The Ricki Sunak Government in the UK is in Trouble
Why is Richi Sunak and his cabinet in the UK government playing hard ball despite public opposition?
The UK economy is in a mess right now. High inflation is a major cause but it is not the sole reason for the crisis in the UK.
High Inflation
At one point in 2022, inflation was at 11%. Latest figures, for December 2022 show 10.5%. The Bank of England set a base rate to control spending and saving in order to keep inflation low and steady. If inflation is high, they increase the base rate to reduce spending to a level which reduces demand and thus lowers prices, bringing inflation and the cost of living down.
To boost growth in the economy, encourage spending, and job creation; they would increase rates. It’s a balancing act. Increasing rates too much will increase spending, and push up prices as demand starts to exceed supply. In early 2022, they took their eyes off the ball and kept rates low when there were signs that prices and inflation were rising.
The government did nothing to monitor the situation and warn the Bank to raise the rate to control the pending inflation increase. Cynics have suggested, with some sound evidence, that it was in the interests of the élite, big business, and the richer members of the Conservative party to keep prices high, and keep profits high. Letting inflation climb to its current levels. Letting the richer élite with more wealth.
Although the government set a target of 2% inflation for the Bank of England, the present high cost of living makes that an impossible target for the short term. In fact, the Bank is predicting a rise from the current 3.5% to 4% on 2 February 2023, and to 4.25% in March 2023.
The current cost of living crisis and high inflation has been caused by several factors.
The Russian invasion of Ukraine, and the resulting increase in gas and oil prices because of the dependence which many western countries have on supply from Russia. Germany particularly depended on Russian imports for 55% of its gas supplies. Although that has reduced in January 2023; the country still imports gas, oil, and coal from Russia in higher amounts than other western states. Because Thailand and China also depend on Russian supply for much of their energy needs, these two countries are reluctant to challenge the invasion in Ukraine.
As well as increases in prices, the war has disrupted supply chains throughout the world. Russia has closed strategic pipelines.
Covid Lockdowns and the Furlough Scheme
Although it may stop the spread of Covid, when people stay at home on furlough they are not working and, therefore, not contributing to the economy. Productivity decreases, fewer goods and services are available. Consequently, under the usual laws of supply and demand, prices go up and inflation rises. Because businesses tend to increase prices just ahead of an increase in costs, price-push inflation, they make higher profits in that short period. Even when people are working from home, they are usually not as productive as when at the workplace or office.
Are Strikes Dysfunctional and Damaging to the Economy?
Unlike in 1926, the present strikes are not general strikes. They are organised by trades unions, after balloting of their members. There is no concerted or coordinated action. That would be illegal under current laws. Members of a trade union are not even allowed to join the picket lines of other unions.
The present disputes are not only about pay.
Nurses, doctors, and consultants in the National Health Service are concerned that government strategies are destroying the health service as we know it. Barristers are worried that cuts in legal aid by the government will result in a lack of adequate resources to ensure fair and timely trials. Even civil servants, including the United Kingdom border force, warn that reducing staff numbers will make the service unworkable. The consequences for controlling illegal immigration and terrorism are serious.
Teachers highlight that insufficient recruitment, the increasing trend of teachers leaving the profession, and the employment of staff not qualified in the subjects being taught; will damage our children’s education in the future. Ambulance drivers and fire-fighters are also stressing that government procedures are preventing them providing the standards of service that the public rightly expect.
Mick Lynch, of the largest rail union, has pointed out the union’s concerns on passenger safety when travelling by train. The government want some trains to be driver-less, and some trains to only have a driver but no guard on board. There would be no rail employee in the carriages to assist passengers in an emergency. Particularly dangerous for women and those travelling at night.
The government’s plans to reduce the number of employees working on track maintenance will likely result in more accidents, some could be fatal. 19 people were seriously injured in April 1981 when an express train derailed in Bushley, Hertfordshire, due to a broken rail. If you use a search engine, you will see there have been accidents every year since records began.
