Digital currencies

Cost of living relief? As the FT reports rumours of a government announcement soon on the cost of living crisis, many think tanks have been advocating different interventions to ease the strain on low-income households.

• Income support. The Social Market Foundation has urged Rishi Sunak to give a one-off direct payment of £300-£500 as a “cost-of-living bonus”. The Resolution Foundation’s Torsten Bell also called for a £300 one-off payment to 8.5m low income households, costing the government £2.5bn. 
• Analysis. NEF has estimated the distributional impact of various policy options available to the government, concluding that “emergency government support is best delivered through the existing means-tested benefits system” NEF’s illustrative £800 boost would offset 60% of the expected £14bn increase in domestic energy bills, with the rest of the cost passed through primarily to higher income families. The Director of Reform, explained in a Twitter thread how benefits have been uprated historically in times of inflation.
• Paying for it. Using research from Common Wealth’s Drilling Down, Political Economists Sandy Hager and Joseph Baines make the case for a windfall tax on the Big Six energy providers to pay for the cost of living crisis.
• Longer term reform. The TUC is calling for emergency measures to protect low paid workers, and “structural solutions to fix our broken energy system”. Citizens’ Advice outlines the failures of Ofgem and proposes recommendations for reforming the energy regulator.

Senior tories call for scrapping NICs rise. The former Conservative cabinet minister David Davis has joined the call to scrap the planned tax rise hitting National Insurance Contributions to be scrapped to alleviate financial pressure on households amid inflationary cost increases.

• Don’t worry about the debt. City economist Roger Bootle explains in the Daily Telegraph why Rishi Sunak can afford to scrap the planned increases in National Insurance Contribution: “rescinding the increases would eventually be self-financing, but in the meantime borrowing can take the strain”.

Cost of cutting the “green crap”. Carbon Brief’s Simon Evans calculates that the cost of cutting clean energy policies - such as energy efficiency subsidies, onshore wind in England and the zero-carbon new homes standard - by the Conservative-led government in the 2010s has left UK energy bills £2.5bn higher than they would otherwise have been.

The politics of energy. E3G’s Euan Graham sets out why the UK’s future resilience lies in the acceleration of clean energy. His briefing takes aim at arguments made by free marketeers on the right for increasing the domestic extraction of natural and shale gas. The Institute for Economic Affairs, for example, have been attacking the Conservative Environment Network (defence here) for advocating more interventionist solutions to the UK gas price crisis.

#UKPoverty2022. Joseph Rowntree Foundation’s new report - “the ultimate reference document for the complete picture of poverty across all its characters and impacts” - finds that 1.8m children are growing up in “very deep poverty” (up by 500,000 since 2011/12) with where 1 in 5 children living in poverty for three of the last four years. (See this Twitter thread summary for key takeaways in areas of housing, work, disability, gender, ethnicity and more.)

• Policies. Commenting on the report JRF’s Helen Barnard outlined a range of policies which could alleviate the persistent trends in child poverty, ranging from investing in social housing, improving job security, better regulation of the energy market and reforming social security.

Food prices and underestimating inflation. Food campaigner Jack Monroe’s viral Twitter thread has sparked debate about differential inflation rates for people on higher and lower incomes. 

• The calculation debate. The New Statesman’s data reporter Katharine Swindells analysed an ONS data tracker to verify Monroe’s claim that the prices of “cheap” items have risen more than the prices of “median” items. However, the FT’s Chris Giles argued that the official data for inflation was calculated correctly; “the real story is that it is high for everyone”. The Resolution Foundation’s Jack Leslie countered, suggesting that official inflation figures largely cannot capture differential rates of price growth for different kinds of product within a specific category”, such as food.
• Better inflation index? The debate has led Jack Monroe to launch their own price index to better capture the rising prices of basic supermarket versions of essential goods and to inform policy targeted at the poorest households. Personal inflation calculators based on individual consumption habits do exist for some countries in Europe, but the UK is not included. NEF’s Real Britain Index was an attempt to provide an alternative measure to the CPI to calculate inflation for those specifically on lower incomes.
• Inflation and environmental crisis. James Meadway explains why the economic mainstream is getting inflation wrong in a blog for PEF, pointing to the role of environmental shocks in driving price rises. He suggests that this will increase the relevance of price controls for specific goods. (For more on this see our recent Digest.) 

A social security system fit for the future? The latest output from the Resolution Foundation’s Economy 2030 Inquiry looks at the social security system and whether it can meet current and future economic and social challenges. It concludes that “The evolution of Britain’s welfare state since its post-war creation leaves it providing a weak safety net - with far too many people falling into poverty, and little insurance for those whose jobs are threatened by economic change.” (Twitter thread summary.)

• Reimagining a non-colonial welfare state. Political economist Gurminder Bhambra observes in a peer-reviewed article that: “The British welfare state was founded less on the 'Spirit of '45' than on the labour, taxes and wealth of colonial populations ... we cannot reimagine the welfare state in the present without reckoning with this historical legacy.” (Read her Twitter thread summary.)

Bidenomics. The US economy is doing surprisingly well, argues economic historian Adam Tooze, but with the failure to get his major Build Back Better Act through Congress, President Biden’s prospects aren’t looking good.

• A new progressive approach? The Roosevelt Institute’s Suzanne Khan looks back at Biden’s first year, hailing a new and “exciting” vision for macroeconomic policy. The Centre for American Progress also reviews the economic recovery, labeling it the “Biden boom”. (For a longer account of the US economy since 2008, see this article by the Centre on Budget and Policy Priorities.)
• Modern supply-side economics. U.S.Treasury Secretary Janet Yellen said the Biden administration is aiming to boost economic capacity through ”modern supply-side economics”. In a speech to the World Economic Forum, she said that the Trump approach of tax cuts and deregulation haven’t worked, and that the focus of policy needs to be on labour supply and public infrastructure. 

Labour’s five-point plan. Shadow Chancellor Rachel Reeves has set out Labour’s approach to economic policy. Her five-point plan encompasses industrial strategy, education and training, raising investment, innovation and trade. Interviewed in the FT, she described Labour as “pro-worker and pro-business” and outlined how Labour would partner with business to develop infrastructure, apprenticeships and to increase research spending. In the Mirror, she argued that a focus on job creation would lead to higher tax revenues and therefore a much needed boost to public services.  

Productivity. New ONS data show that UK output per worker is weak in comparison to other rich countries. A Resolution Foundation report looks in detail at why the productivity gap between the best and worst firms is so large. 

What is levelling up and can it work? The new Centre for Inequality and Levelling Up at the University of West London has published a report bringing together the most prominent voices on levelling up to offer their perspectives on what it means. 

How the pandemic hit the high street. Although ‘levelling up’ focuses on the north and Midlands, the worst affected areas during the pandemic have been elsewhere. The FT’s new postcode tool reveals all.

Greater Manchester Clean Air Zone. Greater Manchester councils voted to refer the Clean Air Zone back to the government for review last week. Mayor Andy Burnham said he was pleased about the vote as in his view it is “impossible” to proceed on the current basis following a large public backlash. 

• Air pollution deaths. Approximately 1,200 premature deaths each year in Greater Manchester are linked to air pollution. 

Community wealth building and economic democracy. Matthew Brown, leader of Preston City Council, explained how Labour in local and regional government are democratising local economies through establishing cooperative banks, developing municipally-owned green energy works and cooperative housing projects.

• Danish housing cooperatives. UCL student Rosie Collington writes on the joy of living in a housing cooperative and how Denmark’s co-ops are under threat from broader changes in finance. About 7% of Danish people live in some form of cooperative housing but recent changes have meant that they have become increasingly unaffordable for newcomers. 

House prices continue to rise. Commenting on new data from HM Land Registry, The Resolution Foundation’s Krishan Shah reports that average house prices have grown 10% in the 12 months to November (Twitter thread summary)

• For more on house price inflation, the effect on the cost of living and inequality, and possible solutions, see last week's Digest.

Will millennials be ready to lead in the destabilised world of 2040/50s? IPPR’s Laurie Laybourn-Langton has published the first output of Cohort 2040, “a project seeking to better understand the challenge facing emerging leaders of the millennial generation and to build a community that helps these leaders more effectively continue the struggle for a better world as environmental destabilisation grows”. The first framing paper outlines the challenge facing future leaders in being prepared for runaway, catastrophic changes to the environment. (Author commentary here)

• Environmental breakdown and cascading system failure. The report features a useful diagram (p.12) illustrating the impact of the interlinked and cascading effects of events on wider social and economic systems. This has consequences for a world which, in the words of the UK’s latest Third Climate Change Risk Assessment, increased the risk of climate-triggered wars in the coming decades from “medium” to “high”. 

Global “climate club”. German Chancellor Olaf Scholz vows to use Germany’s presidency of the G7 to achieve “a paradigm shift in international climate policy.” “We will no longer wait for the slowest and least ambitious…we will turn climate action from a cost factor into competitive advantage by agreeing on joint minimum standards”. (Read this peer reviewed article on the political feasibility of climate clubs for more)

Opportunities and challenges for an effective Green New Deal (GND). A peer-reviewed paper by UCL IIPP’s Katie Kedward and Josh Ryan-Collins outlines the intellectual history of the GND and considers how recent shifts in macroeconomic policy following the Covid-19 pandemic might support the case for a progressive green transition. The authors conclude that greater coherence between fiscal, regulatory, monetary and industrial policy spheres is needed, “with public financial institutions having a key role in driving mission-oriented innovation”

Shorter working week. The Women’s Budget Group and the Women’s Environment Network are hosting an event in February on how a shorter working week could form part of a green, caring economy. Register here.