This was written on the 25th of september for Canvas, an online politics journal.
The Cost of Living Crisis and Socialism
The cost of living is a lived and very visible symptom of the persisting economic slow down that the UK has suffered so acutely since banking crisis six years ago. As Kevin Bridges so eloquently put it, “When 10p crisps are costing 15p, that’s when I began to take an interest in economics.” Unfortunately none of the major parties have, as yet, promised to bring the price of 10p crisps back into line with the price implied by their name, but, ‘the cost of living crisis,’ as it’s been dubbed, is emerged as the most hotly contested policy area in the run up to the next election.
Ed Midland’s promise to freeze energy prices for 12 months was slated by many as a populist move to win electoral support that would translate very little savings into the pockets of general public – criticism that is partially deserved. It is depressingly likely that the major six energy companies will simply and unscrupulously raise their prices before and after the freeze. But it’s also a brave and progressive move by Miliband that’s sent a strong message to the shareholders controlling a dysfunctional market and engineering profits that are hard to justify.
It’s a move that has garnered insults Blair would have winced at. Ideologies have been out of fashion for over a decade, and the term Socialist has almost become derogatory in mainstream British politics. A question that is rarely asked along side such accusations however, is what is meant by ‘socialism’ used in this context? How is it we should characterises the alleged ideology? Neither Ed nor his detractors seem to have given a suitable answer to this question, so the surest answer we can get is to derive one from the policies proposals we’ve seen.
Six energy firms dominate over 90% of the market. Such is the lack of competition and the captive nature of the market they have been able raise profits in contempt of the forces of supply and demand and in line with their own desire. Despite inflation running at just 13% and wholesale gas prices plummeting by 50%, their profits have shot up 74% since 2009. Promisingly, only this morning Ed promised to intervene in other markets, such as water, were a similar rip off culture has developed.
If limiting such grotesque profits so normal people can afford to heat their homes, drink and wash is to be defined as ‘socialist’, then we must be characterising socialism in its most broad sense. Socialism as simply arranging the economy in a way that benefits the people who make up that economy, all off them. If that is what Ed is being ‘accused’ of, them he should continue to do little to deny it.
Cameron’s answer to solving the living cost crisis is his ‘help to buy’ scheme. At first glance it seems like an equally valiant attempt to address the soaring cost felt by normal people, whilst potentially curtailing the ever-growing profits raked in by shareholders. On closer inspection it fulfil neither of these criterion.
Four major Banks dominate their market in a similar way to the big six energy companies, and one of their many sins is to stop offering 95% mortgages in recent years, when buyers have needed them most. Potential homebuyers with incomes suitable to meet mortgage repayments have been stuck paying the astronomical rents of our inflated property market until they can find the £40,000 average deposited to buy a house.
Despite UK mortgages performing very well since the down turn and the banks holding so much of the responsibility for the economic mess we’re in, they’re no longer prepared to take the risk involved in offering 95% mortgages. So Cameron has offered to take that risk off of the shoulders of the poor banks and place it on the taxpayer instead. How valiant.
‘Help to buy’ is a farce; all it’s set to do is further inflate the property market as first time buyers flood the market, whilst forcing the taxpayer to accept all the risk as the banks continue to profit. If Cameron really cared about giving normal people a chance of ever owning a home he’d be building affordable homes for all, restoring local honest banking like exists in Germany and limiting foreign investors from using the UK property market like a monopoly board. But god forbid, such rational policies might be perceived as ‘socialist’.