I’m not waiting till 12.30pm today to treat Liz Truss as the next Prime Minister, we’ve known for some weeks that she is the only horse left in the two horse race.
Short of a technical disqualification what she is saying – goes.
And what she’s saying is good for tax-payers and bad for those with limited and fixed incomes with no protection against hikes in the cost of living.
We are hearing that within a week of her accession , Liz Truss will have announced a meaningful price cap ; hopefully one that protects both consumers and employers. This is what Ros Altmann and Frank Field were calling for last week and it is the only way that the Government can use its resources to manage RPI and CPI for pensioners.
This price cap does not have universal support. One of my regular correspondents wrote me yesterday
We need to plan for energy prices in future and who will pay for them. A price cap protects those who should pay the right price whatever it is. That is wasteful. And wrong.
I suspect he would prefer the Resolution Foundation’s approach based on social tariffs, that would go some way to addressing the more fundamental malaise facing the new Prime Minister. The Resolution Foundation’s recent forecasts were published last week and will make grim reading for those in the Treasury
These forecasts show the problem is not just deep, but is also much longer lasting than current talk of a “winter crisis” implies. These large income falls are caused by a combination of rising energy bills, and weak productivity and earnings growth over the last fifteen years.
A significant policy response from the new Prime Minister is needed, otherwise they risk overseeing the culmination of not just the worst two years for incomes in a century, but also the longer-term culmination of two lost decades for British households living standards.
The reality is that we are not getting richer, not living longer and not feeling better about the way we are being Governed than back in 2000. We were being told then that “things can only get better” but since the financial crisis of 2008-9, things have got a lot worse for all but the most affluent.
Only Theresa May has made any reasoned attempt to right some of the inequalities of the past 20 years and address the needs of those “just getting by”. Those people are the one who are today not getting by and I am doubtful that Liz Truss is as bothered about that as she should be.
This is the kind of issue you find when swimming in the deep end (from the Resolution Foundation again)
A combination of earnings stagnation and the energy shock means the country is on track for two lost decades of income growth. Average real incomes are set to be 7 per cent lower in 2024-25 than in 2019-20 (the worst parliament on record for growth, by a large margin). Indeed, incomes across the distribution are currently projected to be lower in 2026-27 than in 2016-17 and only marginally above where they were in 2006-07.
The number of people living in absolute poverty is currently projected to rise from 11 million in 2021-22 to 14 million in 2023-24 – a rise from 17 to 21 per cent, including 30 per cent of children. Relative child poverty is projected to reach its highest level since the peaks of the 1990s.
Things got better for a bit , but Britain is looking like backsliding into the shallow-end where standards of public services are measured , not against the best, but against increasingly feeble measures of comparison. Our principle comparator, the exchange rate, is showing just what the financial markets think of our current economic and political performance.
As many people finally return to work today, I’d ask them to think about their productivity. We have had a summer of zero productivity from Government and I fear from the difference between emails sent (many) and emails replied to (few), that most of us will be dealing with a backlog of things to do.
The sooner we can get on the front foot and take the positive actions, this blog has been calling for, the better. Hard work and application to detail is needed if things are to get better.