From London
With Boris Johnson lame duck until the Conservative Party announces his replacement on September 5, opposition Labor leader Keir Starmer has taken center stage with a bold plan to combat one of the key issues of the year. : energy prices. Starmer presented a package equivalent to about 35 billion dollars to deal with this “national emergency” so that no one “has to pay a penny more this winter.” Starmer’s plan contemplates maintaining the current annual ceiling on the cost of energy (about 2,381 dollars) eliminating the eighty percent increase announced by the conservative government from October.
Labor would finance this tariff freeze with an increase in the current special income tax that the Tories instituted after strong public pressure (equivalent to almost 10 billion dollars). With the plan of the main opposition party, this sum would be doubled since exemptions and other legal loopholes of the conservative plan would be eliminated and the tax would be rolled back to January of this year.
If the accounts close, in addition to saving the typical household about a thousand pounds a year, Starmer calculates that it would lower the level of inflation, which, according to the Bank of England, will amount to thirteen percent. Labor calculates that the Conservative plan for tariffs will increase inflation by six percent, while with the proposals presented by Starmer the impact would be reduced to two percent. “The cost of living crisis in the UK is getting worse and there are many people who fear they will not survive this winter. We are talking about a national emergency. It needs strong leadership and urgent action,” Starmer said.
Nationalize services?
Starmer’s words can be applied to himself who only now stops doing the plank betting on the simple political discredit of the conservatives. Former Labor Prime Minister Gordon Brown raised it last week in an article in The Guardian that raised eyebrows not only among the Conservatives but within Labour.
Brown proposed to renegotiate the agreements with private companies in the energy sector, end the maximum price ceiling and, instead of freezing, reduce the account that users are paying today. In the former prime minister’s proposal, companies that could not lower their rates should be temporarily nationalized in the same way that Brown himself did with the banks during the 2008-2009 crisis when he was in charge of the government.
Starmer’s plan is rather more timid, but infinitely more audacious than the one proposed by the two candidates to replace Boris Johnson on September 5: former finance minister Rishi Sunak and chancellor Liz Truss. With Boris Johnson in government and Sunak in charge of finances, the Conservatives announced an 80% increase in tariffs in October and a little more in January, due to the increase in international prices due to the war in Ukraine. Sunak included a relief plan for the poorest households.
According to various studies, Sunak’s 400 pounds of assistance per year will not prevent some 15 million people (67 million total population) from falling into what the British conceptualize as “fuel poverty”. This poverty is traditionally calculated as spending more than 10% of a household’s income on energy. In many cases, the dilemma that arises is to eat or light the stove in the harsh British winter.
The dead end of rhetoric
In March Boris Johnson, who still dreamed of surviving the Partygate scandals, refused to have a special rent on energy companies because that would “disincentivize private investment.” Several scandals later, with the public infuriated by the conservative “insensitivity”, Johnson reversed course and announced that there would be a special income for energy companies (gas and oil) that had been increasing their profits exponentially with the war. But after resigning in early July, Johnson ruled out the proposal to extend this special rent to electricity generators: the decision would be up to whoever took office in September.
In the bloody race to replace him (“they’re gouging out their eyes,” said Ruth Davidson, former leader of the Conservatives in Scotland), the two contenders reject a tariff freeze and differ on what they would do in terms of aid. Chancellor Liz Truss, favorite among the members of the Conservative Party who will elect the new leader, focuses her program on lowering taxes as a way to relaunch the economy that entered negative territory in the second quarter of the year (fall of 0.1% ).
Truss wants to revive the totemic figure of Margaret Thatcher, but times have changed: the cost of living has become central. Her deafness regarding this crisis could cost her the leadership of the Conservative Party, which would make her the third woman to occupy 10 Downing Street. Last week she changed her position so many times that nobody is very clear about what she is proposing with the accounts that reveal the British now that summer is ending. On Tuesday, Truss crucified himself with his low-tax mantra. “The first thing we Conservatives do is make sure people have more money in their pockets. I am not in favor of taking money from people with taxes and giving it back with help. That’s Gordon Brown economics.”
Given the uproar caused by his words, he clarified 24 hours later that he was not against helping those most in need. “I did not say that. I said that my priority is not to take the money from him to give it to him later. I believe in a low-tax economy.” Supporters of his rival Rishi Sunak called Truss’s program a “political suicide” and an “economic fairy tale.”
And it’s not that Sunak is a progressive Tory: it’s that Truss is so opinionated that Johnson’s former finance minister seems reasonable. Sunak’s proposal is to add to the aid of 400 pounds, the elimination of VAT on the accounts. A billionaire, married to an Indian billionaire linked to tax havens, Sunak has an equally conservative agenda, only a little more pragmatic: This is not the time to cut taxes to stimulate the economy.
Neither the financial crash of 2008, nor the pandemic or the war have shaken this conservative mantra of recent decades. In 2010 the corporate tax was 26%. In the 12 years of Conservative governments that followed it fell to 19%. What happened in this period with private investment? It remained at the previous level, among the lowest in the G7. In the absence of new ideas is what there is. Among the members of the conservative party, discouragement is such that in a recent poll that included, together with the Truss-Sunak option, the possibility that Boris Johnson would continue as prime minister, 63% preferred the golden-haired blonde before the current chancellor (22%) or former finance minister (19%).