All the talk of recent weeks has been of price caps – perhaps voluntary, perhaps even compulsory – for some staple food and drink products. No one has yet explained how such an idea might make a useful difference in a UK grocery marketplace which is already the most competitive in the world.
My hunch is that someone is practising the noble art of kite flying: allowing the idea to be so thoroughly battered that no one will take it seriously for decades. The government does this to look like it is seriously considering intervention (even though, like us, it has no clue how to do it and even less if it would work), thus signalling to retailers and manufacturers to be on their best behaviour – and showing us voters that it feels our pain.
To demonstrate why intervention may not be an entirely credible option, come back with me to my student days in the mid-1970s. Going around Sainsbury’s one morning, I watched the store assistant putting price stickers on every item. Having forgotten something, I went back late in the afternoon to see the same assistant going around the same shelves. “Didn’t you finish?” I asked. She replied: “I did, but all the prices have gone up again since this morning.”
In 1975, inflation peaked at over 24%. With the exception of 1978 it remained in double digits until 1982. This, despite a whole panoply of interventions from governments both Conservative and Labour. Under the Ted Heath government (elected by the way on a relatively rightwing manifesto), we had a Price Commission with the remit to block inflationary price increases and a Pay Board to do the same for wages. After Harold Wilson was elected in 1974, he ditched the Pay Board in a nod to the trade unions, but kept the Price Commission.
Given Wilson’s experience as prime minister through much of the 1960s, one might think he should have known better. For much of the 1964-70 government, he had a National Board for Prices & Incomes. It was so spectacularly unsuccessful that its chief economist subsequently wrote a book called How to Run an Incomes Policy, and Why We Made Such a Mess of the Last One. It was not a bestseller.
I dredge up all this ancient history to illustrate that there really isn’t very much new under the sun in politics. The moment when you know you’re in big trouble is when the cry goes up ‘something must be done!’ – without any specifics on the ‘something’. Wilson was a very clever man, a truly brilliant academic who was the youngest PM of modern times (sound familiar?). He won four general elections, was PM twice and left office under his own steam. His chancellors included Denis Healey, another brilliant man who matched Wilson and Sunak stride for stride for intellectual heft.
Yet a big brain was not enough. None of the statutory interventions on pay or prices ever really worked. The market stubbornly refused to do as it was told. For all the noise about price caps, I rather suspect our current prime minister would take a lot of convincing to interfere. Of course he made his reputation by doing so in the early days of the pandemic, but these are very different times. I’m sure he has read the calamitous history of those previous interventions. They did not work. In fact they exacerbated the situation, and by doing things which demonstrably failed, successive governments found themselves in worse ordure with voters than if they had sat on their hands and done nothing.
Of course, Sunak’s government does have a real problem. Input costs – energy, labour, ingredients, logistics – remain stubbornly high. My completely unscientific survey of the current experience of local Suffolk farmers, butchers, greengrocers and restaurant owners suggests that double-digit inflation has a way to run yet. It may begin to fall around Christmas, but until then a combination of nerve-holding and teeth-gritting by ministers will be required. However painful that may be, the lesson of the 1960s and 1970s is that there really isn’t a compelling alternative.
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