In what he called a “half-time pep talk” after reshuffling his cabinet, Boris Johnson ordered his ministers to focus relentlessly on levelling-up opportunities and improving people’s “quality of life”. It is a classic Conservative offer to voters – David Cameron pledged to deliver “the good life” for all in 2015 – but one that this new-look government is already putting at risk. A toxic combination of global market shocks, supply chain disruption, Brexit politics and pandemic economics now threatens to push millions in Britain into a cost-of-living crisis. Many people now face a winter of scarcity.
In recent days, another startling picture has emerged of the UK’s intricately interwoven supply chains. Disruption in one area – in this case rising wholesale gas costs – can devastate multiple sectors in ways that seem frighteningly unpredictable.
Record gas prices forced two fertiliser plants to halt operations, denying the food industry the supply of carbon dioxide essential for processing meat and vegetables. Poultry producers warned that supermarkets were days away from running out of fresh chicken, while pig farmers said they would be forced to kill their livestock (often already poorly treated) as abattoirs were facing a shortage of the carbon dioxide that is used to stun the animals before slaughter.
Energy firms risk going out of business because they failed to insure themselves against rising wholesale costs, which would lead to potentially higher bills. Ministers insist that warnings of 1970s-style blackouts and a three-day week are “alarmist”. Perhaps.
Some of these pressures are beyond British control. A harsh winter last year drove higher than usual demand for gas in Asia and Europe, as did the reopening of economies around the world after pandemic lockdowns. Russia is unlikely to relent on restricting gas supplies to Europe just because British consumers are feeling the pinch, and no government yet has the power to make the wind blow hard enough for turbines to stir.
Even so, Mr Johnson’s policy decisions risk turning a global problem into an emergency in Britain. Instead of overhauling the regulation of a liberalised power market, ministers have been preparing to bail out industry giants with state loans and subsidise carbon dioxide production. Ultimately, taxpayers will be the ones who pay.
According to the Resolution Foundation, the poorest in Britain, who are the most vulnerable to energy price hikes, will be squeezed hardest by the gas crunch. As many as 4.4 million households receiving Universal Credit will see their energy bills rise significantly next month. The government will also cut the £20-a-week Universal Credit uplift – a hit of more than £1,000 a year per claimant – as we move towards winter.
Many of these families will be struggling with higher costs for food. Consumer price inflation jumped from 2 to 3.2 per cent in August, the biggest monthly increase since records began. By next April, a 1.25 percentage point rise in National Insurance will take effect. The tax hike is intended to raise funds for the reform of social care. It will disproportionately hurt those on lower incomes.
Amid the upheaval there are opportunities to do things better. As Business Secretary Kwasi Kwarteng has said, the gas crisis reinforces the necessity for the UK to transition to greener energy sources. But the government has been slow in explaining how the country will become a net-zero carbon economy by 2050. A long-promised strategy for decarbonising buildings has been repeatedly delayed amid rows over the politics of forcing homeowners to replace gas boilers with expensive heat pumps.
On 20 September, Mr Johnson put aside his desire for new trade deals to demand the richest nations pay more to help the poorest countries grapple with the effects of climate change. The Prime Minister should now apply his own advice at home, where he has created an ambitious new department for levelling up – led by the non-partisan Andy Haldane, the former chief economist at the Bank of England (and New Statesman contributor) – but continues to enact policies that entrench disadvantage. Confronting climate change and the economic challenges facing post-pandemic Brexit Britain requires courage to be honest about the pain ahead, compassion towards those at greatest risk and competence in planning for the long term.
This article appears in the 22 Sep 2021 issue of the New Statesman, Great Power Play