Another View, by Neil Coupe
Sometimes the simplest of things can be the most thought-provoking.
Driving home on Saturday evening I was listening to the radio and a very calm and articulate lady phoned in and talked about her monthly budget.
In summary, after paying her rent, council tax and utilities, she had £200 per month to cover all her food, clothing and other necessities. She had just learnt that her utility bill was about to increase by £120, thus reducing her remaining budget by 60% to a mere £80 month.
She spoke with a very dignified and stoic despair, leaving the radio presenter unsure of what to say next. There was a long pause and he quietly said that he did not know how to help, but that she was very welcome to stay in touch.
This exchange has stuck in my mind.
The increases in gas and electricity bills have gone from being a looming inconvenience in the future to being a potentially devastating crisis for a huge swathe of the population who are currently just about managing.
Economic policy has been focused for decades on keeping inflation down to foster stability, and to protect the economically most vulnerable. When there is such a huge increase for something which comprises a disproportionate part of people’s income, the effect can be debilitating.
We do not want to see a scenario where people have to choose between heating and eating.
I attended a meeting with the Bank of England four months ago. At the time it was clear that there would be some increase in utility bills and fuel costs, but their view was that this would be a one-off spike and that the price would revert to normal in the relatively short-term.
There is no criticism of their forecast, but this is cited purely to illustrate how quickly situations can evolve, and we suddenly find ourselves confronted with a whole host of unanticipated problems.
For the past 30 years, inflation has averaged under 3% per annum. Only once, in 2011, has it gone above 5%. Between the 1970s and early 1980s it averaged 16%, and, to put it mildly, there are few economic historians that look back on that period with any great fondness.
People in business that I have been speaking to are talking of double-digit increases in prices, from steel prices which have doubled, to someone telling me that the cost of flour has increased by 23% since January, partly due to Putin’s invasion of Ukraine, as our European neighbour is a major supplier of flour.
The increased costs of fuel and utilities will also impact on businesses which will then pass the increased input costs onto customers, fuelling inflation yet further.
It is fair to say that economic forecasts tend to be doom-laden in general. Brexit and Covid had both been expected to cause severely more economic harm than happened in reality.
Twelve months ago, for example, there was huge concern about how unemployment would rise significantly when the furlough scheme ended. The reality was that a fear of not having enough work for people to do has gone full circle into a fear of not having enough people to do the work.
So, it is possible that things will not turn out to be as bad as we currently fear. However, if increasing bills do result in great distress and struggle for people such as the lady on Saturday night’s phone in, then I hope that there are people in power looking out for them and taking action to mitigate what looks to me like a potentially enormous crisis.
