Boris Johnson must respond to growing cost-of-living crisis as further energy prices loom – John McLellan

As temperatures drop, even the comfortably off are likely to be thinking twice about bumping up the central heating a notch, ever since energy analysts’ predictions in October of energy bills soaring as much as a third this year.

Boris Johnson needs to rediscover his political form (Picture: Jack Hill/WPA pool/Getty Images)
Boris Johnson needs to rediscover his political form (Picture: Jack Hill/WPA pool/Getty Images)

Since the research firm Cornwall Insight published its findings, personal finance pundit Martin Lewis has upped the prediction to 48 per cent, and Energy Saving Trust research estimates the annual cost of gas heating for a typical three-bedroom home could surge to £1,360. Despite the consensus that gas and electricity price increases will be crippling and plenty of suggestions for limiting the impact, there is still no actual commitment to meaningful action.

Much of the focus has been on the five per cent VAT which the UK government could scrap, but the rises are such that on its own it might not be noticed. However, the removal of environmental tariffs which now account for an estimated quarter of our energy bills is a different matter.

It’s all very well trying to encourage people to adopt more eco-friendly lifestyles, or sticking on a few pounds to subsidise renewable energy, but these levies were devised when costs were far lower, and consumers could take the opportunity to make informed choices.

Boris Johnson rejected the removal of VAT on fuel as a “blunt instrument” because the rich would benefit too, a description which old-fashioned Conservatives who believe in a low-tax economy might find somewhat concerning.

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The theme is continuing with Mr Johnson resisting calls, most notably from Jacob Rees-Mogg, to scrap the 1.25 per cent National Insurance increase coming in April. For someone earning £30,000 a year, the combination of tax and energy increases could mean a £500 hit on a net income of £24,000.

This would be hard enough at a time of economic stability, but with inflation set to hit seven per cent and the cost of borrowing now certain to rise to keep it under control, it all adds up to a pressure on household budgets which few will have experienced; those who remember the days of 15 per cent interest rates are now in their 50s and only those now approaching retirement will have been earning in the late 1970s when general price inflation far outstripped wage increases.

The Resolution Foundation gloomily estimates a total impact on average households as high as £1,200 this year.

And let’s not forget Council Tax increases coming in April. While some councils might do their best to keep them down, in overstretched authorities like Edinburgh with already unaffordable spending commitments, the temptation to set inflation-busting hikes to meet wage demands could be too tempting to ignore.

Already, SNP-controlled administrations are blaming London, despite the deliberate and ongoing starvation of funding for Scottish local authorities by the Scottish government.

But there’s no getting away from the fact that the big economic levers of general taxation and monetary policy lie in Westminster. The UK government has the means to take direct and immediate action to mitigate the worst effects of economic gloom, one already shaping up to be a political crisis for Mr Johnson which will need more than can-do rhetoric to address.

He might emerge by the skin of his teeth from the Downing Street decor fiasco, and while his devil-may-care attitude to small matters like who funds lavish refurbishment of his taxpayer-funded accommodation may be priced in to public attitudes, not so when what’s at stake is not the reputation of a raffish figure who refuses to play by the rules but the living standards of millions of people.

Red Wall voters tired of years of Labour entitlement and inaction backed the Conservative Party in their thousands for a better way, but waiting for Levelling Up infrastructure projects when, as Harold Wilson didn’t say, the pound in their pocket is being badly affected isn’t what they voted for.

They might even be able to forgive a few staff parties in Downing Street if they’ve been at a few themselves ─ although the recent poll slump suggests otherwise ─ but it is working families’ rising cost of living which will drive them away, not Carrie Johnson’s expensive taste in wallpaper.

Similarly, if the abandonment of the core Conservative principle of low tax becomes a hallmark of this administration, then the 1922 Committee won’t have long to wait for the 55 letters of no confidence from Conservative MPs needed to trigger a leadership challenge.

The test of the local elections in May should concentrate minds, but whatever Downing Street’s plans may be ─ much is resting on Michael Gove’s Levelling Up White Paper due this month to give them some shape ─ it’s entirely possible they do not include what might happen in town halls. MPs (and MSPs), however, will be hearing from their councillors and local associations now about how the campaigns are going and it’s unlikely to be a ringing endorsement.

But there is time for an upturn in fortunes. Firstly, the Omicron strategy of holding nerve and avoiding a return to lockdown without collapsing the NHS might pay off if modelling showing the triple vaccine has successfully reduced the severity to below that of normal winter flu holds true. Secondly, the UK government can still act to reduce the burden on household income.

The eco-levies and VAT on fuel (electricity at least) along with the National Insurance hike can go, Universal Credit can go up, and the UK government can re-appraise immediate spending priorities to match the circumstances.

Here, the SNP’s Omicron response has been angry and harmful by comparison. Less that a year after the Holyrood elections, it has seemingly run out of ideas except rebooting the independence referendum campaign when the wider economic circumstances illustrate just how ruinous establishing a new state would be.

If May is the test, then like an out-of-form batsman, Mr Johnson needs to rediscover the scoring habit.

John McLellan is a Conservative councillor in Edinburgh

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