£10 pints shows cost of living crisis needs a solution

The story which may have most caught many people's eye this morning is the headline that a brewery boss thinks we'll soon be paying £10 for a pint in a pub. He makes this point to highlight the enormous cost pressures that have risen on the hospitality industry, particularly over the last five years.

And while the price of a pint is eye-catching, from foodbanks to polling on what issues concern the public most, it is only part of a lot of data which continues to show that the public generally are very much still feeling themselves in a cost of living crisis. In fact this issue appears to be becoming endemic for many people.

From 5 to 30 November last year, 95 per cent of people report that they have felt pressure from rising food and drink costs, with energy costs impacting 66 per cent and fuel hitting 46 per cent. Almost universally, people can sense their costs going up.

The response to this is that 60 per cent of us are spending less on essentials and, more worryingly, 39 per cent are cutting back on essentials and 36 per cent are cutting back on heating. Given that these come on the back of very high inflation after Covid with which wages have not really caught up (Britain’s wages are the most stagnant in the G7), it is unsurprising households are feeling this.

It is a case of 'quickly, then slowly'. Prices got worse fast – then they continued from there to get worse more gradually, remaining worse and getting worse again but less obviously. This is another case of 'bad policy through statistics', because economists tend to see 'the worst of the cost of living crisis' as having been over by early 2024'.

But it wasn't over, it was just a new baseline. Many more people now felt permanently poor and it is the nature of the remaining spending which is being squeezed that will be felt – on little things that can make life feel like more than surviving. Unfortunately, in economics that is a position referred to as 'weak and stagnant', and it underplays the reality, because many have stagnated at a state of high financial duress.

This disconnect is discussed much more in the US because while the never-ending assault on Britain's social security system continues, it remains a buffer that protects many from the very very worse effects of collapsing living standards. But the anger in the US should be noted – there has been a remarkable 23 per cent collapse in Donald Trump's support among those without a college degree in the space of one year. Cost of living is far and away their biggest source of anger.

It is this which is driving angry politics in Britain where anger has been redirected at migrants. And once again it is the result of the economic orthodoxy of contemporary free market capitalism where 'the market' is supposed to reveal 'the real value of things' – and that includes humans. In pure free market theory, poverty is an accurate assessment of the value of the people concerned.

This has to be changed. That is why Common Weal supports a proper incomes policy. An incomes policy is not the policy-maker’s habit of looking at a poverty line and providing some minimal help for those below it, it is a process of making statements of what we as a society deem to be the acceptable and desirable standard of living for everyone.

An incomes policy would identify extreme financial duress at the bottom, but it would also take a stance on sustained financial erosion in the middle as well, and it would take a view on wealth inflation at the top of society. Making living standards the focus of measurement for government and not abstract GDP growth would redirect the policy agenda in positive ways.

For example, in a cost of living crisis we might target emergency payments to those in most need, but that does nothing for those in the middle. An incomes policy identifies this and untangles the causes of it, just like GDP does for corporate profits. It then suggests policy remedies to constrain the negative effects and boost the positive ones, just as is done with GDP and growth.

But it produces very different conclusions. If food distributors are price-gouging, GDP-focussed policy identifies this as good. An incomes policy would imply the threat or use of price controls. It is a different way to measure national success and produces a different policy programme as a result. You can find out more about our living standards policies in Sorted.