THE supreme inadequacy of the Boris Johnson administration’s response to the UK cost-of-living crisis becomes ever plainer by the day.
And that is a noteworthy thing, given the UK Government’s miserable failure on this front has been grimly evident for a while.
Senior members of the Conservative Government appear unable to grasp the scale of a crisis affecting many millions of people in the UK. Or, if they are aware of it, they are remarkably indifferent to the huge pressures facing households, perhaps because of a general inability to comprehend the everyday financial realities for ordinary people.
The latest official UK inflation figures, published last week, made for dismal reading. Annual UK consumer prices index inflation surged from 6.2 per cent in February to a fresh 30-year high of 7% in March. On the old all-items retail prices index measure, annual inflation leapt from 8.2% to 9%.
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These are eye-watering numbers.
And they present huge problems for households. They also create significant difficulties for many businesses (although some employers will be able to afford proper cost-of-living-related pay increases, particularly those that are pushing through price hikes).
With millions of households under huge pressure following two years of the coronavirus pandemic, and with many still not having recovered from the global financial crisis towards the end of the first decade of the new millennium, it is more important than ever that employers do what they can on the pay front for staff.
What is possible will vary on a case-by-case basis, and employees will have a sense of the position. They are unlikely to take kindly to being denied proper pay increases if they see their employers delivering big rises in profits while declaring they are unable to afford cost-of-living rises.
In recent weeks, we have seen a raft of votes for strikes and other industrial action over pay.
It was interesting to see trade union Unite flag RPI as the “true rate of inflation” on Wednesday, when it announced there had been an “86% yes vote in favour of strike action” among its members working for pharmaceuticals giant GlaxoSmithKline in the UK.
Unite referred to GSK’s pay rise offer of 2.75% as “derisory”, declaring it represented “a substantial real-terms pay cut for the workforce, with the true rate of inflation (RPI) currently standing at 9%”.
The union said on Wednesday that GSK “now has a short 48-hour window of opportunity to make a much-improved offer or strike action will be announced”.
Sharon Graham, general secretary of Unite, said: “Never before have our members at GSK voted for strike action.”
Referring to GSK’s multi-billion-pound profits, she added: “GSK...expects its workforce to swallow a pay cut in the midst of a cost-of-living crisis. As the strength of our members’ vote shows, this is simply not acceptable – I’m backing Unite members and their demand that GSK thinks again. Unite members have their union’s total support in their pursuit of a fair deal.”
In February last year, annual CPI inflation was 0.4%. At that stage, a 2.75% pay increase might have looked quite generous.
However, it is significantly less than one-third of the annual RPI inflation rate for March. And the latest annual CPI inflation reading is more than two-and-a-half times the pay increase offered by GSK.
The official inflation figures have delivered one sapping upside surprise after another for months now. And there is worse to come.
Annual CPI inflation is forecast by the Bank of England to hit 8% this quarter, and the Old Lady of Threadneedle Street has warned it could rise even further later this year.
Amid perfectly justified dire warnings about surges in fuel and food poverty, companies face a difficult balancing act on pay. It should go without saying that food and fuel poverty is unacceptable in a developed economy but it is prevalent in the UK. The balancing act will of course be most difficult for businesses of all sizes which genuinely cannot afford pay increases which get close to the rate of inflation.
Amid the cost-of-living crisis, as millions of households and many businesses worry about what coming months will bring, senior members of the Johnson administration seem alarmingly unperturbed.
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There is a huge gulf between the £693 per year or 54% hike in the energy price cap for a typical dual fuel customer, which was announced in February and took effect on April 1, and the relatively modest support announced by the Government on this front.
This support was trumpeted loudly by Chancellor Rishi Sunak. However, it should be an embarrassment to the Conservative Government. That said, it seems current Cabinet members do not get embarrassed about much, if anything.
The UK Government support amounts to £150 for households qualifying for the council tax reduction measure. There is a £200 “discount” but this has to be paid back over five years, is therefore surely a loan and should not be counted as assistance. And the extension of eligibility for the £140 a year warm home discount (which is rising to £150 for next winter) amounts to a hill of beans.
It has been left to others to highlight the scale of the electricity and gas price crisis facing households. Consumers have also been hit by a surge in prices for a huge range of other items and a staggering rise in the cost of petrol.
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Keith Anderson, chief executive of ScottishPower, warned on Tuesday that the energy price situation was going to “get truly horrific” for the most vulnerable and poorest households.
Touching on the regulatory regime, which has a higher price cap for prepayment meter customers, Mr Anderson said: “Right now people on a prepayment meter pay more and that is perverse and a social tariff should be brought in to discount the price for people in fuel poverty and people on a prepayment, and the cost of that should be borne by those who can afford to pay.”
He added: “My biggest concern is actually when we get to October, particularly around the most vulnerable and the poorest and that tends to match with the people on a prepayment meter… Actually during the summer their consumption will go down so their bills will be more manageable. Come October, that’s going to get horrific, truly horrific. And it’s got to a stage now where I honestly believe the size and scale of this is beyond what I can deal with, it’s beyond what I think this industry can deal with and I think it needs a massive shift, significant shift, in the government policy approach towards this.”
And Mr Anderson had thought through a potential solution, involving the Government enabling a meaningful and swift reduction in the bills of poor and vulnerable customers, with the heavy burden of paying for this not just being dumped on these households in coming years but spread across the consumer base, with the possibility of the Government partially funding the relief.
He said: “I think it’s got to a point now where the Government in October for anybody that is deemed to be in fuel poverty or vulnerable, and that will include prepayment meter customers, £1,000 should be taken off their bill and put into a fund. That fund can then be repaid over a 10-year period. Now you can spread that across the whole consumer base or government can partially fund it.”
Of course, there will and should be debate about whether or to what extent the big energy companies can do more to ease the pressure on customers. Whatever the case on that front, Mr Anderson’s comments do signal an awareness of reality that seems to be sadly lacking in the Johnson Cabinet.
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