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The cost of living crisis is getting worse by the day and we have a government that is akin to a rabbit caught in the headlights . It just doesn ' t know what to do or when to do it . There is a little room for manoeuvre , however . It is probably going to do a windfall tax on the energy companies but , to be frank , this will be of very limited help . To cut taxes such as VAT is too broad a measure ; it would help everyone a little , whereas properly targeted relief is needed . It could give extra money in benefits and a short term rise is easily affordable .
What is not affordable politically , is the removing of this when the crisis is over . The Chancellor was badly burned politically when he gave Universal Credit claimants a £ 20 a week bonus during the pandemic . No one gave him credit for giving this unprecedented bonus but he was damned by everyone when he took it away again . There will be much resistance to doing this again . We have a prime minister who is obsessed with being liked and this bonus paid no political dividend for the government at all . All in all , you can expect little help from the government this time around .
What is causing this crisis ?
The first thing that has to be acknowledged is that this is happening everywhere , at least to some extent . The Ukraine war is a major problem and looks like it won ’ t end soon . This has disrupted supply chains for everything , from grain to energy . If you ’ re feeling a bit down about your lot at the moment , spare a thought for the people of the Ukraine itself , thousands of whom have been murdered by the demented tyrant Putin . Also spare a thought for the two thirds of the global population who barely have enough to eat as it is , many of whom will now face starvation . If you ’ re worried about the refugee problem , then expect much worse to come on that front .
The cost of living crisis was well underway before this war started . Ironically , the main reason globally for this is that the world ’ s economy bounced back faster than expected after the pandemic , and we just were not ready . Add to that governments , especially ours , spent vast sums on protecting the economy ( and only some of it wisely ) and now there is nothing left in the kitty to deal with this crisis .
For the UK there are far worse problems to come . For those who voted to “ take back control ,” that statement now looks utterly ridiculous . You may remember that the big advantage Brexiters were sold is that we could take back control of our trading relationships . We were once again going to be a global trading nation , free to trade with whomever we like and on the terms we like . Has that happened ?
72 trading relationships have been set up around the world and all but two of them are controlled by the EU . As and when the EU decides to change those relationships , ours will change too and we will have absolutely influence over that . The only free trade agreements your Brexit crazy government has come up with are with Australia and New Zealand , which are not expected to add more that 0.01 % to growth . The government ’ s own statisticians accept that our economy has grown and will only grow for a generation at about 4 % below what it would have done .
Thousands of small businesses have given up their exports to the EU because the new rules have been badly thought through and badly implemented . You only have to look at the queues on the M2 to see how awful the situation is . Sadly , this may well get very much worse .
The problem of Northern Ireland is enormous . Our government made commitments to its largest trading partner , the EU , then within six weeks of signing the agreement , has tried to renege on them . In short , Boris Johnson has shown that he is not a man of his word and that his entire government is dishonest on this issue . The EU is threatening a trade war which , if that threat is carried out , will be disastrous . That isn ’ t all . It is entirely possible that the US may side with the EU on this . If that happens , a very severe recession , if not a depression , looms .
We can hope that common sense prevails , but it isn ’ t looking likely just now . We used to talk about going back to the dark days of the ' 70s with high inflation and poor industrial relations . That now looks like the best option .
Finally , a very sobering thought ...
There is hope that the current rate of inflation ( 9 %) will fall next year . All well and good . But that doesn ’ t mean that prices go back down again . It means that they stop increasing at the same rate . International pressures and the pandemic have doubtless affected us severely , as it has with the entire world . But , it is fair to make comparisons with other developed economies . In the G7 nations we are the worst performing of all . In the G20 we are second to bottom . Only Russia is performing worse . Russia can blame its plight on economic sanctions . We can too , only ours were imposed by us on ourselves .
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