The Kremlin’s energy war is pushing Europe and the UK towards economic meltdown and socialism says Allister Heath for the Telegraph.
Britain is now in grave danger of falling into Vladimir Putin’s trap. His kamikaze economic war on the West will eventually take down his disgusting coterie of war criminals, but in the meantime it is beginning to inflict immense, permanent damage on the Western way of life, to the great delight of Moscow’s siloviki hard men.
We risk ending up with calamitous poverty, civil disobedience, a new socialist government by next year, a break-up of the UK, nationalisations, price and incomes policies, punitive wealth taxes and eventually a complete economic and financial meltdown and IMF bailout. The situation in the EU is, if anything, worse.
This is not a plea for pacifism, for looking away when Ukraine is being illegally invaded by a savage regime. Britain was – and remains – morally right to back Ukraine in a carefully calibrated way. Instead, this is a plea for an economic counter-offensive, for Liz Truss, the next PM, to tackle Putin’s economic and energy war head-on.
Mass, immediate intervention is inevitable, but must be designed to avoid hastening Britain’s shift into demagoguery, welfarism and socialist central planning, all steps down Hayek’s “road to serfdom” that the Leftist and green elites are longing us to take. The wrong response – because too little is done, or because the wrong solutions are chosen – would merely advance Putin’s masterplan to cripple the West.
Cheap and plentiful energy is essential to our consumerist societies. We cannot be delusional about the scale of the developing catastrophe. Household energy and vehicle fuel costs will jump from 4.5 per cent of household spending in early 2021 to some 13.4 per cent by April next year, much higher than at any time during the past 50 years, including the 1970s, according to Carbon Brief.
Households may face a rise in energy costs of £167 billion, or 7 per cent of GDP, taking total expenditure to £231 billion, more than government spending on health, and that is before the hit to business is accounted for. The rise for consumers alone is more than the combined defence and education budgets.
This is equivalent to a Depression-style shock. Pay rises will protect some workers at the expense of investors, but – until and unless energy prices fall again – our national living standards will slump massively. The nation is sending tens of billions more abroad to pay for energy imports.
The state can borrow to cushion the blow, reducing future consumption to prop up current living standards, but our impoverishment cannot be magicked away. Coming after years of QE, there is a real danger of excess borrowing triggering even higher inflation, rocketing interest rates, mass repossessions and a banking crisis, so caution is imperative.
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Putin has slashed gas supplies to Europe, driving up energy prices and raising the risk of blackouts and rationing this winter Credit: Reuters/UMIT BEKTAS