Turn on the radio or scroll down your phone and the big headlines belong to Covid. But when this latest version of the plague drops off the front pages, another story is set to take its place – and this one will hang around for most of the year, setting the terms of trade at Westminster and possibly deciding Boris Johnson’s future.

You can spot the buildup this week, from Keir Starmer’s warning of a crisis to Tory backbenchers clamouring for Johnson to act now on high fuel bills. And you can already see the misery in the stories about how Britons now wrap themselves up in blankets and turn on their hairdryers to keep warm, rather than run the central heating. Over the next few weeks, the crisis will only grow.

On 7 February the energy watchdog, Ofgem, sets the new maximum price for energy bills. Utility firm bosses are warning that the cap could easily go above £2,000, twice what it was last winter. Experts at the National Energy Action charity have warned that fuel poverty could rise to its highest levels since John Major was in No 10, with about 6 million households having to choose between heating and eating, or paying the bus fare or buying sanitary pads.

This means 2 million households, which as recently as last autumn were still keeping their heads above water, will sink when the new cap kicks in on 1 April. At just that point, taxes go up too. National insurance will rise, as will council tax across much of the country, alongside a stealth increase in income tax bills. Put all that together and the Resolution Foundation warns that the average household stands to lose an extra £1,200 a year. To this we can add the effect of higher petrol prices. These bills will pile up while wages and benefits are falling in real terms. It is a recipe for widespread deprivation and massive political turbulence. It also blows apart the electoral coalition that handed Johnson his landslide. In true-blue Woking, only 6% of households are in fuel poverty; in Workington, by contrast, which went Tory only in 2019, that proportion is nearly 14%.

My bet has long been that boring old economics will inflict far more damage on Boris Johnson than baroque politics. Most critics of the Sun King have spent the days since 2019 attacking his rule-breaking, his brinkmanship with Brussels, his sheer bad behaviour. Until the revelations about the parties at No 10, hardly any of it landed with a public that is wearily well used to a political class trashing norms to fill its boots; just ask the Right Hon Member for Greensill Capital. But all those voters, left unmoved by 42-point headlines and stinging op-eds, are far more likely to be mobilised by the largest tax burden in 70 years, swingeing cuts to frontline services and surging inflation.

No wonder the government can barely quell its anxiety. The business secretary, Kwasi Kwarteng, has been meeting energy bosses in a series of emergency summits, the latest held on Wednesday, while Chancellor Rishi Sunak’s team has been grumbling to journalists about having to stump up for any of this. Still, with only a month to go before the Ofgem announcement, no deal is on the table.



What’s odd is that Johnson has himself pledged one such remedy. Co-writing an article in the Sun less than a month before the EU referendum of 2016, he vowed that Brexit would mean the end of VAT on fuel bills. “We will be able to scrap this unfair and damaging tax,” Mr Leave wrote . “It isn’t right that unelected bureaucrats in Brussels impose taxes on the poorest and elected British politicians can do nothing.” A whole two and a half years since becoming prime minister, he has done precisely nothing. This week he squirmed on TV that cutting VAT was a “blunt instrument” that wouldn’t direct help towards those in most dire financial need. Fancy that! If only someone had warned us that this guy reneges on a deal.

But if Starmer wants to capitalise on this moment, he needs to do far better than make nothingy speeches larded with abstract nouns and bedecked with flags. Labour wants to scrap the 5% VAT rate on energy bills, but in truth it’s small change: £10 back on a £200 monthly bill. Better would be to call for a windfall tax on gas and oil companies, which have been making a killing as fuel prices rise, and direct that money to the least well-off. If Labour can take that position early and loud enough, they’ll reap rewards when the Tories copy them. They can also point to the failures of the energy market ­– the collapse of 26 suppliers and the consolidation of their customer base back into the hands of the big six – as grounds to try something new: to use the public sector to direct more investment into nationally secure renewables.

This is a generation of politicians that has never faced an inflation shock but is nevertheless haunted by the mythology around what happened in the 1970s. With good reason: Thatcher used that episode finally to dismantle the Keynesian welfare state and to exile the left for more than a decade. The right is already reheating those old arguments about how inflation and higher interest rates must mean reduced public spending, and how taxpayers don’t want to pay for “green crap” and reducing poverty.

It is essential that the left counter those points now. This isn’t the 70s, and there is no danger of a wage-price spiral. This is a workforce that has just emerged from the worst squeeze on living standards since Napoleon marched across Europe – and it is just about to enter another one. It’s not the labour force that isn’t working: it’s the markets and the supply chain. Those are what need to be fixed.

Source: The Guardian

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