Good morning, and here’s a riddle to start your day: what needs fuel in its tank, but also has to be balanced? What will turn into a black hole if we don’t fix its roof when the sun is shining? What will max out its credit card if we don’t live within our means?
The answer, of course, is not a motorhome floating through space and brandishing a Visa, but the economy – or, more accurately, the economy as Conservatives think about it. From Margaret Thatcher to Boris Johnson via David Cameron and George Osborne, all of those visions of the limits on the state’s financial firepower are framed by the right. All of them rely on a “common sense” idea so intuitive as to seem like a truism: the amount you have available to spend is strictly constrained by the amount you pay.
Why am I ruining your morning with overworked Tory metaphors? Because inflation hit 9% yesterday, and the accompanying cost of living crisis will most painfully impact the poorest. Almost every one of today’s front pages covers the situation. Today’s newsletter is about some of the ways to reduce the pain – and the heretical suggestion that a truism might not actually be true. That mindblowing idea, and several others, are right after the headlines.
Five big stories
Conservatives | Tory party officials came under increasing pressure to remove the whip from an MP arrested over claims of rape and sexual assault, as it emerged one alleged offence is connected to someone under 18.
Cost of living | Police officers should use their “discretion” when deciding whether to prosecute people who steal in order to eat, the new chief inspector of constabulary told the Guardian.
Ukraine | The UN warned that the war in Ukraine has helped to stoke a global food crisis that could last years if it goes unchecked, as the World Bank announced an additional $12bn in funding to mitigate its “devastating effects”.
Deportation | A Home Office deportation flight to Jamaica took off with seven people on board. The government reportedly had a list of 100 people it hoped to remove on the flight.
Health | More than 42 million adults in the UK will be overweight or obese by 2040 and at higher risk of cancer, an “alarming” new report reveals. Some 71% of people are expected to be overweight by 2040, against 64% today.
In depth: Rebooting the debate on cost of living
For a sense of the government’s approach to the cost of living crisis, consider the two measures that the Treasury took out for a test drive in briefings yesterday: a “warm home discount” on energy bills in England and Wales, and a 1p cut to the basic income tax rate, brought forward from next year. The former would benefit the poorest 3m, and will cost about £1bn. The latter will be spread out across everybody, including those who have barely noticed the spike in their bills – and is worth five times as much.
Meanwhile, many Conservatives are blaming the Bank of England for not raising interest rates early enough to keep inflation under control – but as the bank’s governor Andrew Bailey said on Monday, “we can’t predict things like wars – that’s not in anybody’s power.”
Randeep Ramesh, the Guardian’s chief leader writer, says that it’s time to think bigger, and quotes John Maynard Keynes’ view that trying to beat a recession with monetary policy – the measures available to a central bank to control the supply of money – is like “pushing a piece of string”.
Instead, he argues, we need to let go of the idea that big fiscal interventions – spending more money – are irresponsible. “There have long been injunctions that you can’t run big deficits or you go bankrupt,” he said. “Throughout coronavirus, central banks showed that there didn’t have to be this artificial limit to spending. But these ideologies take a long time to disappear.” So how did we get here?
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The status quo
That pervasive idea that the country’s finances are analogous to a household budget – you have to balance the books – was popularised by Margaret Thatcher, and reinforced by David Cameron’s government during the austerity years. “In the mid-80s, the left didn’t accept that,” Randeep said. “But it was dragged to that position. The Tories cemented the analogy in people’s minds.”
The reality of using monetary policy as your primary weapon against inflation and a cost of living crisis is that you wind up arguing, as Andrew Bailey has, that people should not ask for pay rises even as their expenses rocket. In the end, even when they succeed in keeping inflation down, those policies “shift disposable income from poorer families to richer ones, and they help people who invest in the pound – which is basically the city,” Randeep said.
When the government does consider big interventions, it much prefers tax cuts to new spending. Rishi Sunak’s speech yesterday promising to cut taxes for business makes the front of the Daily Mail, while cabinet ministers Liz Truss and Alister Jack are on the front page of the Daily Telegraph with calls for more of the same.
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The alternative
Another view of the way the economy works accepts that there are hard limits on our spending in the shape of finite resources and responsible stewardship of the planet – but adds that “when we say we’ve ‘spent all the money’ – the truth is there is no finite amount of money we can spend,” Randeep said. “Otherwise we wouldn’t have gone through £400bn during the pandemic without breaking a sweat.”
This is a crisis “created by a spike in the price of fuel, by coronavirus, by supply chain disruption,” he added. “If that’s what’s causing inflation, the Bank of England isn’t going to tame it. You have to deal with those issues differently.”
One measure popular with those who are sympathetic to this view – laid out by economist Torsten Bell in First Edition last week – is to bring forward an increase in benefits slated for next year. Other ideas might include a freeze in student loan repayments, greater subsidy for public transport or home insulation, and rent control.
If these ideas sound revolutionary, Randeep points out versions in place in Austria, Italy, and France. In the US, Joe Biden paused federal student loan repayments, subsidised healthcare, and sent $1,400 in Covid relief to more than 100 million people. Despite those examples, in the UK, such policies remain beyond the pale.
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So why aren’t we talking about it?
When Labour’s shadow chancellor Rachel Reeves was asked what she would do to deal with the effects of inflation on the Today programme yesterday, she talked about tax cuts and repeated Labour’s policy of a windfall tax on North Sea oil revenues – a crowdpleasing measure that had Boris Johnson on the back foot at yesterday’s Prime Minister’s Questions, but one which fundamentally accepts the narrative of balancing the books. The £2bn or more Labour estimates it would raise is a relatively small sum, but No 10 is still reported in The Times to view it as “ideologically unconservative”.
The problem for Labour is that it has made a commitment that new day-to-day spending will be covered by taxation. “They are hamstrung because they don’t have an answer to the question ‘Where do you get the money from?’,” Randeep said. “Let’s be honest – the economy is worth two trillion. These sums are a rounding error.”
It’s not like the Tories won’t bend the rules when it suits them. As today’s Guardian editorial says: “If the Conservatives can argue that taxes must come down to deal with inflation, even at the cost of a higher deficit, then surely Labour can argue that public spending could be increased for the same reason.”
Nonetheless, the right’s framing of the issue has become so pervasive as to be unnoticeable, the air that we breathe. To overcome that, Randeep argues, you need to talk about “[wanting to] make sure everyone has a home, can eat properly, has a good standard of living. You need to fight on different political terrain.”
That may still sound like a radical idea. “I don’t think it’s radical,” said Randeep. “What is radical is this unwillingness to see beyond our self-imposed limits. We’ve become an outpost for an ideology that has run its course. Through our strange political theatre, we have kept it alive.”
What else we’ve been reading
Even the coldest heart (mine) was melted by Eurovision on Saturday - and second place for Sam Ryder was a pretty fun subplot to Ukraine’s victory. Zoe Williams’ interview with our irrepressible runner-up is a treat. Archie
Inflation, wage stagnation, unemployment – these numbers all reflect real people, in desperate circumstances. Sarah Butler interviewed Jane Jones, a supermarket worker, who sees the human consequences of an economy in flux on a daily basis. Nimo
Watch all of Derry Girls. Then rejoice at Rebecca Nicholson’s five star review of the finale: “It is a rare comedy that bows out on a high like this”. Archie
Like political correctness before it, the word ‘woke’ has become a catch all term to disparage anythings progressive. Ellie Mae O’Hagan takes a look at how the political discourse has gotten to this point. Nimo
Peter Hessler’s account for the New Yorker of his time teaching at Sichuan University - and what happened when he was reported for “political wrongdoing” to the Chinese authorities - is beautifully written, and lit up by extracts from his students’ essays about their lives. Archie
Wagatha Christie latest
There was no courtroom action in the Rooney-Vardy case yesterday, which has – like many a game of football played by Coleen and Rebekah’s respective spouses – gone into extra time.
Instead, the trial will come to a close today, with closing speeches anticipated from both parties’ lawyers. High court judge Mrs Justice Steyn is expected to give her verdict on the trial at a later date in writing.
Sport
Football | Rangers suffered heartbreak in the final of the Europa League, losing to Eintracht Frankfurt in a shootout after a 1-1 draw. Aaron Ramsey missed the vital penalty.
Cricket | James Anderson and Stuart Broad have been brought back into the England test squad for the series against New Zealand. They were joined by uncapped 23-year-olds Matthew Potts and Harry Brook.
Climbing | Olympian Shauna Coxsey speaks to Emine Saner about her decision to keep climbing nine months into her pregnancy. “I’m a pregnant woman making choices,” she says.
The front pages
The Guardian newspaper leads today with “Police chief warns of surge in crime as cost of living crisis fuels poverty”. The Express says “It’s impossible! Pensioners can’t cope with 9% inflation”. The Mirror has “The GREAT inflation swindle” saying pensioners face an 11% inflation rate while it’s “just 8% for the multimillionaire chancellor”. The Times splashes with “Hopes for a windfall tax blocked by No 10 team”. The Financial Times says “Sunak warns of tough times ahead as inflation hits 40-year high of 9%”. The Metro headlines its coverage of the subject with “Cost of living crisis – inflation hits home”. According to the Daily Mail, Tory ministers are examining a “Triple tax cut boost” to ease the cost of living crisis. The Daily Telegraph says “Putin turns screw on global food supplies”. The i reports “MPs block inquiry into alleged rapists working in parliament”. The Sun says the Vardys are planning to move to the US.
Today in Focus
How Vladimir Putin rejuvenated Nato
Finland and Sweden this week formally applied to join Nato after years of non-alignment. Jon Henley reports on how the Ukraine war has given the alliance a new lease of life.
Cartoon of the day | Martin Rowson
The Upside
A bit of good news to remind you that the world’s not all bad
For the first time in history, the US men’s and women’s football teams will split prize money equally from both World Cups. Before this seismic agreement the winnings were deeply uneven: for the men’s World Cup in Qatar later this year, the prize money stood at $400m, but for women’s cup in 2023 it was only $60m.
This achievement is part of a wider years long battle for equal treatment for the women’s football team: the US Soccer president Cindy Parlow Cone said: “These agreements have changed the game forever here in the United States and have the potential to change the game around the world.”
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