The cost of living crisis would be better termed a poverty crisis

Editorial: The only way many households will manage to get by is cutting back on food spending and reducing their usage of gas and electricity at home

(Dave Brown)

Even without the 50 per cent or so rise in gas prices now in place, there were too many families who were “just about managing”, to recycle a fashionable political phrase from a few years ago. They’re finding it even more difficult to manage now. The only way many households will manage to get by is by cutting back on food spending – and reducing their usage of gas and electricity at home.

It is, for some, not even so much a choice between eating or heating but sometimes being unable to afford either. We may be sure that poverty will rise, as a result of these global trends in commodity prices – but also because of the bad choices the government is making, such as the abolition of the £20 weekly uplift in universal credit.

Some families will also go into debt, many through desperation – and some in the hope that the cost of living crisis will eventually pass, and prices for essentials such as gas, food and petrol may even come down. Perhaps. But, before then, there is every indication that inflation will accelerate, that there will be a further substantial hike in energy bills in the autumn, and that interest rates and thus mortgage repayments will also steadily climb higher.

The net effect of the government’s plans on tax and national insurance will shrink disposable incomes among the middle classes, with minimal assistance (if any) from the chancellor’s spring statement for those unable to work. The cost of living crisis would be better termed a poverty crisis.

It is, though, fair for the government to point to global factors, such as war and Covid disruption, for some of the squeeze on living standards, but Britain has also the unique effects of Brexit, which has created shortages of labour and further increased the cost of importing goods from the EU. It is this effect that is too little discussed, given the global forces that disguise it, but it is something that the Office for Budget Responsibility, among others, has highlighted.

Loss of easy access to the EU single market and other trade effects will depress UK productivity growth over the coming years, and that means sluggish economic growth, wage rises and stagnant living standards, which includes public services. Take the boosterish rhetoric away from Rishi Sunak’s statements and we find that he himself is forecasting growth in the national income of one to two per cent for the foreseeable future – about a half of what used to be the norm.

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There will simply be no room for tax cuts or much real-terms investment, whatever headline-grabbing manipulations are made to the basic rate of income tax. That will also apply to the next government, whichever party wins the next election.

Few governments prosper politically when the economy and living standards fall short of public expectations. In a month there will be the first major opportunity for the voters to pass their verdict on the record of the Johnson administration, set in the context of 12 years of Conservative-led governments. Because many of the council elections were last contested in 2018, which was not a vintage year for the Conservatives, the results may flatter Boris Johnson.

Yet there will be no mistaking the disquiet and disappointment in the public mood, with his shameful Covid rule-breaking in the news, once again. The cost of living crisis won’t be just a talking point about the future, but painfully evident to the electorate. Mr Johnson has a reputation of being a bit of an escape artist, but this is one crisis he can’t talk his way out of.