bankrupted our family. Sadly, it did lead to the end of our time selling French fancies and crispy fresh bread.
Happily, our return to ‘the family business’ of Fish & Chips in North Yorkshire has been less fraught but, even now, with every economic ripple, international shock or political uncertainty, we see people hesitate before they indulge in that traditional family favourite.
While the latest political crisis, global horror story or economic problem might not directly or immediately change the amount or value of the money in people’s pockets, they still change their behaviour and outlook directly and immediately.
In a vibe-based economy, people can’t help but react to the vibes
Whether it’s the theoretical value of their house (or the clearly linked and seemingly relentlessly rising cost of their rent), the cost of a cup of coffee or the price of Friday night tea, people cannot help but act and react to the intangible and almost entirely unmeasurable vibe. Perhaps that is why a 6am pint and 16 quid breakfast at the airport is something we buy without a second thought, because we’re trapped in the liminal space and deep in the holiday vibe.
All of which makes it extremely difficult to reconcile the ‘technical’ improvements that may or may not have been made to our economy in the last two years with the ‘tangible’ feelings we get when deciding if we can afford a fresh loaf, an extra sausage, or rent.
According to the House of Commons Library, most of the technical indicators for our economic situation are relatively good. GDP is up 0.6% in the last three months, productivity in Q1 was up 0.9%, inflation is holding at a relatively low 2.6%, earnings are above inflation by 0.3% and (great news!) house prices are up 2.7% in the year to April.
Thus, we can conclude that, while Starmer might have been holding onto his state of grace with whitening knuckles, and smiling through clenched teeth, it would appear his assertion that he leaves us better than he found us is true … for a given calculation of true.
Inflation, real and otherwise
According to the UK Office for National Statistics (ONS), it uses a large and constantly evolving basket of goods and services to calculate overall inflation. It’s a substantial list that includes food and drink, goods and services, and a whole range of things that might catch our eye and drain our accounts in any given financial moment. Many things on that list – such as rent and rates and food and basic services – are unavoidable. Other things – such as new clothes and furniture, eating out and entertainment – we can simply choose not to spend our money on or, increasingly, simply not have the disposable income for that to even be a choice.
Unless the use and productivity of allotments has increased exponentially, the one place where all of us have little or no choice, and where we might most feel the tangible truth of the economy, is food. According to the latest reports, as the world has slowly evolved to meet the shocks of an aggressive war of occupation in one of Europe’s most important breadbaskets and a senseless war of distraction on the all-important oil price, food price inflation is also down … for now.
But more anecdotally, I can tell you that when I first bought my chip shop in June 2014, the price of a box of haddock was £95. That same box is now £250 and rising. I can’t tell you how much cod is, since we stopped buying it when it became too expensive for us to be able to sell even at a break-even price. While I don’t have the exact numbers, I can confidently say my menu price is something in the order of 100% more than it was in 2014, while my end-of-year income is about 10% less than when we bought the business.
So, for all the technical improvements in the economy, I have yet to feel any tangible effect on my personal bottom line or, more accurately, a tangible positive effect.
Speed up, or else …
In the wake of Andy Burnham’s recent entry into Larry the cat’s house, Angela Rayner warned her party that they need to speed up delivery or face the electoral consequences. Even after two years of incremental improvements in the technical numbers, it’s hard to argue with that logic in a tangible way.
Caps on the price of bus rides, the scrapping of the already small amount of VAT on electricity, and changes to rates for at least some struggling sectors might seem like noodling around the edges of the ongoing cost-of-living crisis. But they do at least seem to be attempts to make a tangible difference in ways that people might actually feel.
More importantly, they signal a desire to shift the vibe and the narrative away from one of perceived decline (managed and otherwise) to one of cautious optimism and the belief that, while it is clearly not the only option, things might actually get better.
There is, of course, no universal panacea and this might all be little more than placebo. But as we have already established, sometimes the willingness to spend is at least as important as the ability to spend. Perhaps a better vibe might actually create enough economic momentum to translate into a better reality for those 13.4 million people in our country living in absolute poverty.
I was no fan of our smiling and graceful former prime minister and, with reports already coming in about our airfields being used to bomb Iran, I have many reasons to feel deeply distrustful of the latest, unmandated occupant of Larry’s house. But if Burnham is able to speed up delivery and, more crucially, our experience of that delivery, I will give credit where it is due.
I don’t really care what the nominal value of my house might be, at least not nearly as much as I care about my ability to stock the kitchen cupboard with affordable biscuits. Biscuits: they are properly tangible.
More from Paul Rowlston
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