Home Coffee prices Soaring inflation is shattering the status quo – no wonder the government is spooked | Andy Beckett

Soaring inflation is shattering the status quo – no wonder the government is spooked | Andy Beckett

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OWhen a government nips at a key opposition policy that it has spent months mocking and that goes directly against its ideology, you know something pretty big is going on. The Conservatives’ screaming U-turn on a windfall tax on energy companies to fund payments to “mitigate” the cost of living crisis is in part a generally crude attempt to change the subject of Partygate. But it is also a more telling signal: that the government has belatedly become very preoccupied with inflation policy.

It’s just to be. For many voters, many of whom are conservatives, high inflation is very scary. Economies are shrinking. Wage increases are rarely enough. Investing safely seems impossible. State benefits are even less than usual. Luxury, small delicacies and even the essential become unaffordable. The whole process of personal enrichment promised by capitalism is reversed. The solidity of money – the basis of so many of our lives – reveals itself as an illusion. It becomes clear that money can decay, like everything else.

High inflation makes people angry. When Britain last had a prolonged period of it, from the early 1970s to the early 1980s, right-wing politicians, commentators and voters often described it as a disease and claimed that it was caused by the greed of trade unionists and the debauchery of Labor governments. This was seen as a sign of decadence, which could lead to national collapse. “Inflation is a great moral evil,” said Geoffrey Howe, Margaret Thatcher’s stern first chancellor, in 1982. “Nations that lose confidence in their currency lose confidence in themselves.”

Rishi Sunak announces one-off £5bn tax on energy companies to ease cost of living crisis – video

The UK currently has the worst inflation of any G7 country. Huge further increases in food and fuel prices are seen as inevitable, such as the £800 rise in the energy price cap in October, which energy regulator Ofgem predicted this week. “It is difficult to overstate the magnitude of the coming cost of living crisis,” the Resolution Foundation warned in March. The generally sober think tank predicted “the highest inflation in 40 years and the worst income squeeze on record”.

This shock is beginning to be felt in a country that is much more unequal than in the 1970s, and which has many more vulnerable people. In 1975, around 13% of British residents lived in relative poverty. The figure is now around 22% – and our population is a fifth larger.

Unlike the 1970s, average wages have already been stagnating or falling for more than a decade. The climate crisis and commodity speculators are making food price spikes more frequent. And the state’s ability to respond to social emergencies has been weakened by 12 years of austerity. High inflation may be familiar to older Britons, but its return could lead a fragile and divided country into uncharted territory.

What could be the politics of our new era of inflation? The fact that the government’s new cost-of-living plan is its third in four months suggests that panic and improvisation will be the Conservatives’ response. The latest measures are generous – up to £1,200 will go to the poorest households – but they may not be generous enough. The increase in the energy price cap this year is expected to be £1,500. And energy prices aren’t the only thing going up. Many forecasters also do not expect inflation to decline quickly. We should probably expect more special announcements from Rishi Sunak.

The fact that this time around he had to lean so heavily on a Labor idea suggests the Tories have run out of inflation remedies. That their windfall tax – shamefully disguised as a ‘targeted temporary levy on energy profits’ – is more ambitious than Labor’s also suggests there could now be a bidding war between parties over cost policies. of life.

But they may struggle to cope with the crisis regardless. In times of inflation, social conditions can change rapidly. At the height of German hyperinflation in the 1920s, the price of a cup of coffee sometimes doubled the time it took to drink it. There was panic buying, hoarding and an increase in theft and prostitution. Politics became polarized and scapegoats were identified: immigrants, inadequate politicians, corporate profiteers. Much of the energy of politics has shifted from parliament to the streets, in protests, strikes and riots.

The UK is not quite as feverish yet, but it is showing some of the same symptoms. This week, the RMT union voted for the first nationwide railway strike in decades, in part because employers “refused to keep staff pay in line with… soaring costs of living”. Last week, the Gendarmerie’s chief inspector said officers should use “discretion” when deciding whether or not to prosecute people who steal food.

But it is inflation’s impact on those used to living comfortably that often makes it most politically disruptive. More than austerity and falling wages since 2010, it threatens people with assets – the voters the Tories depend on. In the inflationary 1970s, they formed aggressive, often far-right lobby groups like the Middle Class Association, campaigned against “malicious” tax increases and the “disproportionate suffering” that price hikes imposed on business owners and professionals, and ultimately helped to radicalize the Conservative Party. to party. Today, many middle-class people are protected against inflation to some degree by the high value of their properties. But if collapsing real incomes also cause house prices to fall, then the anger of the middle classes will return.

And the old inflation scapegoats are less available. Unions are smaller and weaker now. Labor is not in government. There is greed and decadence in this country, but centered on Johnson’s Downing Street and his pet business interests. Inflation is eating away at the status quo, and today’s status quo is completely conservative.

The process is not always quick. There were years of soaring prices in the 1970s before there was a change of government. If the current crisis lasts, it is possible to envisage the formation of a populist and anti-inflationary party which calls for a price cap on much more than energy. But our electoral system would limit his chances. Meanwhile, the disappearance of physical money from our lives, accelerated by the pandemic, makes it easier to avoid thinking about our dwindling money. As the sometimes docile years following the financial crisis have demonstrated, our country often responds to economic punishment less drastically than pessimistic forecasters imagine.

However, he reacts at the end. After the financial crisis came the fall of the Gordon Brown government, the 2011 riots, Corbynism and Brexit. By the time the cost of living crisis is over, it could be a different country.