&#8220;Fiddling While Rome burns&#8221;

The newscaster on Sky News said the Tories are “fiddling while Rome burns” in relation to proposals from the leadership candidates on the cost of living. My immediate thought was that I wish they were fiddling, as then there would at least be music while the country collapses into a recession with rampant inflation undermining the incomes of working-class people.

The current government cannot do anything about the cost-of-living crisis or the upcoming recession until a new leader is elected; a promise to the nation following Boris Johnson’s resignation. In one of the biggest economic crises in memory, the United Kingdom is waiting to find out who the next Prime Minister will be. Despite being thrown out for lying and corruption, Boris Johnson is formally the Prime Minister while we wait for the leadership campaign to conclude; but Johnson is literally a Prime Minister in name only and cannot and will not do any policy interventions despite this cost-of-living crisis; Doing nothing is a policy choice. There is no way that the Tory party will allow a general election because they will lose that election and do not want to risk losing power.

That doesn’t stop the leadership candidates from making policy commitments many of which will do nothing to stop the upcoming recession or help with the cost-of-living crisis. Labour leader Keir Starmer, finally came out and made a policy proposal; proposing to freeze the energy price cap (which keeps on rising) funded by a higher windfall tax, investment in insulation and prioritise sustainable energy production; the Tory Party still has not come out with a clear set of proposals. While Starmer’s proposals refuse to call for the temporary nationalisation of energy companies put forward by Gordon Brown, nor address the rising prices of food and other necessary commodities, they are better than nothing. And nothing is what we get from the Tories at the moment.

A tracking poll conducted on August 18-19th about voter intentions shows the Labour Party at 39%; increasing its lead over the Conservative Party by 8% (up from a similar poll taken at the beginning of August which showed Labour up by 2%).

The last set of policies from the Tories attempting to address the cost-of-living crisis in June 2022 included a windfall tax (aka the energy profits levy) on energy companies, tempered by an 80 pence the pound relief on reinvestment in the fossil fuel industry, one-off payments of £650 to all on welfare benefits, £400 grant to all households to cover rising energy prices (this replaced an earlier policy of a £250 loan to those that needed emergency relief due to rising energy prices), £150 to disabled people to help with rising energy costs and dependence upon machinery using energy, £300 increase in the winter fuel allowance for older people. These policies help those significantly impacted by rising energy costs but they are short-term one-off policies primarily addressing rising energy costs. They do not address the rising prices of food, clothing and household necessities. They were a major positive step for those with low incomes whose only relief was a lagged cost of living increase of 3% in benefits.

However, they do not deal with the structural problems of the British economy caused by neoliberalism and austerity introduced following the “great recession” of 2007-8. They are meant to be (and are) a short-term sticking plaster; exceptionally useful as incomes were unable to keep pace with rising inflation. The windfall tax on energy companies was offset by the subsidies on reinvestment in the fossil fuel industry; rather than deal with sustainable energy generation, they further attempted to increase the supply of fossil fuels.

Tory leadership campaign: choosing the next PM

The Tory leadership campaign began with the elimination of the would-be Prime Minister (PM) among Tory MPs who voted for their choice of leader until the contest came down to two candidates. It was both interesting and horrifying listening to what these would-be PMs advocated as their priorities.. It gave a good indication of how right-wing Tory Party MPs are.

These included: supporting shipping refugees to Rwanda, only one among a whole panoply of attacks on human rights. Candidates advocated leaving the European Human Rights Court, eliminating the Human Rights law that was incorporated into British Common Law. There are calls for continued attacks on trade unions and the right to strike. The government already passed a law allowing striking workers to be replaced by agency workers which came into effect on July 22nd, one wonders if they think it has not gone far enough as the purpose of that legislation has no other purpose than to break strikes … they clearly have forgotten their “shock” of P&O ferries sacking all their workers and hiring agency workers to save money). There are attacks on “woke culture” especially concentrated on the dangerous notions of social justice and systemic racism (another present from the US which unfortunately has crept across the pond) and attacks on the rights of trans people to self-identify.

Economic priorities included increased spending on the military (how will that address a cost-of-living crisis?), lowering taxes (which of course only affects those that pay them) because “that’s what Tories do,” shrinking state intervention in the economy to ensure economic growth (they clearly have not understood the role of the state in ensuring economic growth but they are Tories …), no more “handouts” to those that “are not contributing” (i.e. those that are not in paid employment), supporting people starting small businesses, increasing supply of fossil fuels and abandoning net zero targets to address climate change … in other words, the usual right-wing nonsense

The final two candidates to be our next Prime Minister are Rishi Sunak (the former Chancellor of the Exchequer under Boris Johnson, who quit to force Johnson’s resignation) and Liz Truss (the Foreign Minister; she didn’t resign to bring him down). Liz is preferred by Tory members because of her loyalty to Johnson and the fact she believes that the cost-of-living crisis can be beaten; aka falling into recession can be averted.

It is probable that Liz Truss will win the election (you did not think that Tory Party members would vote for a billionaire of Indian descent, did you?) … the MSM keeps on saying that Truss will win unless she says something so ridiculous that she loses support (alas that hasn’t happened yet).

The Tory Party membership is to the right of Tory MPs (damn scary given what the MPs themselves said), so we have had the spectacle of watching Truss and Sunak shift even further to the right with every husting as they try to woo the approximately 166,000 Tory members to vote for them as leader… While the majority of Tory Party members are older white people, their younger members are even more grotesque blaming the poor for being poor, denying the impact of racism, hating migrants and refugees and genuinely enjoying spouting hate against those they think are living off society who in their minds are clearly responsible for Britain’s economic decline. They are like the older members, but even more poisonous. So it seems like it will take something really special for Tory members to shift from Truss to Sunak.

At Liz Truss’ recent visit to a synagogue near Manchester, she accused woke civil servants of straying over into antisemitism and then followed that up by making an antisemitic comment about Jewish values, while setting up a plan to protect Jews from antisemitism. In an interview in the Jewish Chronicle, she said:

“So many Jewish values are Conservative values and British values too, for example seeing the importance of family and always taking steps to protect the family unit; and the value of hard work and self-starting and setting up your own business.“

Having been educated in Jewish values of healing the world (Tikkun Olam), loving my neighbour, and giving charity (and of course, there is only one god), I have never seen the encouragement to set up your own business written in Halacha (Jewish Law); but clearly, her knowledge of Jewish values exceeds mine (she also has Jewish friends and mentors apparently … )

Perhaps, as they say, I am the wrong sort of Jew and I should go and look in the Talmud for this Jewish value so important to Jews that somehow was missed in my Hebrew School classes. This brilliant statement made the MSM, but it hasn’t impacted her campaign in the least. This is only one of her “gaffes” – she really has to say something incredible to shift the momentum over to Rishi Sunak … just think all Jeremy Corbyn did was support Palestinian human rights to be called an antisemite, yet somehow stereotyping Jews is not antisemitism … it seems that using antisemitic tropes in the name of protecting Jews from antisemitism really raises the bar over here.

I guess we should be glad that she didn’t raise the spectre of Jewish Bolshevism but that would not have been in line with her attempts to pat Jews on the head for being hardworking and opening businesses … this “Jewish value” is very important to Truss as that, along with immediate tax cuts, are her policy for keeping Britain out of a recession, what is lacking is good old fashioned hard work, self-employment and small businesses opening which will “unleash growth.” Clearly, the British working class is far too lazy, just look at their productivity … at least the ONS understands that it is a problem of capital investment in tech and not the actions/inaction of the British working class (…)

Rishi Sunak has trumpeted his Conservative credentials about tax-cutting but argues that first, they need to address rampant inflation in Britain and the cost-of-living crisis. Truss’s policies to combat the rising cost of living and to stave off the recession are two-fold: 1) immediately cut taxes; and 2) since she believes in hard work, self-employment and opening small businesses to create economic growth she supposedly has a raft of policies to ensure that. In her mind, what Britain is lacking is a “sense of ambition.” That low productivity in Britain is the fault of “idle” workers rather than the fact that nominal (money) wages are so low, that it doesn’t pay to introduce technology to increase productivity. The race to the bottom which has been Tory economic policy since the “great recession” first stagnated nominal wages and inflation is now destroying real wages and undermining benefits that are already too low to ensure that people can survive on them.

What will immediate tax cuts do? What is their purpose? They will not affect those most hit by the rising cost of living. So, what is she expecting to happen? What Truss is trapped in is ideology, rather than reality. Her ideology revolves around supply-side economics … so perhaps she thinks that increasing the savings of those that are not near destitution and having them open up small businesses or become self-employed will lead to economic growth to avert a recession. She talks about keeping money in people’s pockets rather than going to the government as taxation … it’s one of her favourite lines

But supply-side and trickle-down economics do not create economic growth, but instead, lead to further income and wealth inequalities. Cutting taxes for those that have decent incomes or live off their wealth increases economic inequality; there is no guarantee that they will reinvest in the economy. Given financialisation and financial speculation combined with short-termism in investments, it is far more probable that any investment that will occur due to increased money in “people’s” pockets will be in those sectors rather than in the real economy. If supply-side economics worked, Britain would have had ample economic growth, it didn’t.

Moreover, those barely able to eat, pay rent and cover electricity and water bills (whose numbers are rising) will just become worse off or forced to borrow (if they are able to) to cover basic necessities. Moreover, since Truss believes (and she has said this often ) that those with low incomes and/or dependent upon welfare benefits are not contributing to the British economy, then helping them is a drain on the economy. This is a dangerous ideology as people believe this nonsense and this impacts upon how disabled people, single mothers and people of colour (whose incomes are lower due to racism) are treated, thereby increasing oppression.

Truss’ policies to deal with rising energy prices are increased reliance on the fossil fuel industry to increase supply including abandoning the Green Energy Levy, reintroducing fracking, and nuclear energy and increasing production of bio-diesel. She advocates eliminating solar panels from farms as they are” taking up space” instead of producing crops that could be made to produce bio-diesel. Of course, this has been picked up by Rishi Sunak … somehow they still have not understood that bio-diesel is polluting and diverts away from food production (it is not as if they do not know that there is a worldwide food crisis, in fact, both of them claim they want to increase agricultural food production, but hey) … we are in a situation where periodically you need to pinch yourself to make certain you are awake and not having a nightmare.

The Cost-of-Living Crisis

The current government is not doing a thing as inflation skyrockets and people sink into poverty. Current Tory Ministers periodically put their heads above the parapet and say that there is a plan in the works and help is coming so that we know that they are still alive …

The Consumer Price Index (CPI) has hit 10.1% the CPIH (which includes housing) is up at 8.8%: these rising indexes represent the erosion of real wages. The Retail Price Index (RPI) which provides a far better index in terms of the consumption of the working class was at 12.3% in July 2022. Both the CPI and CPIH are up, not due to energy price rises, but due to rising food prices (which no one is talking about) …

The Office of National Statistics (ONS) graph below compares nominal wages and real wages from Jan-March 2001 to Apr-Jun 2002. We can see the stagnation in nominal wages (your take-home pay) from late 2007-8 due to both the economic crisis and austerity policies introduced by George Osborne (then Chancellor of the Exchequer). We see another fall in both nominal and real wages during the Covid pandemic due to furloughs covering only part of nominal wages (only some companies kept workers on during the pandemic) and falls in wages due to both rising unemployment due to so many being sacked during the pandemic and dependent upon Universal Credit, even with an uplift of £20/week. This benefits system was not designed for people to live on but enacted to push “lazy” unemployed workers back to work. If we look at the current period, despite increases in average weekly nominal wages after people have gone back to work and hence average wages have risen, we can see the impact of rising inflation eroding any gains and we can see the collapse in real wages.

What is needed to combat rising inflation is raising the national “living” wage and benefits. While it is unknown how long inflation will last, treating the cost-of-living crisis as a short-term problem belies the fact that nominal wages and benefits are too low: a structural problem caused by neoliberal economic policies and Tory responses to the “great recession” putting the onus on the working class.

The latest ONS statistics clearly show the difference between public and private sector wages.. We can see clearly the impact of austerity following the “great recession” when public sector wages were first frozen and then their growth was capped at 1%. The excuse was that public sector wages were too high compared to the private sector. According to the ONS:

“Average total pay growth was 5.9% for the private sector in April to June 2022, and 1.8% for the public sector.”

To get an idea of how bad the situation is, in May 2022, 6 NHS Health Trusts opened up food banks or provided food voucher programmes to help their staff be able to afford to eat; so much for the heroes of the pandemic, huh?

Already, there has been massive strike action in Britain. Rail workers and bus workers have been on strike over pay as well as attempts to “modernise” the system; including the elimination of guards on trains which is a safety hazard. Dock workers are on an 8-day strike at Felixstowe freight port over offers of a wage increase of 7% because the rate of inflation is greater than that. Postal workers are set to go out next week for 3 days of strike over pay. British telecom workers have already been out on strike. There have been teachers’ strikes over the pandemic, but they have been more local, but more strikes over pay and pensions are expected. In two London boroughs, refuse workers in Labour-run councils have gone out on strike over pay. Expect more public sector workers to go on strike over pay as wage offers fall below the cost of living.

Finally, trade unions are fighting back and our current summer of discontent will continue into the winter. The Tory response was legislation passed in the Commons in June 2022 allowing the replacement of striking workers by temporary agency workers to break the strikes, this legislation came into effect on the 22^nd of July; looking at the debate in the Commons is very instructive and it is questionable whether this legal under international law.

Welfare benefits are important to understand the situation. They do not only go to those that are unemployed; women with children and disabled people in employment get support to help with costs for children and cover extra costs of being disabled such as payments to cover social care. Many people with lower incomes get housing benefits to cover rent. Many benefits are means-tested in Britain, but not all.

Many women dropped out of work during the pandemic to care for their children and offer support and assistance to family members with impairments. There is a crisis in childcare, much of which is privatised and very expensive; the difficulty of affording childcare means that many women with young children cannot enter the workforce. When children are able to go to school, women often work several part-time jobs around school time. Given that those dependent on benefits to supplement their incomes are primarily women with children and disabled people, this is a very dangerous ideology. It blames those with low incomes, those needing benefits to supplement their incomes, or being dependent upon benefits to survive as somehow responsible for their poverty rather than the economy.

Universal Credit (UC; the main benefit system) and the earlier legacy benefits system are linked to the cost of living, but these changes in benefits are lagged and as such the 3% increase in benefits this year was far lower than inflation measured in all indexes. That is why Sunak offered the one-off payments for those on benefits of £650 to help cope with rising costs of living.

The ideology underlying Universal Credit was that those that are unemployed or are dependent upon benefits are lazy and don’t want to work. Embodied in the benefits system, there is conditionality forcing people to look for work, there is also a benefit cap which limits how much people that are not working can get in benefits. In addition, there is a 2-child maximum in terms of how much money you get in child benefits. If you get a job, the benefit cap is lifted meaning you can get more money (until you hit the level where you no longer qualify for many benefits). But women, especially mothers, are trapped, neither able to get childcare to get a job and unable to get a job because they cannot afford childcare.

Inflation and Recession

While people mention the danger of stagflation, in reality, we have passed stagflation and the economy is heading in a far worse direction. Stagflation is a combination of economic stagnation (relating to economic growth) and inflation; which was a threat in the oil crisis in the 1970s. The main difference between the 1970s stagflation and now is that wages were higher in the 1970s due to the capital-labour accord where workers’ wages were linked to productivity. This happened due to stronger trade unions and a larger industrial sector. The abandonment of the wage-productivity linkage was part of undercutting workers’ wages and was the beginning of the neoliberal attacks on wages. Currently, we have had a decade of stagnating money wages and there is not much lower they can go while ensuring subsistence. There is nothing left to give in terms of workers’ incomes. The British economy was already stagnant heading into the pandemic. While there has been some growth following the end of lockdown, essentially, we are in a period of stagnation; but are heading towards a recession.

We are moving to a combination of inflation and recession which is far worse than stagnation and inflation. The Tory Party candidates do not understand that a recession combined with inflation is far more dangerous. So, while Liz Truss babbles about increasing British economic growth and beating back a recession through a revolution of hard work, self-employment and small business creation, she is talking nonsense. The way in which Central Banks address inflation is inconsistent with her fantasies of economic growth created by plucky Britain picking itself up by its bootstraps. Moreover, her policies seem to imply that there is high unemployment in Britain which isn’t the case; the latest employment, unemployment and economic activity and inactivity rates have been released by the ONS are below. These quarterly statistics, starting with Aug-Oct 2021 and ending with Apr-Jun 2022. Unemployment has fallen, but both economic activity and inactivity have fallen slightly. The problem is not here an “idle” working class causing a recession.

It seems that the British economy is heading towards a recession combined with inflation. Traditional methods of addressing inflation such as raising interest rates actually dampen economic growth and will exacerbate recessionary tendencies. Raising interest rates will impact small businesses that borrow to bring in stock or intermediate goods and that will cost them more; mortgages and other borrowings (e.g., credit cards, loans) increase due to the higher rate of interest. The idea of raising interest rates is that they will slow down an overheating economy – we don’t have an economy that is overheating; our economy is slowing down.

Rising interest rates (which are being done by all central banks) would work if inflation was being caused by increasing demand by intermediate producers of goods and by consumers, but it will not help in a situation where it is predominately profits and profit rates in the energy sector that are leading to increasing prices.

Rising food prices had a major impact on the rising inflation in June/July. There are many things at play here, including transport costs as the price of petrol has risen. Britain being in a drought will not help and we need to talk about Brexit and the pandemic because international supply lines have been severed by both the EU and Britain. Climate change impacts food production in Europe: the heat wave has impacted agricultural production.

The last thing we need in an economy heading into recession is increased interest rates because they increase debt across all borrowing. If these interest rates continue to increase, it will dampen the economy. The cost-of-living crisis is not primarily caused by increased business and consumer demand and hence interest rate increases will not address the problem. Neither will tax cuts and support for a revolution in small business creation and self-employment. It seems that Truss is waiting to get the whole picture to make policy pronouncements about benefits … but it is doubtful that she really is losing sleep over the “idle” poor…

Some final thoughts

Britain is facing a number of crises, the cost-of-living crisis and the upcoming recession are only one among many. There is an environmental crisis. Climate change has led to a record-breaking heat wave in Europe. The Cobra Emergency Response Committee was convened by Conservative MP Kit Malthouse in July to discuss the extreme heatwave caused by climate change and emergency preparedness (but not the economy). Wildfires around Britain (of all places) are caused by the heatwave and limited rainfall. The limited rainfall has led to a water crisis and hosepipe bans around the country; water provision is privatised and repairs on old pipes just have not been done and massive leakage is wasting water.

There is a housing crisis, a water crisis, a crisis in the NHS, an environmental crisis, a non-existent refugee crisis caused by the refusal of the Tories to allow all refugees a legal way to enter Britain, a cost-of-living crisis, a democracy crisis due to Tory attacks on freedom of assembly, free speech and freedom of protest, and the criminalisation of poverty. Another crisis of democracy relates to the demand by the Scottish National Party for another independence referendum which the Tory Party will try to scupper just as they ignored the votes of Scotland against Brexit. The North of Ireland still does not have a working government because the Democratic Unionist Party is trying to get the British government to abrogate the Northern Ireland Protocol (you know the agreement where Johnson put a border in the Irish Sea) set up due to Brexit to get around the fact that trade between the Irish Republic and North Ireland must be open to satisfy the Good Friday Agreement.

Talking with a friend recently led us to wonder whether the situation is almost apocalyptic … in all honestly, if they were fiddling while Britain burned at least we would at least have music for accompaniment.

Susan Pashkoff is a revolutionary Marxist, Economist, political activist and blogger. She writes on issues around US and British politics and economics, gender and women's oppression, and disability.

“Fiddling While Rome burns”