Politics

The cost-of-living crisis is going to upend British politics in 2022 | Aditya Chakrabortty

TTurn on the radio or scroll down on your phone and the big headlines belong to Covid. But when this latest version of the plague falls off the front pages, another story is set to take its place – and that story will linger for most of the year, setting the terms of trade at Westminster and possibly deciding the future of Boris Johnson.

The cost of living is about to shape our politics in a way it hasn’t in decades.

You can spot the buildup this week, from Keir Starmer warning of a crisis to Tory MPs calling on Johnson to act now on high fuel bills. And you can already see the misery in the stories about how Brits now wrap themselves in blankets and turn hair dryers on to keep warm, rather than turn on the central heating. Over the next few weeks, the crisis will only get worse.

On February 7, the energy watchdog, Ofgem, set the new maximum price for energy bills. Utility chiefs warn the cap could easily exceed £2,000, double what it was last winter. Experts at the charity National Energy Action have warned that fuel poverty could rise to its highest levels since John Major was 10, with nearly 6 million families having to choose between heating and eating, paying bus fare or buying sanitary pads.

This means that two million households, who were recently still keeping their heads above water, will be drowning when the new cap begins on April 1. Only at this point do taxes go up, too. National Insurance will rise, as will council tax in most parts of the country, along with a discreet increase in income tax bills. Put it all together and Resolution will warn that the average family risks losing an extra £1,200 a year. To this we can add the effect of higher gasoline prices. These bills will accrue while wages and benefits decrease in real terms. It is a recipe for widespread deprivation and widespread political upheaval. It also breaks the electoral coalition that gave Johnson his landslide victory. In true blue Woking, only 6% of households are fuel poor. In Workington, by contrast, which only hit the Conservatives in 2019, that percentage is close to 14%.

It has always been my bet that boring old economics will do much more harm to Boris Johnson than baroque politics. Most of the Sun King’s critics have spent the days since 2019 attacking his rule-breaking, his brinkmanship policy with Brussels, and his sheer bad behavior. Until the unveiling of the tenth-ranked parties, hardly any of them had reached an audience exhaustively accustomed to shattering the norms of the political class to fill their shoes; Just ask a Right Hon member about Greensill Capital. But all of those voters, left unmoved by 42-point headlines and scathing opinion pieces, are likely to be mustered by the heaviest tax burden in 70 years, swinging cuts to front-line services and soaring inflation.

No wonder the government can hardly allay its anxiety. Business Secretary Kwasi Quarting has met with energy chiefs at a series of emergency summits, most recently on Wednesday, while Chancellor Rishi Sunak’s team grumbled to reporters about having to pounce on any of this. However, with only a month left before Ofgem’s announcement, there is no deal on the table.

Oddly enough, Johnson pledged himself one of these treatments. He co-wrote an article in The Sun less than a month before the 2016 EU referendum, vowing that Brexit would mean the end of value-added tax on fuel bills. “We will be able to abolish this unfair and destructive tax,” Mr. Turk wrote. “It is not right that the unelected bureaucrats in Brussels tax the poorest British politicians and the elected can do nothing.” After two and a half years as prime minister, he has done nothing specifically. This week, he asserted on television that the value-added tax cut was a “blunt tool” that would not direct aid towards those most in need of financial assistance. Fancy that! If someone had warned us that this man had reneged on a deal.

But if Starmer wants to take advantage of this moment, he has to do much better than give nameless speeches full of abstract names and embellished with flags. Workers want to scrap the 5% VAT rate on energy bills, but it’s really a small change: £10 on a monthly £200 bill. The best would be to demand an unexpected tax on the gas and oil companies, which were making profits as fuel prices rose, and funnel that money to the less wealthy. If Labor can take that position early and loud enough, they will reap the rewards when the Conservatives emulate them. They can also point to the failures of the energy market – the collapse of 26 suppliers and the consolidation of their customer base once again in the hands of the Big Six – as a basis for trying something new: using the public sector to direct more investment into nationally safe renewables.

This is a generation of politicians who have never experienced inflationary shock, but are nonetheless haunted by myths about what happened in the 1970s. For good reason: Thatcher finally used that episode to dismantle the Keynesian welfare state and exile the left for more than a decade. The right is already reheating those old arguments about how inflation and higher interest rates should mean cutting public spending, and how taxpayers don’t want to pay for “green shit” and reduce poverty.

It is imperative that the left tackle those points now. This is not the 1970s, and there is no danger of a wage-price vortex. This is a workforce that has just come out of the worst pressure on living standards since Napoleon marched across Europe – and it’s on the cusp of entering another one. It’s not the workforce that doesn’t work: it’s markets and the supply chain. This is what needs to be fixed.

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