Iain Macwhirter: The cost of living crisis is stabilizing upside down

The default reaction to any initiative from this government is to reject it with contempt. Well, they are conservatives, aren’t they? As everyone knows, the Conservatives are looking after themselves, cutting public spending and lining the pockets of the rich.

And so Michael Gove’s leveling program was dismissed by opposition parties as at best a facade and at worst an exercise in red-wall vote-buying. Most journalists seem to agree.

I have a different point of view. We should applaud any minister who is genuinely interested in rebalancing Britain and tackling regional inequality, even if he is a Tory.

So when Michael Gove calls on this government to “put the money and the power in the hands of the working people”, and promises to make this legally binding, I am inclined to say: well, about time. He will have plenty of time to condemn them for not keeping their promises.

Certainly, there is not a lot of public money in this leveling. The initial money is less than what was lost to fraudulent Covid ‘bounce back’ loans. The Treasury pulled the purse strings. But money is not everything, despite what Labor and the SNP say.

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Indeed, if leveling up was simply a matter of additional public spending, Scotland would already be leveled to the stratosphere. Indeed, Scotland has benefited, year after year, from at least 11% more public spending per capita than the rest of the UK. Indeed, the Independent Institute for Fiscal Studies says the Scottish government has 30% more to spend.

When Nicola Sturgeon mocks the lack of fresh money, she condemns her own record. The SNP has been in power for almost 15 years and has little to show for the tens of billions in extra spending funneled into Scotland through the Barnett formula.

Glasgow’s men are still dying far too early and healthy life expectancy is declining across the board. A quarter of children still live in poverty, education levels are falling and the NHS in Scotland is not doing better despite all the extra money pouring into it. It was creaking long before Covid struck and revealed its deep weaknesses. And don’t talk about ferries, crumbling roads, deserted city centers.

real irony

Ironically, the Conservatives’ upgrade agenda – local empowerment, education, welfare, culture, transportation, productivity, etc. – recalls the Scottish Government’s own national performance framework with its measures, scorecards and results models. This was born ten years ago, when the SNP could still credibly call itself a progressive party. They don’t talk about it much but it’s still there.

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That a Conservative government has now accepted that the market has failed, which is essentially what leveling means, is a significant, if not historic, development. Just a few years ago, conservatives called state interventionism futile and counterproductive.

Bureaucracy gone mad… meddling with the market… don’t kill the golden goose.

Whether the Gove upgrade actually works is, of course, another matter. The cost of living crisis has overwhelmed it with a water price shock that will level living standards precisely in parts of the country that are expected to rise. We haven’t seen anything like it since the 1970s. The financial crash of 2008 was a minus compared to what is happening now. A global energy crisis, 7% inflation, rapidly rising interest rates and a supply chain crisis compounded by Brexit.

Previous past

For historical parallels, we have to go back to the OPEC energy crisis of 1973 and the consequences of the Barber Boom. Conservative Chancellor Anthony Barber has cut interest rates and pumped money into Britain’s sluggish economy in the hope of spurring a ‘race for growth’, as he put it. The only growth was in inflation.

Prices rose at an annual rate of 25 percent just a few years later. Britain had to turn to the International Monetary Fund in 1976 for emergency loans – although Harold Wilson’s Labor government then inherited the wreckage. Keir Starmer should be careful what he wishes for. Labor could be in government in less than two years.

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The infamous wage and price spiral of the 1970s was the result of powerful unions doing their own leveling in manufacturing and mining, and 20% wage increases became the norm. Today, few workers outside the public sector are unionized, so the wage/price spiral is unlikely to repeat itself. This means that the inhabitants of low-wage regions will become poorer more quickly.

The Bank of England insists we’re all going to get poorer faster than after the 2010 recession – except, of course, the asset-rich plutocrats who seem to be getting richer no matter what. real economy. But inflation hits the poor harder because they have to spend more on what economists call “non-discretionary spending” and what the rest of us call feeding their families.

As food writer Jack Monroe has demonstrated, inflation of supermarket staples is far higher than the Bank’s overall figure. Walk into your local Morrisons or Tesco and the proof is all around you. Value brands are disappearing from the shelves. The size of the packages is decreasing. The weights are mysteriously declining.

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Wealthier middle classes in Waitrose already pay more for the same thing and rarely look at posted prices. But the inhabitants of large houses are shocked when they discover the amount of energy they consume. And they will certainly notice that their mortgage payments will increase due to the Bank of England raising interest rates to fight inflation.

After decades of printing money while drunk, the Old Lady wins the punch bowl. Yet higher borrowing costs are meant to make businesses less willing to expand, which means fewer jobs, especially in areas slated for leveling.

blame game

SCOTLAND has its own problems, including a colder climate and slower economic growth. But as SNP deputy leader at Westminster Kirsten Oswald demonstrated on Friday, the Scottish government has no cohesive response to the coming crisis other than to blame the evil Tories.

The Scots are going to wonder why, with our prodigious oil and gas reserves and huge wind farms, they are getting so much poorer and colder. Some may think that independence will magically solve the crisis. Others will think they need an independence referendum right away like they need a hole in the roof. Scotland’s oil and gas are kept ‘in the ground’ so you can forget about the drop in energy prices after independence.

Chancellor Rishi Sunak is at least reducing the impact of energy prices through municipal tax refunds and loans. It won’t make a huge difference, but neither would Labour’s windfall tax on energy companies, morally justified. It was a global crisis that put most energy supply companies out of business. And Sunak is right: net zero means we have become accustomed to higher energy prices.

The Scottish government could still act. Maybe honor his promise to reform council tax, pay discretionary benefits, raise taxes. He has more powers than he gives. Blaming London and waiting for Boris Johnson’s government to collapse may sound like good policy, but it’s not a responsible strategy, let alone an advertisement for life after independence.

This article originally appeared in our sister title, The Herald in Scotland.

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