Soaring inflation spells more trouble for Osborne

The UK now has the highest inflation of any EU country except Estonia.

The latest inflation figures are shocking. The Consumer Price Index rose 0.7 per cent last month to 5.2 per cent (the target rate, of course, is 2 per cent), the highest level since September 2008, while the Retail Price Index, the traditional measure of inflation, rose to 5.6 per cent, up from 5.2 per cent in August and the highest figure since June 1991. The UK now has the highest inflation of any EU country except Estonia. And all this before the Bank of England has injected £75bn worth of quantitative easing (QE), with inevitably inflationary consequences. It's nothing compared to the 1970s - when inflation rose above 25 per cent - but it explains why almost everyone is feeling the pinch.

The causes are wearily familiar: the depreciation of sterling, the VAT rise and rising energy prices (voters' number one concern, according to opinion polls). Average gas and electricity bills rose 7.5 per cent between August and September. But over the last year, excluding bonus payments, wages have risen by just 1.8 per cent, meaning millions are suffering an effective pay cut.

So, to quote Lenin, what is to be done? There is a (correct) bipartisan consensus that lack of growth, not inflation, is Britain's biggest problem. Hence George Osborne's support for a second round of QE (described by him in 2009 as "the last resort of desperate governments") and the government's tacit agreement with the Bank of England that interest rates will remain at record lows. A premature rise in the base rate (currently 0.5 per cent) would strangle growth. Similarly, Ed Balls and Ed Miliband continue to believe that sustained monetary stimulus is essential for the health of the economy.

In addition, all sides both hope and expect that inflation will come down next year as temporary factors such as the VAT rise and the surge in oil prices are discounted. Indeed, the Monetary Policy Committee's biggest fear is not inflation but deflation.

But none of this will prevent Labour delivering some potent attack lines. Here's Rachel Reeves, the party's new shadow chief secretary to the Treasury and a former Bank of England economist:

It's now clear we have the worst of all worlds - high inflation, rising unemployment and a stagnant economy since last autumn. When Britain now has the highest inflation of any EU country except Estonia, families and pensioners feeling the squeeze want out of touch Ministers to take some responsibility and take action now ... The Bank of England has been put in an impossible position by George Osborne. It has been left to do all the work to support the economy, while spending cuts and tax rises that go too far and too fast have crushed growth and the VAT rise has fuelled inflation too.

The stark reality for Osborne is that, under his stewardship, the UK now has one of the highest rates of inflation in the EU and one of the lowest rates of growth. As low and middle earners (11 million of whom have seen no rise in their real incomes since 2003) are squeezed by rising prices, falling wages, higher taxes and lower benefits, the pressure will intensify on the Chancellor to offer some relief.

George Eaton is political editor of the New Statesman.

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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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