Two years ago, as the world locked down with Covid and we all huddled around our televisions wondering how many of our relatives were going to die, the British government spent billions on preventing the economy from collapsing. It passed £70bn to employers to enable them to keep nearly 12 million staff on furlough at a time when revenues had plunged; it spent another £28bn supporting the incomes of 2.9m people who were self-employed. These schemes were not perfect – another couple of million people received no support at all, which, trust me, wasn’t great – but without them, many more businesses would have gone bust, and vastly more jobs would have been lost. It’s no exaggeration to say that the economic support the government offered during lockdown ensured that people could eat.
Rishi Sunak, who was the chancellor, received plenty of plaudits for all this, and briefly became the most popular politician in Britain, which is pretty funny in retrospect (he seems genuinely to have believed it was his enthusiasm for austerity and sound money that people warmed to, not the piles of free money). Thing is, though, this was really just the government doing a job we’ve expected of it for decades: even after years of miserly “reform”, we still assume that, when circumstances mean that people are unable to provide for themselves, the state should step in to provide for them. To a great extent, this is what the state is for.
Which brings us to today, or, more accurately, to next January, when the average household energy bill is predicted to hit £4,266 a year, more than four times higher than it stood just two years earlier. This increase will mean that the average household loses more than a tenth of its income, as much as that household spends on housing or food, significantly more than it spends on holidays or entertainment. To a worker earning £22,000, the extra cost of keeping the lights on will be equivalent to a doubling of their tax. And this, remember, is without even considering rising food costs, rising interest rates, rising rents. It is difficult to overstate the scale of the meteor that is about to hit our bank accounts.
It is difficult, too, to overstate the impact this will have on the wider economy. Already, anecdotes abound of bars and cafés shuttering without warning, because they simply can’t afford their energy bills. Once a significant proportion of the British public can’t afford to eat out or socialise any more, this is going to get much, much worse. Businesses will close. Jobs will be lost. And then, those negative effects will multiply.
It is not, however, difficult to work out what the state could do about any of this. This month Ed Davey, who readers may be surprised to learn is leader of the Liberal Democrats, called on the government to create an “energy furlough” scheme. Taken literally, the phrase is meaningless, but it’s a great bit of political communication, immediately conveying both the policy (hand out money) and the reason it’s required (an unprecedented national crisis).
We can question how to fund it, through national debt or a windfall tax or some other means. We can debate, too, the form of the much needed longer term solution, which will probably involve greater investment in everything from renewable energy and home insulation to gas storage infrastructure. What we can’t do, though, is counter Davey’s argument that, with the country facing “a drop in living standards unlike anything we have seen in my lifetime”, the state has to step in.
I can understand why Liz Truss, all but certain to be prime minister in a matter of weeks, has been reluctant to say this out loud: talk of a bigger state is anathema to the Tory members whose votes she needs. (I can understand, too, why Boris Johnson hasn’t got involved: because he’s a selfish, lazy man who’s never even pretended to care about anyone but himself.) I can even understand why this reality would be upsetting to ideological conservatives, who have spent decades rolling back the frontiers of the state, and are horrified by the idea that a Conservative government might have to roll them forward once again.
But I don’t see how such a position can survive the winter. If left to run its course, the soaring cost of energy bills will devastate the UK, driving households into debt, leaving people hungry, wiping out jobs and businesses. The effects will not distinguish between old or young, Leavers or Remainers, those who vote Tory and those who’d rather die. Every one of us will be affected, and even relatively rich households will see dramatic hits to their finances.
Yet it doesn’t have to happen. Just as when Covid hit in 2020, the state can prevent much of this, and whatever the long-term downsides of adding a few billion quid to the national debt, they can’t possibly be worse than the immediate downsides of not acting. The question for those who’d rather let events run their course is: what on earth do you think the state is for?
[See also: Why Rishi Sunak failed]
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