Heroes: British Exceptionalism is our Weakness 

 

‘And I can see there’s something wrong with you 

But what do you expect me to do?’ 

 

Until you admit you have problems you can’t begin to overcome them. 

 
Brexit is just the latest example of our global delusions. Government is there to serve the people, not just the one’s it chooses to. This is why the current government isn’t fit for purpose.  

Yet again the government’s priorities prove that they govern based on exclusion rather than inclusion. To support this assertion we have Grant Shapps’ suggestion that it is unlikely the government will step in to protect households from rising energy bills this winter. This is in spite of analysts and energy firms saying high energy bills are here to stay for the coming winter. 

Rather than helping those in need, the energy secretary told the Times that once inflation had fallen the government would ‘absolutely‘ need to cut taxes. Perhaps he meant ‘if inflation falls?’ 

Shapps said: ‘We don’t want to be in a position … of having to constantly pay energy bills. We’re having to tax people in order to pay it back to people … that money doesn’t come from nowhere.’ 

Surprisingly, Shapps made one correct statement; money doesn’t come from nowhere. It comes from taxpayers and is effectively allocated by the government via the treasury. What Shapps is saying is simple; the governments priority is tax cuts that primarily benefit high earners, rather than helping poorer people pay their heating bills. 

This seems to apply to law and order too; you are 23 times more likely to be prosecuted for benefit fraud than tax fraud, even though the latter costs the economy nine times more. ⁽¹⁾ 

In a clear attempt to the appeal to the lowest common denominator within the electorate, the government is considering  mandatory prison sentences as a solution to persistent shoplifting, despite the fact that shoplifting is indelibly linked to poverty.  
 

‘you are 23 times more likely to be prosecuted for benefit fraud than tax fraud, even though the latter costs the economy nine times more’

 
Last year, even the new chief inspector of constabulary declared that officers should use ‘discretion‘ in prosecuting those who steal so they can eat, adding that ‘whenever you see an increase in the cost of living or whenever you see more people dropping into poverty, I think you’ll invariably see a rise in crime.’ Shoplifting has more than doubled in the last six years, reaching 8m. 

As I have written before Britian is a poor country with some wealthy people. According to the Trussell Trust: 
 

• One in seven Britons, 11.3 million people, experienced hunger last year because they lacked enough money.  
• The richest fifth need only spend 11% of their disposable income if they seek to meet the cost of a government recommended healthy diet, the poorest fifth have to spend 50% .  

 
As a result, millions are skipping meals and schoolchildren steal food from their peers, while nurses have to resort to food banks.  

If there is a crime here, it is committed by the government’s failure to look after its citizens. 

Mussolini, my mother, would applaud such policies, but she isn’t any sort of benchmark. Yesterday she told me she thought of countries such as Spain and Italy as being poor! 

Interestingly, whilst our government claims that it’s winning the fight against inflation, Spain where inflation has just fallen to their 2% target, clearly is. Why? 

The Spanish government took quicker, more concerted action than ours did. Spain capped energy prices by more than the UK, lowered the cost of public transport, taxed excess profits and put in place limits on how much landlords can raise rents. Yes, there were costs, but not as disastrous as our recessionary policies. 
 

‘If there is a crime here, it is committed by the government’s failure to look after its citizens’

 
Twelve months ago, the Institute for Public Policy Research argued for a similar approach in the UK, I.E., using fiscal policy to reduce prices directly. Yes, the government did introduce energy price support measures, however, in Spain energy price caps are set to continue into next year, whereas we have already lowered ours, covering fewer businesses than previously, and all support is due to end in the autumn. 

Pubs, restaurants and other businesses have had to bear the full brunt of continually high electricity costs since the spring. With the expectation of another energy price spike this winter, households and businesses will currently be unprotected from another price shock. 

The onus is now solely on the BofE to stabilise UK inflation. The theory is that inflation is now driven by too much money chasing too few goods. This is total rubbish; it is ‘pass the parcel‘ inflation, the result of businesses and people trying to pass on higher costs to others, if they can. The Bank’s own analysis partly confirmed this, finding that about 75% of inflation stemmed from people passing on high energy and food prices at the end of 2022. 
 

‘it is ‘pass the parcel‘ inflation, the result of businesses and people trying to pass on higher costs to others’

 
Within this there is the typical UK inequality, who is able to ‘pass the parcel’ on inflation. The Bank  recently highlighted that wage growth was ‘concentrated in higher-paying sectors such as financial and business services’ while ‘pay growth in lower-paid sectors like wholesaling, retailing, hotels and restaurants had been broadly flat‘. 

As the above illustrates there is an ongoing focus on wages, with too little attention being paid to the role of businesses in keeping price pressures up by ‘passing the parcel’. Also, many landlords have been increasing their rents in-line with inflation, something that the temporary rent control policy in Spain contained. If the costs of inflation were fairly shared, businesses and landlords would also take a hit and absorb some of the costs, rather than workers taking most of the hit. 

The Bank’s only tool is interest rates, which impacts those with least, be they families or businesses. Insolvencies are running at 40% higher than a year ago. The fatal combination of rising prices and higher borrowing costs has inescapably hit consumer spending. 
 

‘The fatal combination of rising prices and higher borrowing costs has inescapably hit consumer spending’

 
In the medium term, we are facing both an economic and a political race against time. The Bank’s hawkish tone means that there may be no early cut in rates, even if inflation declines. 

Unfortunately, this is all too typical of UK government; too little, too late, and favouring rentiers over the majority. Just another example of their policies of exclusion rather than inclusion. 

On the other side of the Atlantic things are very different, as the US economy is growing more quickly than expected.  

US inflation fell to 3% in June, down from over 9% last year, and close to the Fed’s goal of 2%. As inflation has subsided, real wages, I.E., what wages will buy, have finally risen. As a result economic growth has accelerated, as consumers expect the economy to continue to do well. 

In the UK there is the distinct possibility of a recession, the so-called crash landing, due in large part to the BoE’s rate increases slowing the economy, stop wage growth and cause higher unemployment. Whilst the Fed acted in the same way as the BoE, their actions are being offset by ‘Bidenomics’’;  massive public investments in infrastructure, semiconductors, wind and solar energy, and manufacturing. 
 

‘In the UK there is the distinct possibility of a recession’

 
In addition, the Biden administration has also tough antitrust enforcement, a pro-labour National Labor Relations Board, and strict limits on Chinese imports. 

The overall impact of these policies is a change to the structure of the American economy in favour of the bottom 90%. In short, they are tackling income inequality, 

As we know all too well a restructuring of this nature is difficult to achieve for the simple reason that the monied interests don’t want it. As in the UK, right-wing Republicans, who represent the monied interests have championed supply-side economics, including tax cuts that benefitted mainly the rich and large corporations. 

These tax cuts increased the federal debt, fuelled giant profits in the biggest firms and financial institutions, and stoked a surge in billionaire wealth but did nothing for average working people. The much vaunted trickle down effect was just an illusion. 

When Democrats were in office, the monied interests used neoliberalism, calling for deregulation, privatisation, free trade and the domination of finance over the economy. 

The result was similar to that of supply-side economics: wealth surged to the top, but average working people remained stuck in the mud. 

In contrast, the Biden administration is focused on altering the structure of the economy. 

Over the past year: 
 

• Manufacturing construction in hi-tech electronics, which the administration has subsidized through Chips and the Inflation Reduction Act, has quadrupled. 

• Tens of billions in infrastructure spending has been funnelled to the states for road, water system and internet upgrades. 
• More clean-energy manufacturing facilities have been announced in the last year than in the previous seven combined. 

 
To succeed these investments must translate into high-paying jobs, which often require unions. Something Biden clearly understands; ‘When I think climate, I think jobs … union workers are the best workers in the world.’  
 

‘This could be a template to make the economy both stronger and fairer in years to come’

 
If Bidenomics continues to alter the structure of the economy in ways that help the vast majority, voters will give Biden another term and reward Democrats with both houses of Congress. 

This is what Labour should be learning from, not reheated, failed, tired policies flogged to death by recurring Tory governments. This could be a template to make the economy both stronger and fairer in years to come. 

I thought we could call it ‘levelling-up!’ 
 

‘Before the risin’ sun, we fly 

So many roads to choose 

We’ll start out walkin’ and learn to run’ 

 
 
Notes: 
 

1. https://www.theguardian.com/commentisfree/2023/aug/03/shoplifting-crime-poverty-prisons-tories-law-and-order 

 
 
A hard hitting piece from Philip as he looks at the reality behind the spin; Sunak’s slogans and gaudy baubles have rarely stood up to anything approaching close scrutiny, but delivered in his cringemaking ‘briefcase wanker’ style, what we are currently being fed is particularly thin gruel.

‘Stubborn’ inflation, higher for longer energy bills, hiked mortgage payments and the life throttled out of the economy by the one-trick-ponies at at the BoE.

And who’s suffering the most? The have-nots.

Surely that’s meat and drink to a ‘socialist’ party? The opportunity to redouble its support for the working class, and rekindle our manufacturing sector by investing in clean energy technology.

But apparently not; Labour’s light-blue leader has apparently cooled on tackling the climate emergency, leaving the Daily Mail’s ‘eco-zealots’ (sic) as the only choice for those dissenting against Shapps/Fox/Stockheath/Green’s ecocidal decision to give fossil fuel companies a golden ticket in return for some token gestures in the direction of renewables.

For those unfamiliar with Jonathan Pie, this is what he thinks about Sunak’s green credentials – even though his daughters recycle:
 

 
@coldwarsteve
 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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