21 September 2021

Forget gas prices, the UK’s real cost-of-living crisis is elsewhere


Today’s headlines about the looming gas price crisis make grim reading – not least because the Government’s track record of dealing with unexpected shocks to the system is, vaccines aside, not great.

Ministers seem set to try and stave off the acute effects via the traditional route of spending lots of money, in this case on loans to energy companies that take new customers from failing firms. How this will square with the Treasury’s bid to bring spending under control post-Covid is anyone’s guess.

Whether or not they find the courage or imagination to tackle the deeper, structural problems is another question, and it doesn’t look promising.

There seems to be no suggestion, for example, of re-thinking the ill-advised energy price cap. Instead, there is tough talk about ‘no rewards for failure or mismanagement’ to justify letting suppliers go bust. 

But whose fault is it when the wholesale price of a commodity goes up, but the retail price is fixed by the state? And suffice to say, a smaller number of government-backed suppliers is probably not good news for consumers in the long run.

Likewise, the Prime Minister is reportedly standing firm on the ‘green levy’ he put on energy bills. This might be good news for Net Zero, but its bad news for families facing higher energy costs – and if the Government does need to roll out these emergency loans, much of it is effectively the state paying itself.

What about reducing Britain’s reliance on imported energy? Well, I’ve written previously about what a forlorn hope it is that we might rebuild a strong domestic nuclear industry. And, as Harry Phibbs writes today, developing the United Kingdom’s substantial shale gas reserves would not only cut across the Net Zero agenda but surely involve felling a tree or two. No chance.

Even the apparent willingness to hose public money at keeping energy bills down has a sting in the tail. Because the Treasury will have its due and, at some point, somebody is going to pay. Judging by past performance, it will be working-age people.   

Energy costs are obviously an important issue. A steep rise can have a serious impact on people’s cost of living, and particularly hurt asset-rich older people with no income. Yet it would surely be better to make targeted interventions to support the genuinely needy, rather than holding down prices across the board.

It is also telling when the cost of living is or is not front-page news and a national crisis. The answer is basically when it affects older people.

For instance, the unprecedented marginal tax rates faced by young workers to fund Boris Johnson’s social care levy are a cost-of-living issue. As are student loan repayments. 

That’s before you even get started on rent. According to Property Reporter: ‘the amount of net income required to cover the cost of renting has increased +16.8% in the last two decades to 45.5% nationally’. In parts of England, it has reportedly hit 75%!

The human implications of this are enormous. The average age of first-time property buyers is climbing into the early thirties; growing numbers of young people can’t afford to move out and are trapped in ‘hidden households’; with the conditions for family formation delayed, the birth rate is falling.

And that’s not factoring in the harder to quantify quality-of-life stuff, such as the benefits that accrue from such space-intensive luxuries as a large book collection or a chest freezer, or the infantilising effect of being forced to share a house well into your career.

All of that, much more than what the Government assures us is temporary disruption to international energy markets, is the UK’s real cost-of-living crisis. But don’t expect to see ministers stirring themselves to fix it anytime soon.

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Henry Hill is News Editor of ConservativeHome.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.