As Keir Starmer visits the war-torn Gulf this week, he may well feel a sense of vindication: his reluctance to join President Trump\u2019s war against Iran seems to have aligned with British public opinion. The Chancellor may also be breathing a sigh of relief that the political pressure for an energy price bailout for British households has faded, for now.<\/p>\n
But the situation remains highly volatile. Barely one day after the ceasefire was announced, Israeli attacks on Lebanon have plunged negotiations into further turmoil. The consequence will be commodity prices remaining above average pre-war levels for months to come. Further price moves will depend on whether a long-lasting agreement is reached, and whether export flows through the Strait of Hormuz resume without strings attached from an emboldened Iran.<\/p>\n
So as we enter the summer months, clarion calls for yet more bailouts from the UK exchequer<\/a> \u2013 however closely targeted \u2013 will almost certainly continue. For the sake of the British economy, the Prime Minister and Chancellor must resist.<\/p>\n The economic reality is obvious: Britain cannot afford to keep doing this. We remain scarred by the substantial debts built up as a result of the coronavirus pandemic, as well as increased costs to service that debt. Economic growth remains anaemic, with little sign of sustained recovery. Choosing to hike spending \u2013 accompanied by tax rises to pay for it \u2013 would consign any hope of growth to the dustbin.<\/p>\n But the impact of further bailouts<\/a> would be far deeper. One of the most pernicious legacies of the pandemic was the sense of expectation and dependency that it engendered within the British population. Make no mistake: Rishi Sunak\u2019s Treasury \u2013 where I worked at the time \u2013 had no choice but to implement a comprehensive package of support for workers and businesses at breakneck speed \u2013 most famously, furlough. And despite some unavoidable cliff-edges, the success of the packages was a rare bright spot in an otherwise traumatic period in recent British political history.<\/p>\n Those of us involved at the time knew that the sheer breadth of support would have unpredictable long-term consequences for the economy and our politics.<\/p>\n Now, following another exogenous shock to the fragile UK economy, the Treasury is expected to step in again to protect households from price rises. This pandemic-induced trance that the British population has fallen into simply cannot continue.<\/p>\n First, households are in a reasonably strong place to withstand the uncertainty facing the global economy in the coming weeks. UK families save more than their US and European counterparts, with the official household savings rate \u2013 the percentage of disposable income that is saved \u2013 now hovering near 10 per cent, a sustained increase since average pre-pandemic levels of five per cent. Ofgem\u2019s energy price cap has already been cut in April, with the added benefit of an average \u00a3150 saving from the Treasury\u2019s decision at the Budget to remove some green levies from bills. And the UK has seen sustained falls in inflation over the past few years from 11 per cent to around three per cent, accompanied by successive interest rate cuts.<\/p>\n Second, things happen in the world. Bills rise. Prices go up. Jobs are lost. Markets crash. The British state cannot be expected to put an arm around everyone\u2019s shoulders<\/a> whenever a detriment occurs. No market economy can be built upon a pervasive sense of dependency that calls upon a cash-strapped state to step in whenever trouble arises. And no dynamic, enterprising society can be held together by an insatiable reliance on continual public sector bailouts that will never, ever be enough.<\/p>\n What the UK Government can do is weave resilience and self-sufficiency into the fabric of our economy so that geopolitical flux can be mitigated to the greatest extent possible. <\/p>\n Take energy policy. Two things can be true at the same time: the Government can take sensible steps to reduce our reliance on imported energy by developing affordable \u201cgreen\u201d alternatives in the long term \u2013 as well as tapping into the abundance of oil and gas sitting in the North Sea in the short term. And if the Prime Minister wants to increase defence spending<\/a> so we have a Royal Navy that actually works, he can do so without spooking the financial markets by simultaneously addressing our clearly out-of-control welfare bill.<\/a><\/p>\n The UK is not alone: France, Germany and other European countries all face similar problems. But the Prime Minister has a chance to resist the predictability of yet more debt-funded state handouts and make the case for a more resilient country able to withstand shocks and stand alone on its own two feet. He should show real leadership and seize the chance to shape the political zeitgeist for himself. For most political leaders, they don\u2019t come very often.<\/p>\n","protected":false},"excerpt":{"rendered":"As Keir Starmer visits the war-torn Gulf this week, he may well feel a sense of vindication: his…\n","protected":false},"author":2,"featured_media":10819,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[5153,13,421,1437,94],"class_list":{"0":"post-10818","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-britain","8":"tag-bailout","9":"tag-britain","10":"tag-debt","11":"tag-iran-crisis","12":"tag-keir-starmer"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116379085873336033","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/10818","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=10818"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/10818\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/10819"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=10818"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=10818"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=10818"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}