The Tory free market madness costs us all
Expert slams Government for refusal to help in crisis
HIGH inflation, record energy prices, and a shortage of workers. We are facing an economic crisis.
Andrew Bailey, the Governor of the Bank of England, said this week it has several causes – war, Brexit, Covid, all one-off shocks.
But what he did not say is the Government is making things worse because their ideology is driving the response, doing almost nothing in the belief the market can solve the problem.
Their inaction is costing us all, dearly. Here’s where they are getting it wrong.
They’ve got the cause of inflation wrong
Inflation is a general increase in the level of prices. Electricity, gas, diesel and petrol, food and other basics are all going up in price. They think that we have 1970s-type inflation. But that inflation was fuelled by pay rises bigger than growth in the economy, so people had too much to spend. We have the exact opposite. People haven’t got the money to pay for the basics needed to live. Despite this, the Bank of England is raising interest rates to try to push net wages down – because that’s what Tory ideology tells them they must do. And the Bank follows the line on this – because if they don’t the Chancellor can over-rule them. Rate rises make life for many much harder. We need interest rate cuts instead, now.
They won’t spend to help out
The Government could help by increasing benefits and pensions and the pay of their own lowest-paid employees. They could do this now. But they won’t. They’re ideologically opposed to benefits, including pensions. Cutting government spending is all they believe in.
Every penny spent on these extra benefits and pay would go straight back into the economy as those receiving them spend all the money they get to survive. That would support businesses, jobs and taxes paid. But this might also create short-term government debt and they’d rather those with low incomes suffer than risk that. They don’t care if a pensioner starves if government spending is saved.
They won’t tackle price increases
The Government could tackle some of the big price rises we’re facing right now. 20p or more out of every £1 spent on gas, electricity, diesel and petrol goes to the Government. As their prices have risen, so has the amount the Government gets from them in tax, so they’re profiting. If the Government simply fixed the amount they get from each unit of energy sold at their 2020 rate by cutting VAT and duties they could cut prices right now. But they won’t because they want to pay off the Government’s debts and pass the burden on to the public. People are losing so the Government can balance its books. That’s the price of ideology.
They won’t help people back to work after Covid
According to the Government, we have had a labour crisis since the end of the Covid pandemic. That’s because the number of people working since Covid began is down 482,000 whilst vacancies are up 427,000. The Bank of England say we need rate rises to tackle this, to force wages down. I say we need decent ventilation, workplace protection and support for older people to get them back into work after Covid. But the Government says Covid is over.
They aren’t helping people get pay rises
The real problem we have is that millions of people in the UK don’t have enough to live on. The National Living Wage is useful, but it’s not enough to really live on and it’s become a base level rate that too many employers now choose to pay. The Government wants to keep it that way because this maximises employers’ profits. But what the Government should be doing is pushing up wages.
Until the 1990s there were pay boards in the UK that set the wage rates for about 20 industries from construction, to agriculture, to hairdressing. They made sure that when unions could not protect people’s pay, they still got a fair deal. We need those boards back, now. We’d have more, better-paid jobs – and fewer zero-hour, gig economy jobs. But the Government hates such interventions, thinking them
left-wing.
They won’t impose windfall taxes
People are losing so the government can balance its books. That’s the price of ideology
If people are paying more for the electricity, gas, diesel, petrol, food and other things they’re buying and those things cost no more to make (and by and large, they don’t) then someone is making more profit.
The oil companies are. So too are the banks because of interest rate rises. But the Government is objecting to taxing them more because their ideology is that all profit is good.
They even voted against a Labour plan for windfall taxes, but we need them now.
Richard Murphy is a chartered accountant and economic justice campaigner. He blogs at www.taxresearch.org.uk/Blog/ and tweets @RichardJMurphy.