After two years, there may be gentle on the finish of the Covid-19 tunnel. Every day recorded instances of the Omicron variant are falling and it appears doubtless plan B restrictions can be eased in England on the finish of the month. Nicola Sturgeon has relaxed the 500-person restrict on mass gatherings in Scotland.
The return of life to one thing approaching regular must be unalloyed excellent news for the federal government. In any case, the pandemic has resulted within the economic system shrinking by nearly a tenth in 2020, sending public borrowing to a peacetime record.
In truth, the waning of Covid-19 as a difficulty might make life extra reasonably than easier for Boris Johnson, as a result of it is going to enable folks to give attention to all the things else that it happening. They are going to be free to ponder a 50% increase of their vitality payments in April, a rise in taxes, and costs rising quicker than wages. Chuck in greater rates of interest from the Financial institution of England and it’s not laborious to see why even Tory-supporting publications have been warning a few cost-of-living disaster.
Warren Buffett, the veteran US investor, once said that it’s solely when the tide goes out that you simply see who’s been swimming bare, and infrequently has that maxim appeared extra apt. Despite the fact that the economic system will proceed to develop this yr, for a lot of voters 2022 goes to really feel extra like a recession yr than 2020 did.
It’s taking the federal government a very long time to understand the political peril this represents, notably at a time when public anger over the events at Downing Avenue is palpable. Labour has been operating laborious with its “them and us” assault on the prime minister over adherence to lockdown guidelines, nevertheless it now has the chance to mount the identical argument on the economic system: the wealthy are benefiting from hovering home and share costs, whereas these struggling to get by can be clobbered by a rise in nationwide insurance coverage contributions and £600 a yr on the typical family’s gasoline payments.
On the top of the pandemic, it was laborious for Labour to get a listening to on the economic system. No person was actually eager about what the principle opposition celebration needed to say throughout a well being emergency; and, in any case, Labour was broadly supportive of the measures taken to forestall lockdowns resulting in mass unemployment.
That’s now altering. Partly, that’s as a result of cash is not gushing out of the Treasury on the price it was. Rishi Sunak introduced £1bn extra for hospitality firms in December, however beforehand determined to not proceed with the £20 every week uplift to common credit score introduced firstly of the pandemic and insisted on a nationwide insurance coverage (NI) improve to pay for additional spending on the NHS and social care. Each these choices – controversial on the time – look much more questionable within the gentle of the following soar in international vitality prices, a worth shock harking back to the Seventies.
However partly, too, the federal government’s delay in responding to calls for for shoppers to be shielded from looming worth rises has allowed Labour to fill the vacuum. Its plan features a short-term minimize in VAT, shoppers not being anticipated to choose up the tab for the prices of the greater than 20 vitality corporations which have lately gone bust, and a windfall tax on North Sea oil and fuel to assist pay for an expanded and extra beneficiant heat house low cost – the assistance with payments offered to these on low incomes. Underneath Labour’s proposals round one-third of UK households would see just about no improve of their payments subsequent yr. There could be one thing off payments for everybody, with additional assist for many who want it most.
It’s fairly laborious for the federal government to push again towards Labour’s concepts. The prime minister himself said in the course of the EU referendum marketing campaign that one of many advantages of Brexit could be the liberty to set our personal VAT charges, and the primary Thatcher authorities imposed a North Sea windfall tax in 1980. Accusing Labour of being the celebration of tax and spend has its difficulties for the Conservatives, provided that taxes are on track to be their highest since Clement Attlee was prime minister.
Whether or not the vitality disaster represents Keir Starmer’s breakthrough second stays to be seen. The excellent news for the federal government is that unemployment is low and inflation is predicted to fall again later within the yr after peaking within the spring. The dangerous information is that the time-honoured Conservative manner of ramping up the economic system – a house-price growth – shouldn’t be an choice as a result of the property market is already crimson sizzling. Whereas the principle focus of Labour’s assaults has been the prime minister, the shadow chancellor, Rachel Reeves, has additionally been accusing Sunak of going lacking in motion. Reeves clearly thinks the chancellor is wanting susceptible, which certainly he’s.
Two years of Covid haven’t essentially modified the fundamental guidelines of politics. Governments thrive when wages are rising quicker than costs and residing requirements are going up. They battle when the other is the case. Opinion polls counsel “crimson wall” voters are angered not simply by Johnson’s flouting of lockdown guidelines but in addition by his failure to ship on his levelling-up agenda. Given the squeeze on household budgets, there has not often been a extra opportune second for Labour to suggest an alternative choice to NI will increase: wealth taxes on the wealthy.