The ‘Energy Profits Levy’. The government acquiesced to cross-party calls for a windfall tax last week, announcing a 25% “Energy Profits Levy” to partly fund a £15bn package of support for households struggling with rising energy bills. Paired with the Energy Bill Rebate, all households will now receive financial support ranging from £550 to £1200 depending on means-testing. (Read Carbon Brief’s summary of the package and surrounding media coverage, and read the Resolution Foundation’s analysis of the ‘broadly progressive’ distributional impacts.)
Is the stimulus enough to prevent recession? Media coverage highlighted the generous size of the package, but the stimulus will not fully offset the effects of the Energy Price Cap’s rise in the Autumn on household incomes - described as ‘catastrophic’ by National Energy Action’s Adam Scorer. (NEF’s Chaitanya Kumar explains that the poorest households are still ~£700 poorer on average, despite two packages of support so far this year.)
Political fallout: free marketers vs pragmatists? Politico detailed the ideologies at play in the various responses given by different Conservative figures. Richard Drax accused the Chancellor of throwing ‘red meat to socialists’ in the Commons, but the package largely went down well with ‘Conservative MPs who are most worried about the cost of living crisis’, such as ‘Compassionate Conservatism’ advocate Robert Halfon who told Playbook: ‘I’m not interested in ideology. I’m interested in doing the right thing for millions of people in our country who are struggling.’ One unnamed Conservative MP told the Sun’s Kate Ferguson that colleagues criticising the package are “ideological nut jobs living in a fantasy world. They should spend less time at the Adam Smith Institute and more time down at Lidl.’
Beyond the windfall tax? The cost of living crisis is far from over and political pressure for the government to provide future packages of support will remain high. The IFS has warned that “if oil and gas prices remain high” - and analysts say they will - “then the government will doubtless come under pressure to continue the additional household support for at least a further year”. Similarly, the Times’ James Forsyth warns that ‘these sums will really only keep the wolf from the door. This living-standards crisis will go on long enough that it won’t be the final intervention that ministers will have to make.” So what form could future interventions take?
The cost of living is more important for voters than ‘Red Wall’ stereotypes. University of Oxford’s Elections Unit has released a report exploring the relationship between economic insecurity and voter choice. The authors Jane Green and Roosmarijn de Geus suggest that the ‘Red Wall’ classification of voting constituencies is misleading and that the cost of living crisis could ‘very easily change’ the Conservatives’ electoral fortunes as more people become economically insecure.
Price gouging debate in the US. Research from the Federal Reserve Bank of Boston finds that corporate concentration over the past two-decades could be amplifying inflationary pressure from supply-chains disruptions in the US. Groundwork’s Lindsay Owens accuses US corporations of ‘profiteering’ from inflation and explains why they are driving up prices for consumers further in an interview with MSNBC.
ONS refines food inflation measurements. The ONS has begun more accurately measuring food price inflation by tracking the price changes of the cheapest groceries in supermarkets, following Jack Monroe’s campaign.
Explaining the ‘magic money tree’: the self-financing state. A new paper from UCL IIPP details the institutional analysis of the UK government’s expenditure, revenue collection and debt issuance processes. Josh Ryan-Collins and co-authors find that the government’s purchasing power derives from “Parliament, rather than the Treasury and Central Bank”.
Amazon’s tax dodging. A new report by the Centre for International Corporate Tax Accountability and Research and TaxWatch details Amazon’s receipt of public money through government contracts and calls for action to limit Amazon’s global tax dodging. (Read Twitter thread summary from TaxWatch)
Weak HMRC enforcement. HMRC admitted “it has no idea how much tax is being evaded through offshore assets” in the words of the FT’s Emma Agyemang. Tax Policy Associates made FOI requests and found that the government is failing to properly analyse data on tax abuses of the UK’s richest tax residents (Twitter thread summary from Tax Justice Network’s Alex Cobham).
Union power and industrial peace. A new peer-reviewed paper on the German model of industrial relations finds that “powerful unions and a robust collective bargaining system are compatible with relatively friendly and peaceful industrial relations and with the avoidance of distortionary pitfalls traditionally associated with strong labour power.”
Bonus redistribution. The High Pay Centre, Equality Trust and the TUC wrote to the chairs of FTSE 350 companies last week and urged them to freeze fixed pay for executives and distribute their annual bonuses to low-paid workers to help ease the cost of living.
Seasonal worker pilot scheme exploits migrant workers. An investigation by The Bureau of Investigative Journalism and the Guardian found that Nepalese migrant farm workers participating in the UK government’s seasonal worker visa scheme have been charged almost a third of their wages in recruitment fees. The investigators suggest that this story highlights the “underfunding of labour enforcement”, particularly in schemes aimed to plug worker shortages exacerbated by Covid-19 and Brexit.
Post-growth economic strategies in practice. Economists Michael Jacobs and Jonathan Barth have produced a paper attempting to depolarise the debate between inclusive green growth and post-growth. The authors argue that a ‘post-growth’ economic strategy can measure the success of both environmental sustainability and equality policy goals in Germany, the EU and the US.
Recessions worsen inequality: inequality worsens recessions. The Bank of International Settlements has released a paper exploring why inequality increases faster and more persistently in the aftermath of recessions. They find evidence of an “adverse feedback loop: recessions persistently worsen inequality, and greater inequality serves to deepen recessions.