As the Conservative leadership election rumbles on, the cost-of-living crisis is looming larger every day. Inflation is at levels not seen for decades, the Bank of England expects a recession in the coming months and, if there is no effective intervention, energy price increases will put much of the country into fuel poverty. This isn’t just a consumer challenge: many firms are also worried they will be forced to close.
Many businesses were hit hard by the pandemic, forced to curtail operations or close completely as consumers were told to stay at home. Staff shortages hindered an immediate bounce back. War broke out in Europe. And now costs are rising at a terrifying rate. As a nation, we are seeing what might usually be generational events one after another – tackling this toxic mix requires bold action now. That is why at BusinessLDN, we have published six priorities for the Prime Minister to start to tackle in the first 100 days, so that the country has a fighting chance of meeting the economic challenges head on.
A lot of attention during the Conservative leadership campaign has focused on whether it is better to cut taxes or increase spending to prevent a hugely damaging recession. The next Prime Minister should make it the absolute first priority to urgently bring forward a solution on energy prices. At its core should be a system of direct payments, protecting those who are most in need, while in parallel creating incentives to reduce energy use and reform tariffs.
Once this is addressed, attention should turn to an ambitious retrofit programme to improve energy efficiency, and enable businesses and homeowners to generate their own energy. This will help to manage future price volatility, enable the Government to meet its net zero targets and create green jobs that will help to stimulate growth in the economy.
However, it is not just on energy where cost pressures loom large. The charity Pregnant then Screwed earlier this year revealed that two in five mothers work fewer hours than they would like because of high childcare costs. Businesses want to play their part, but need a system parents are confident can work for them to avoid a continued drain of talent. The next Prime Minister should tackle this head on – bringing back employer-supported vouchers, and expanding the 30 hours provision to 1-2 year olds.
For those who can choose whether to commute to work, cost and convenience remain barriers for many who have been used to working remotely. Rail travel remains in the process of recovery and with commuters set to face a double digit increase in fares, action must be taken now. The Government must keep fare increases well below inflation in the short term, and revamp the fare structure in the long term, so that commuters return to towns and cities across the country and have some money to spend when they get there.
It’s also vital that we don’t see further cuts to services, as these will undermine rail’s recovery. This is also true for Transport for London; a sustainable funding deal must be agreed that protects services to support more people returning to the office more often. The last thing we would want to see is cuts just at the time when net zero aspirations mean it needs to be doing more of the heavy lifting moving people around the capital, not less.
And beyond the short-term interventions needed, the UK has long term structural issues around a lack of housebuilding, and the need to give people the right skills to thrive in today’s workplace. Supporting young people into jobs, encouraging economically inactive workers back to work and reskilling people of all ages is crucial to mitigate the cost-of-living crisis, especially when many fell out of the workforce during the pandemic. And when it comes to housing, London alone desperately needs to build over 60,000 new homes every year to meet demand, but delivers just a fraction of that – and so the backlog builds, costs rise and competitiveness declines. Successive governments have talked about the need for more homes, but the next Prime Minister must actually deliver on this, spurring recovery as they do so.
The last two years have seen one crisis after another for the capital, the country, and its businesses. Acting on these areas with urgency will start to create conditions for growth that cannot be achieved by tax cuts alone, and will ease the pressure on businesses and families this winter. The leadership contest lasts for another 10 days. Action must drive the next hundred.
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