Woe to be in England

The cost-of-living crisis in the United Kingdom (UK) has pushed households into financial hardship and the looming prospect of poverty. According to a survey conducted in February 2024 by the Office for National Statistics (ONS), a near majority of households reported an increase in their cost of living compared to the previous month.[1] This increase, evidenced by high levels of ongoing inflation, has been confirmed by Statista, a German online statistics organisation, which notes that, “As of March 2024, 46 per cent of households in Great Britain reported that their cost of living had increased in the previous month … Various factors have been driving price rises in Britain, with the inflation rate hitting a high of 11.1 percent in October 2022.”

There are many causes for this economic malaise, evidenced by, amongst other things, a surge in food prices. These include a shortage of workers, which makes performance of essential tasks artificially expensive, the energy tribulations caused by Russia’s invasion of Ukraine, and the COVID-19 pandemic’s adverse effect on supply chains.

The UK’s unconditional commitment to achieving net zero emissions by 2050 has worsened the economic stagnation because the transition to ‘renewables’ is expensive. In this context, a Spectator article focusing on the impact of net zero policies, is germane

To claim that net zero has sparked an industrial boom in Britain. you have to be pretty inventive with the figures. … If we are losing out on investment and job creation, that has less to do with the relaxation of one or two net-zero targets. Britain, after all leads the world purely in terms of the reduction in territorial carbon emissions, which have halved since 1990. It has rather more to do with the expense and bureaucracy being imposed on businesses in a desperate attempt to reach overly demanding net-zero targets.[6]

On this view, the UK government’s decision to move to net zero by 2050 and its determination to transition to a decarbonised future have undoubtedly exacerbated the cost-of-living crisis. But this view does not appear to have diminished the government’s appetite for pursuing a policy of decarbonisation. Indeed, the UK has adopted a comprehensive set of policies and commitments to facilitate the achievement of the 2050 target. Specifically, the government’s 2021 Net Zero Strategy outlines a series of measures designed to reduce emissions and meet targets up to the sixth carbon budget, covering the period between 2033 and 2037.[7] The 2023 Net Zero Growth Plan builds on these strategies and focuses on the deployment of technologies for the decarbonisation of homes, power, industry, and transportation.[8]

In addition, the United Nations 2030 Agenda, and its associated sustainable development goals (SDGs) – one of which strongly endorses the government’s climate change narrative – are promoted in the UK as appropriate tools suitable to alleviate poverty, protect the planet, and contribute to worldwide prosperity. However, these goals, implemented, sometimes enthusiastically, by many companies, do not meet with general approval. Its critics lament that the implementation of the 2030 Agenda changes the function of companies from institutions established to maximise shareholder profit and offering services to their consumer clients, to social engineering tools.

In doing so, these companies have effectively become government agents that implement social engineering policies, which may be hostile to the views and aspirations of their shareholders. More damning that these policies have accelerated the cost-of-living crisis in the UK by diverting massive amounts of money to the financing of divisive policies which support only a small minority of the UK population. Using companies as change agents has also effectively obliterated the division between the ‘public’ and ‘private’ spheres of commercial life in the UK.

At present, the rate of inflation stands at 4 per cent, much higher than the expected and manageable 2-3 per cent. The poorest households, which already spend most of their income on essential items such as food and housing, are the hardest hit by the cost-of-living crisis which is, understandably, one of the main concerns of the UK government.[2]

In January 2024, according to the Harmonised Index of Consumer Prices (HICP), the UK’s inflation rate of 4 per cent was higher than that of France, Germany, the Eurozone average, and the United States.[3] The monster of inflation has been exacerbated by the relatively low level of business investment compared to other G7 countries. This shortfall may expose the existence of structural impediments.

Two months later the Office for Budget Responsibility (OBR) predicted that there would be a slight increase of 0.1 per cent in real household disposable incomes per head in 2024, followed by a higher increase of 1.7 per cent in 2025.[4] However, households in the UK with lower incomes are disproportionally affected by rising prices because they are more susceptible to high food, transport, and energy costs.

The parlous situation confronting low-income households is heightened by the recent decision of the Bank of England to increase interest rates.[5] The cost of borrowing, especially for mortgages, has risen substantially, and approximately 1.6 million households that have fixed-rate mortgages expiring in 2024 will face higher mortgage costs. Moreover, rental prices have also increased in recent years, which could potentially impact household budgets further.

Ultimately, managing the cost of living and protecting the environment need not be mutually exclusive endeavours. However, different crises – especially the cost-of-living crisis – will continue to occur at unexpected moments. The UK government will need to moderate its commitment to net zero emissions and refrain from imposing its divisive social engineering policies on companies if it wants to win the war against inflation and restore a modicum of prosperity to the UK’s population.

To address these challenges, the UK government, adopting targeted anti-inflationary measures, therefore needs to prioritise policies that will encourage business investment, increase the supply of workers, and improve the overall well-being of its population. In taking these steps, the UK might build a more resilient economy that can better withstand future challenges and deliver measurable improvement in the prosperity of its citizens.

Kashan Pirzada is a lecturer of accounting at Birmingham City University. He previously served as an associate professor of accounting at the University Utara Malaysia (UUM) and as an Associate Fellow of the Asian Research Institute for Corporate Governance (ARICG).

Gabriël Moens AM is an Emeritus Professor of Law at the University of Queensland. He also served as Pro Vice Chancellor, Dean and Professor of Law at Murdoch University. He recently published The Unlucky Country, co-authored with Professor Augusto Zimmermann (Locke Press, 2024)

[1] House of Common Library: Rising cost of living in the UK 8 March 2024, available at https://researchbriefings.files.parliament.uk/documents/CBP-9428/CBP-9428.pdf.

[2] Statista, available at: https://www.statista.com/statistics/886366/issues-facing-britain/#statisticContainer.

[3] Harmonised Index of Consumer Prices, available at: https://researchbriefings.files.parliament.uk/documents/SN02794/SN02794.pdf.

[4] Economic and fiscal outlook – March 2024, available at: https://obr.uk/efo/economic-and-fiscal-outlook-march-2024/.

[5] Interest Rates and Monetary Policy, available at: https://commonslibrary.parliament.uk/research-briefings/sn02802/.

[6] ‘Net-zero targets have hamstrung British prosperity’, The Spectator, 2 March 2024, available at: https://www.spectator.co.uk/article/net-zero-targets-have-hamstrung-british-prosperity/.

[7]  Department for Energy Security and Net Zero, and Department for Business, Energy & Industrial Strategy, Net Zero Strategy: Build Back Greener, Published19 October 2021, Last updated 5 April 2022, available at: https://www.gov.uk/government/publications/net-zero-strategy.

[8] Department for Energy Security and Net Zero, Powers Up Britain: Net Zero Growth Plan, Updated 4 April 2023, available at: https://www.gov.uk/government/publications/powering-up-britain/powering-up-britain-net-zero-growth-plan.