The Glasgow Guardian reflects on how governments across Europe have responded to the cost of living crisis, while considering the role of global markets.
Over the past few years, Europe has been subjected to a series of crises, namely the COVID-19 pandemic, the Russia-Ukraine war, and the subsequent mass inflation. Although nowhere near the peak inflation rate of Hungary of 19.9%, the UK’s inflation rate reached a peak of 11.1% in October of last year, making it the fourth highest in Europe. Most of the recent inflation can be attributed to the EU’s isolation from Russia’s fuel reserves, which drove up oil prices along with everything else in a chain reaction. Additionally, the rising prices of many commodities are the result of lockdowns that limited and disrupted global supply chains and harvests. However, research at the London School of Economics shows that a third of UK food price inflation since 2019 was caused by Brexit, contributing to the UK’s position at the top of European inflation rankings.
In comparison to other European countries, the UK has done little to curb the effect on taxpayers. The UK actually raised National Insurance by 1.25% and gave tax breaks to big banks late last year, whereas Ireland reduced income tax. While big economies like Germany, France and Italy have allocated financial one-off handouts to workers, pensioners and students, the UK government initially expected repayment of their £200 loan to energy customers over the next five years. This has been remedied and raised to £400. However, minimum wage has increased in the UK, alongside Germany, the Netherlands and Turkey.
The ‘Get around for £2’ scheme introduced in England in January this year, and later extended until December 2024, cuts travel costs for bus riders across England. However, it is not as glamorous as Germany’s countrywide €9 ticket, introduced in summer 2023—now €49; nor is it Spain’s completely free travel in the winter months. Despite what bankers at Canary Wharf may think, cancelling your Sky subscription won’t fix the crisis; rather, a lack of escapism from poverty will only exacerbate it. What the UK desperately needs is more focused aid for those in poverty, control of the renting market, affordable transportation for everyone, and to scrap the TV licence, like the French and Danish governments did.
Attempting to accelerate the fall of inflation, the Bank of England is maintaining the interest rate at 5.25%, in order to discourage borrowing and spending on goods and services. Eventually, this will cause price disinflation, however advancing debt and mortgage payments, thereby raising rent prices and the risk of homelessness. With UK wages mostly being spent on bills, pre-existing problems—such as high housing and childcare costs—have only exacerbated the crisis for low-income families. The rise in food prices has also increased visits to food banks dramatically, now frequented by full-time workers such as teachers and paramedics. The increased percentage of the household budget being spent on fuel and electricity also means that people can’t afford other essentials such as prescription drugs, which are not free in England, presenting serious health risks and potential worsening of mental health.
Last year seems to have been the year of government action sweetening the transition into the longer-term crisis that we are currently experiencing. It is important to note that prices will not deflate in future, as inflation percentages will not go below zero (at least in Britain), as that only occurs in cases of low consumption paired with excess production, which is not the most attractive state of the economy. As long as the war between Russia and Ukraine persists and governments cut tax on fossil fuels instead of developing clean energy, energy prices will stay high and real wages will have to increase to stay level with them.