A cost of living crisis is coming

Many households in Britain will face increased costs in the coming months. For some it will constitute a cost of living crisis. While the causes of this are many and varied, most of them fall into one of two categories: they have either been caused directly by government, or they could have been prevented by government.

One of the biggest increases will be for energy. Gas and electricity bills are set to go up by huge amounts. Gas is relatively clean compared to the coal it replaces, yet the government has cowed to an economically illiterate climate lobby that chants “fossil fuel” without regard to the role gas could play in bridging the energy gap until solar and wind become sufficiently plentiful and cheap. There is a wealth of gas under our feet, yet the government has effectively banned hydraulic fracturing by setting an impossibly low limit on underground tremors that barely register. If that limit were raised, and alternative technologies were encouraged to extract the gas, the energy shortage would cease and the prices would fall.

Energy bills on retail sources were capped for consumers, while wholesale prices went unchecked. Inevitably, as the wholesale prices rose and producers were unable to pass them on, many went bankrupt, reducing both supply and choice. The price cap has led to increased energy prices, and the sensible solution would be to scrap it. The commitment to Net Zero Carbon is set to bring prohibitive cost and price increases, and the decision to require gas boilers to be replaced by fuel pumps will cost thousands per household.

Government could do much to facilitate the development of the new small-scale nuclear reactors, but again it seems too afraid of the anti-nuclear lobby to take a bold initiative. Nuclear is a renewable and non-polluting source of energy as far as climate is concerned.

The climate levy imposed on businesses in pursuit of a green agenda has increased the cost of the energy they use, and this has been passed on to their customers by way of increased prices. This has hit transport businesses hard. And although train companies are exempt from the levy, rail fares are set to increase faster than inflation, hitting commuters and other passengers.

Increases in the Living Wage have increased labour costs for businesses, costs that are being passed on to their customers by way of higher prices. This is particularly so in sectors such as hospitality that use minimum wage labour to keep costs down.

Tax increases are contributing significantly to household spending. Thresholds are not being fully indexed, dragging more people into higher tax brackets. The threshold salary that starts university loan repayment has been frozen, meaning more people will pay on lower real incomes. Steep rises in Council Tax are also on the way. And the 1.25% Health & Social Care Levy announced for April will hit the pay packets of quite modest wage-earners. If the government needs more money, it should borrow, rather than tax. Borrowing can be repaid out of booming growth, whereas tax increases will stunt that growth.

The government’s backtrack on its proposed housebuilding reforms have meant that housing will continue to be in short supply, raising prices and mortgages. There is a soaring demand for rental properties with a shrinking supply of suitable ones. This has pushed up the rent costs that for young people in cities constitute a large part of their budget.

The list goes on. Telephone charges are going up, and rises are on the way for TV and broadband. And everyone who shops in a supermarket has seen prices going up at much more than the published rate of inflation. Some of this is obvious as people have to pay more than they did before, but added to it are the concealed rises where the price stays the same, but for a reduced size or quantity. And the very low-priced supermarket specials such as beans at 10p a tin seem harder to find.

This coming crisis is bad news for households, and therefore bad news for the government that presides over it. Yet the solution is not difficult. They should stop doing the fashionable things that attract praise from obsessive NGOs and their acolytes, but which impose heavy costs on ordinary citizens. They should instead do what they were elected to do.