Living standards squeezed. The Resolution Foundation has dubbed 2022 as the “year of the squeeze”. It calculates that persistent inflation, including the predicted increase in the household energy price cap by over 50% and alongside the rise in National Insurance Contributions (NICs) - both of which come into effect in April - will reduce annual disposable incomes this year by an average of £1,200 per household.


Inflation driven by rising cost of energy. Age UK estimates that 150,000 older households are likely to fall into fuel poverty this winter because of soaring energy prices. National Energy Action have warned that fuel poverty could rise by 1.5 million to 6 million households, which would be the highest level since records began in 1996. They are campaigning to expand the Warm Home Discount scheme and Winter Fuel payments (and other proposals) to address fuel poverty.


Labour’s proposals. The Labour Party has proposed a windfall tax on the profits of North Sea oil and gas producers to fund measures to reduce household energy bills. Its measures would include removing VAT on energy for a year and spending an extra £3.5bn on the Warm Homes Discount, increasing it from £140 to £400 a year, while doubling the number of vulnerable households eligible to 9.3 million. It would also remove from bills the cost of transferring consumers of failed companies. Labour calculates that its plan would save most households about £200, while targeted support to low earners, pensioners and the “squeezed middle” would save them £600. Ed Miliband's op-Ed for the Guardian outlined Labour's proposals and criticised the government for failing to regulate the energy market over the last decade.


Can price controls tackle inflation? Political economist Isabella Weber argues that strategic price controls are an option for tackling inflation when it is being driven by increase in the price of specific goods such as energy. Price controls would avoid the risk of causing a recession, unlike conventional inflation control policies such as raising interest rates and fiscal constraint. “Price controls would buy time to deal with bottlenecks that will continue as long as the pandemic prevails. Strategic price controls could also contribute to the monetary stability needed to mobilize public investments towards economic resilience, climate change mitigation and carbon-neutrality.” Weber’s article sparked a sharp response on Twitter (since deleted) from the Keynesian Nobel prize winner Paul Krugman, which in turn provoked a strong defence by fellow economists Stephanie Kelton and James Galbraith. Noah Smith outlined the argument against price controls to fight inflation on his blog.

Weekly Updates

Covid-19 and work

Covid-19 is here to stay. Commenting on the emergence of the Omicron variant and the failures of international cooperation to equitably distribute vaccines, an editorial from the Lancet journal argued that “the window for pursuing the elimination of SARS-CoV-2 has closed. Moving towards a so-called post-pandemic world will be far more complicated than scenarios such as ‘Zero Covid’. The challenge now is to determine the level of Covid-19 that is acceptable for individual nations in a fundamentally interconnected world.” 

Beyond furlough. The TUC’s Kate Bell looks at the financial support that workers need at this stage in the pandemic, including the continued relevance of a permanent short-time working scheme. 

  • Working time reduction. The European Network for the Fair Sharing of Working Time has published a newsletter detailing developments in working time reduction across Europe. This includes details of an investigation into the possibility of a four day week in the UK construction industry


The “great resignation”? The job market is not as much in flux as often claimed (such as in reports of a “great resignation” of workers), according to a new report by the Resolution Foundation’s Economy 2030 Inquiry. It finds that the reallocation of labour across different sectors has actually been slowing down over recent years. 


Tracking transition. Autonomy has launched the UK’s first ‘job transition database’, detailing potential pathways between jobs and industries. The tool (ASPECTT) helps to identify skills gaps and jobs over time across regions, to assess the risks of greater automation across sectors, and more.

Devolution and local economies

Levelling up. Ahead of the publication of the government’s long-awaited Levelling Up White Paper, Cambridge professors Ron Martin and Pete Tyler set out the scale of regional economic inequality in the UK and call for ‘bold, mission-oriented policy’. They compare the UK’s annual spend on regional policy of £4.9 billion to the £55 billion per year spent by Germany on its programme to level up East Germany after unification. 

Freeports. The government’s new freeports are set to further entrench regional inequality, according to Sean Benstead at CLES. A Centre for Cities report found that low tax and regulation zones have little impact on job creation.

Inequalities

Wealth inequality. Last week the ONS released its biennial survey of household and individual wealth, reporting that median household wealth grew marginally in the last two years to £302,500. However, the LSE’s Hannah Tarrant and Warwick’s Arun Advani write that the data, which covers the period up until March 2020, fails to capture the impact of the pandemic and underestimates the share of wealth at the very top.


CEO pay. Last Friday marked the day on which the earnings in 2022 of the median FTSE 100 CEO surpassed the median UK full time salary. The calculation is based on previous research by the High Pay Centre on CEO pay. Although most FTSE 100 companies are yet to disclose their CEO pay for 2021, 57% of those that have reported it have seen an increase on 2020 levels.

Climate change

Green QE failure? The Bank of England’s push to green its quantitative easing (QE) programme is falling short of the mark, a study by SOAS and UWE Bristol economists and others has shown. Last year, the government explicitly included the transition to net zero in the BoE’s mandate. However, the study finds that the new strategy may even lead to higher subsidies for high-carbon activity. Co-author Yannis Dafermos summarises the study in this thread


Greenwashing. An investigation by the Guardian has found that fossil fuel companies are some of the biggest spenders on ads designed to look like Google search results for climate-related terms. 


1.5°C? The world is nowhere near on track to meet 2030 emissions targets, argues Glen Peters of Norway’s Center for International Climate Research. Most of the emissions drop in 2020 rebounded in 2021 and emissions look set to grow in 2022. 

Don’t Look Up. Sociologist Stefan Aykut explains how the blockbuster Netflix satire Don’t Look Up “(mis)represents the climate crisis and how a social science perspective helps”, drawing attention to the importance of power and other social factors in the determination of climate policy.

Fiscal policy

Fiscal rules. Rishi Sunak, is unnecessarily constraining public spending, argued New Economy Brief’s Michael Jacobs in the Guardian. With such low servicing costs, he argues, the argument of ‘unsustainable’ debt does not justify the Chancellor’s arbitrary cap on much-needed public investment. 

Time for action. Campaigner Jonathan Waxman argues in this thread that failure to think differently about government spending and debt will prevent much needed and timely solutions needed to tackle climate change.

Ownership

Passive funds. A report by Common Wealth finds that passive funds (​​investment funds that track a particular market index to determine which shares to buy) have massively expanded since the 2008 financial crisis. It argues that the increase in passive funds could further concentrate the ownership of the UK’s largest companies and undermine investors’ ability to force funds to divest from harmful or polluting activities.