In every other period of history when inflation combines with wage cuts, and people struggle to pay for the basics in life, confronting a real cost-of-living crisis, that’s when people get angry. It’s when they see the system is failing them. It’s when they demand change and are increasingly open to radical change.

All those who want radical change, and that should include the Labour Party, must not underestimate the potential of this moment. This is no time for half-hearted measures. We need a Radical Recovery Programme. Radical action to:

• Increase incomes;
• Control prices;
• Control rents;
• And invest in sustainable green growth – insulation, energy conservatism and alternative renewable energy sourcing.

Increase incomes

How do we increase incomes? For a start, we demand that every worker gets at least an inflation proofed pay rise. On pensions, every Conservative and Labour MP stood on a manifesto promising to maintain the triple lock on pensions. There are already two million pensioners living in poverty in our country – and yet the government legislated to scrap the triple lock for this year, because of fears that it would mean a 6-8% rise.

Even though the Bank of England was predicting inflation increases of 7-8%, the government went ahead and uprated pensions and benefits by just 3.1%, meaning a real-terms cut for millions of pensioners, disabled people and unemployed workers, family carers and others.

All benefits and pensions need to be uprated by 8% – where inflation is forecast to peak – and we should immediately restore the £20 Universal Credit uplift and extend that to those on legacy benefits, like Employment and Support Allowance and address the scandal of the poverty level of Carers Allowance.

The government should also cancel the National Insurance rise and the stealth income tax rise, and instead align capital gains tax rates with income tax – so that we tax wealth at the same level as income from work.

Control prices

We need a programme of price controls. Start with energy costs. Household energy bills were already set to increase by £700 before Russia started the current war with Ukraine – an increase of nearly 50%. The government is now briefing that people should expect another sharp increase in the energy bill price cap in October.

What this country needs is not a rise in the price cap, but the introduction of a profit cap. Research by the Common Wealth think tank shows the profit margin for electricity in the UK is 42.5% and 40.5% for gas. Where energy is publicly-owned and regulated, as in France, energy bills aren’t going up by 50%, but by 4%.

Ironically, the French energy company EDF makes some of its profits from the UK’s privatised energy market. So the government must act to cap bills now – and there is no better time to press for the nationalisation of the sector so it is run for people, not profit.

The government should also look at doubling the Winter Fuel Allowance this winter for pensioner households and extending the allowance to those on Universal Credit and legacy benefits.

We also have to cap other key costs where we can – especially where that matches our climate commitments. So I welcome Labour mayor Andy Burnham regulating the buses in Greater Manchester and, as he gets control, capping bus fares at £2 for an adult and child fares at £1.

Control rents

That leads us to rent controls. In many parts of the country, the largest single expense is housing costs – especially for those in the private rented sector. Last October, ahead of the Spending Review, I called for a rent freeze for all. I’m pleased to see London mayor Sadiq Khan is now calling for the same in London.

We also need to scrap the benefit cap, which is causing social cleansing in our cities. And, of course we need a mass programme of council housing – zero carbon council housing.

Invest for green growth 

Unemployment is low, but wages are falling. Too many jobs are insecure and low-paid. In the 2019 election, Rebecca Long Bailey and I launched the ‘Warm Homes initiative’ to insulate 27 million homes, create hundreds of thousands of jobs, reduce bills and save lives.

The government should also be investing on a historic scale in publicly-owned wind, wave and solar power, generating a domestic supply chain to create good jobs here in the UK.

Tackling the long-term causes of the crisis

Of course, the immediate causes are the impact of the pandemic on supply chains forcing up price inflation, especially energy prices but also foodstuffs, and yes the tragedy of the war in Ukraine. Although these are the immediate causes, there are much longer-term causes that stretch back over the last 40 years, back to the 1980s.

This cost-of-living crisis has been a long term brewing at the heart of neoliberalism. The dominance of the neoliberal economic model has meant that the market diktat of short-term profiteering has dominated our economy, rather than long-term investment planning. A model that has transformed our economy from production to financialised rent seeking.

An economy fuelled and dependent on cheap fossil fuel, heedless of the environmental risk. An economy reliant on cheapening the cost of labour by the imposition of anti-trade union laws, casualisation, privatisation, outsourcing, offshoring and of course straightforward wage cuts.

After 40 years of neoliberal dominance, most people do not have the economic resilience to cope with the cost of living hit they are now experiencing. Add to this, the privatisation of energy, which has meant that people have been ripped off by profiteering energy companies for years. Alternative energy sources have been limited by the lack of investment on the scale needed. Energy usage and demand is at high levels also because of the lack of planned investment in insulation and energy conservation.

We have a climate crisis, a cost-of-living crisis, and a housing crisis – and the government’s response is to leave it to the market, whose failure has created these crises. It’s time for some hard lessons to be learnt and for some radical action to halt and reverse the disastrous economic strategy of the last 40 years. We need a Radical Recovery Plan that takes the first steps in this process.

John McDonnell, Labour List, 21st March, 2022, 11:00 am