ShareLONDON: The UK's new Prime Minister Liz Truss takes power following a "summer of discontent" and as Britons tighten their belts in response to double-digit inflation and soaring energy costs. Liz Truss inherits an economy set to enter recession before the end of the year, with double-digit inflation forecast to soar further. "We have a historically huge shock to the cost of living and incomes," said James Smith, research director of the Resolution Foundation think-tank. "The next prime minister will have to focus on the current crisis from day one."
Workers from refuse collectors to lawyers have for several months been joining picket lines to push for higher pay. The strikes have won widespread support but at the same time infuriated some people caught up in train cancellations, overflowing bins and empty shelves.
The industrial unrest comes as drought in England and Wales, exacerbated by climate change, has parched crops, sparked wildfires and caused trees to shed leaves early. But many households are already shivering in anticipation of a winter of massively hiked energy prices. "It's summertime in the UK but the living is anything but easy," quipped the Financial Times. "Almost nothing seems to be working in Britain," wrote The Economist magazine, adding: "It could get worse".
Inflation impact
The Office for National Statistics this month said its consumer price index had risen 10.1 percent in the year since July 2021, the highest jump in 40 years. The cost of food and non-alcoholic drinks has risen most sharply, with the biggest price hikes basic foods such as milk, cheese and yoghurts.
This comes as inflation has created the steepest fall in real-term wages in two decades, hitting those on lower incomes the worst. "These price rises have made the country worse off and many or all of us will ultimately lose out as a result," said the respected Institute for Fiscal Studies (IFS) think-tank. In a sign of growing poverty, the number of children eligible for free school meals is up almost 1.9 million since 2021.
'Real hardship'
Meanwhile, the UK energy regulator is shortly to allow suppliers to charge consumers vastly more, to reflect high global wholesale prices. The UK has some of the least energy efficient and oldest homes in Europe and a slow rollout of green technology such as heat pumps.
High bills will hit people across society but particularly those on low incomes with high energy needs, said Smith of the Resolution foundation, citing large families and people with disabilities. "I think we are going to see real hardship and even destitution," he warned. The poorest in Britain often use pre-payment meters, meaning they cannot spread energy costs across the year.
The Resolution Foundation has proposed a 30-percent discounted "social tariff" for low- to middle-income households. While Europe is also experiencing a big energy shock and the US is seeing its economy overheat and high inflation, "in a way we've got the worst of both worlds", said Smith.
The University of York has estimated that two-thirds of UK households will be in "fuel poverty" by January-paying over 10 percent of net income on energy. Experts warn of severe consequences. "In a matter of weeks, many more parents are going to be facing impossible choices between eating or heating. "Yet we still do not yet have a plan from the UK government that recognizes the urgency or scale of this energy price crisis," said Dan Paskins, director of UK Impact at Save the Children.
Industrial action
In a "hot strike summer", numerous sectors are demanding pay rises equal to inflation-rail and bus workers, dockers, postal workers and even criminal lawyers. In Scotland's capital, Edinburgh, council workers who remove rubbish timed a stinking strike to coincide with the city's globally famous arts festival. Dockers have walked out at the major container port of Felixstowe, in eastern England, in a move set to hit supply chains.
The rise in strikes has prompted right-wing media to draw parallels with the 1970s, when nationwide strikes were widespread. The National Institute of Economic and Social Research think-tank stressed, however, that "the strikers in 2022 ... are operating from a position of weakness".
Only about 23 percent of the workforce is now represented by unions, it said. Due to Brexit, COVID and other factors, the labor market is tight, with fewer workers than jobs. This has hit sectors such as airports, which let specialized staff go during the COVID, resulting in long queues for holidaymakers and flights scrapped from schedules.
Promises
With inflation at a 40-year high above 10 percent, fuelled by rocketing energy and food prices, Truss promised during her campaign to cut taxes. She pledged also to reverse a recent increase in workers' National Insurance contributions that fund the public health service and welfare payments. Truss is also proposing to axe taxes on fuel that pay for the transition to cleaner energy but she has rejected "sticking plaster" solutions to the cost-of-living crisis such as direct government aid.
An emergency budget is expected within weeks, as the Bank of England (BoE) predicts that the UK will enter a year-long recession by the end of 2022. Before then, Truss is expected to present a plan to tackle soaring energy bills. "If I'm elected prime minister, I will act immediately on bills and on energy supply," Truss, who steps up from her role as foreign minister, told the BBC on Sunday.
Truss, 47, has backed the UK's ambition to achieve carbon neutrality by 2050. She favors all-out investment in energy including controversial fracking technology where it is backed by locals. Truss also wants more energy to come from the North Sea and backs current UK government policy on investment in nuclear power and renewables. Boris Johnson last week pledged £700 million ($815 million) in funding for the new Sizewell C nuclear power station, as he prepared to hand over power as UK prime minister and Conservative party leader. - AFP
