Just as soaring prices upended the economy in the late 1970s, the same pressures are once again the most important economic issue - 2 January 2022
“It strikes me that Britain, both economically and politically, is at a turning point not dissimilar to the late-1970s,” I wrote in this column back in August. “Boris Johnson should beware of a new winter of discontent”.
That rather gloomy summer prediction came just a few weeks after the Prime Minister declared his mid-July “freedom day” – a time of growing optimism. Various finger-waggers, not least in Westminster and Whitehall, accused me of being too downbeat.
Yet, despite my huge faith in the talent and grit of UK entrepreneurs and firms, as 2021 ends, the outlook remains deeply concerning. There are clear signs – visible last summer, now even more so – we’re heading for a 1970s-style moment of economic and political reckoning.
It was Larry Lamb, more than 40 years ago, who first used Shakespeare’s words to convey a sense of dismay across the UK. The legendary Sun editor declared a “winter of discontent” – a headline that came to define an era.
Back then, as inflation spiralled and government debt escalated, society became more fractious. Shoppers and businesses faced regular shortages, as increasingly stroppy trade unions exerted power.
Amid widespread strike action, mounting economic chaos and a breakdown of vital public services sparked deep public unease. As voter outrage peaked in late 1978 and early 1979, Lamb captured the national mood as he wielded Shakespeare’s great phrase.
Labour was then in power, under the ineffectual leadership of “Sunny” Jim Callaghan. And, of course, we’ve been living through a once-in-a-century pandemic. But, despite those differences, the UK faces engrained economic and political challenges every bit as serious as during the bad old days of the late 1970s.
The emerging parallels between contemporary trends and those dysfunctional years of my early childhood are increasingly stark. Just as inflation then upended the UK economy, price pressures are once again the most important economic issue we face.
The Consumer Price Index in November was 5.1pc higher than the same month the previous year, up from 4.2pc the month before. With inflation at a 10-year high, and now over two and a half times the Bank of England’s 2pc target, official claims that price pressures are “transitory” have finally been scrapped.
The UK now faces a major cost of living crisis, just as during the late-1970s. The November inflation number was driven by record prices for necessities – fuel, utilities, clothes and food – hitting the poor hardest.
Rising prices and tax bills mean workers on £30,000 – close to the average wage – will need a pay rise of over 7pc during 2022 “just to stand still”, according to the Institute of Fiscal Studies.
In October, though, annual earnings growth fell to only 3.8pc, just as inflation topped 4pc – so real wages over the previous year were flat. Since then, while official figures are yet to be published, pay growth looks even weaker as price pressures have cranked up – suggesting post-inflation earnings are now falling.
The Bank of England has lately acknowledged CPI inflation will reach 6pc by the spring. So real wages will continue to fall, increasingly so, into 2022. Just as that happens, the Tories will repeat Gordon Brown’s old trick of raising national insurance contributions and freezing thresholds in the hope nobody notices taxes are going up.
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and here as an addendum is another article from the Telegraph on the same day by Roger Bootle entitled "Surging inflation will define 2022" . He adds Omicron pales in comparison to the economic risk posed by rising prices