Central bank digital currencies. The Bank of England and HM Treasury will launch a consultation this year into the possibility of introducing a central bank digital currency (CBDC) in the UK. A CBDC would allow households and firms to hold digital money directly with the Bank of England. The primary motivation behind the consultation is the risk that unregulated digital currencies pose to the financial system - particularly so-called “crypto-assets” such as Bitcoin, but also planned ‘stablecoins’ such as the Facebook-backed Diem (formerly called Libra). UCL’s Josh Ryan-Collins explains how a CBDC would work, and the benefits and risks

Cryptocurrencies’ carbon footprint. Private cryptocurrencies, such as Bitcoin, have been widely criticised for their climate impact. The creation or ‘mining’ of new Bitcoins requires complex computer calculations, making it a very energy-intensive process. Bitcoin’s energy consumption is tracked by both the Bitcoin Energy Consumption Index and the Cambridge Bitcoin Electricity Consumption Index; the former estimates that its carbon footprint is now as large as Norway’s. Visual Capitalist has created several infographics comparing the carbon footprint of Bitcoin compared to gold - Bitcoin is 15 times more carbon intensive. ForexSuggest.com calculates that offsetting the carbon emissions of the top ten cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin, would require the planting of around 385 million trees per year

Stablecoins. ‘Stablecoins’ are second generation cryptocurrencies, aimed at maintaining a stable value against official currencies; examples are Diem and Tether. Economist Barry Eichengreen explains how they work. 

Weekly Updates

Inflation and energy

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.

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.

Poverty and social security

#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.)

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. 

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.)


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

Local economies and housing

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

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.

Environment and climate change

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)

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.