Tim Lang’s Field Notes: Why tax cuts won’t address the cost of living

Tim Lang’s Field Notes: Why tax cuts won’t address the cost of living

Field Notes

Why tax cuts won’t address the cost of living

Professor Tim Lang

Wednesday 17th August 2022

One of the many fascinating aspects of the Conservative Party leadership process has been how the discourse was seemingly blind to the real problems facing the country. Cost of living? Climate? Geo-politics? Diet-related ill-health? They barely featured as key societal challenges in themselves and were, if anything, reduced to the necessity of cutting personal income tax. Rather than face the looming reality of a massive erosion of spending power for millions more consumers, the leadership contenders vied for who could be more Thatcherite and firm. No more hand-outs to the poor! Suspend ‘green’ levies on energy! Reduce the state! Cut civil servants!

No wonder captains of industry expressed alarm. When the dust settles, and the new UK Prime Minister is in office, we’ll see what actually happens. But signals matter. Environmental, consumer and health organisations have reason to be concerned.

What’s the likely future for food policy? A shift from the anaemic Government Food Strategy paper of a few months ago is unlikely. It was widely criticised as lacking specifics and urgency, not least by people from the Dimbleby team who helped produce the Independent Review. So there’s unlikely to be a new Food Act before the next election unless necessitated by the new leader’s promised bonfire of all remaining traces of EU legislation and regulation. If lit, say good-bye to those promises of retaining high food standards post Brexit in trade deals.

Food, health and environmental movements will have to consider their positions carefully. Bow to a race to the bottom? Or ramp up public pressure? How? There’s a strong strand of the Conservative Party thinking food doesn’t deserve any special policy attention and should simply be left to market rule. Why have Defra?

And which EU leftover regulations will go first? Water quality? Food safety? Pesticide controls? Net Zero commitments? There’s already an attack on proposed levies on unnecessary plastic packaging. To its shame, yoking this to cost of living concerns, food manufacturers said this will add £60 a year to shoppers’ food bills, implying an easy cut. But does the British public really want more plastic waste drifting down its streets? I don’t think so.

The Food Standards Agency’s latest consumer attitude survey shows continuing public concern about matters such as food waste, sugar in food and animal welfare. Food awareness is high. Given this, one possibility ahead is that the ‘new’ government might not actually have a bonfire of standards but simply weaken the regulators, those whose job is to police those standards. We’ll see which approach emerges.

Meanwhile the immediate food politics will surely be rising food prices and the income squeeze. The same new FSA survey shows 18% of consumers now categorised as food insecure, a staggering level for such a rich country. This will increase this winter unless there is a dramatic transfer of funds to the already squeezed. It won’t come from income tax cuts. The Institute for Public Policy Research calculates that such tax cuts would disproportionately benefit the affluent, not the already poor or working poor or the about-to-be impoverished. It would be more effective, say IPPR and others, to increase benefits and get cash into people’s hands. Cost of living politics look set to be in a rough place for more years.

I see some policy realities emerging as a result in coming months.

Reality 1 is that the policy attention on energy and food prices will continue. So far, energy costs dominate publicity. But the food collateral damage will quickly become more visible. Why? Because food is a flexible item in household budgets. It’s eaten every day. Or should be. The ONS says average food price inflation has been 6% but pasta is well over that; frozen pizzas actually fell. See figure 6 here. The industry think-tank IGD expects a whacking 15% inflation this summer. To disguise this, some packaged foods are getting smaller, the so-called ‘shrinkflation’ effect. The political question now is: will mass hunger make sizeable sections of the population restless? Or will people accept it?

Which takes us to Reality 2. Policy options available to Government are stark. What’s possible for energy doesn’t easily replicate in food policy. There is no food price market cap which can be lowered, as is mooted for energy. There are no easy food sector windfall profits which could be one-off taxed. BP alone made £7 billion profits in the last quarter whereas Tesco’s profits for the whole year 2021-2 was £2 billion. Food profitability tends to be higher in manufacturing. Sure, tax food companies but the easiest fix to rocketing food poverty is for the State to inject quantitative easing or take on more national debt to enable a massive transfer to benefits and redeemable for food. Give people money to buy food. A big increase in Universal Credit would be a start. Might this be the moment when a US-style food stamps scheme is introduced in the UK?  Might hardliners in Government come up with plans for mass catering or have redeemable vouchers at Nando’s et al? No doubt minds are working up options already. Be prepared.

For the millions about to be pushed deeper into food insecurity, these macro options are distant. The immediate Reality 3 is a far cry from consumer capitalism’s ‘freedom to choose’. The millions facing runaway cost of living pressures are now locked into an age-old set of options. Increased reliance on extended family? Extended debt but how far? Theft? This is already happening, with a rise in ‘first-time shoplifters’.  Sell possessions? Hard if you haven’t much. Turn to food banks? But they are struggling too. In 2010 there were only 66; now there are thousands, many unable to meet demand. It’s glib and easy for PM hopefuls to say to the Financial Times there will be no state hand-outs, only to back away somewhat, but the reality of squeezed incomes is that food gets cut unless there are quick transfers of funds. Mothers feed their children before themselves. Then it shows in health profiles later.

Reality 4 is that this can be painted as a dire Dickensian situation but it has new features too. New fixed costs, new aspirations, new reliance on ready-made foods, new thresholds of what’s deemed a decent standard of living. Retailers are in a bind, too. What can they do? Increase value offers? Handouts? More food to food banks? Keep prices low? Feed soup kitchens? All these are understandable if dire, but the fact remains that it’s the state which has most policy options. And, as yet, there’s no mass outrage about food costs or a coherent set of popular demands on government. There should be. Its offer so far is weak. Mass campaigns and a coherent alliance of social movements might emerge. NGOs have been cowed by 12 years of austerity but radical demands for better wages are emerging, not least in strikes. Who expected that?

In the mid-Victorian era, the co-operative movement started by demanding affordable good food. If the agri-food system wasn’t working, it set out to produce something which would. That social communitarianism was replaced by the mid-20th century welfare state and by the post-World War ll retail revolution which lowered prices and spread a consumerist approach to food: cheap + choice. Now that, too, has been hollowed out.

Some bottom-up experimentation has been developing, such as shopping clubs and social supermarkets, but the scale isn’t yet there for mass appeal. I note the London Borough of Hammersmith and Fulham is doing a 12-week trial using Gousto the ‘meal kit retailer’ delivery firm to deliver food parcels (sorry, meal kits) for, or is it in lieu of, food banks. Keep your eyes on this one. Might these sad times shake the Coop movement to step up, and rediscover the Rochdale principles? Will the cost of living crisis deliver a new ‘can’t pay, won’t pay’ food movement? Or a renewed Coop citizenship versus Gousto consumerism? Might farm box schemes discover a heart? Or is this a return to Victorian charity systems now normalised?

Reality 5 is that food system reorientation politics are set to rise up the agenda. Food’s troubles are symbols of the need to redesign the economy generally. But what to do when Government buries its head? What to do about climate change? Or food that is too cheap yet unaffordable to too many? Its environmental and health costs are externalised. Housing is also too expensive but also unaffordable to too many. The gap between rich and poor is indecent. Travelling through the British countryside, as I have this summer, I see desiccated fields. The EU Drought Observatory shows at least a third of Europe, including the UK, suffering long-term water shortages. Crop yields will be down, accelerating food price inflation. Brexit induced labour shortages already hit the horticulture sector. Elected on an anti-migrant ticket, the government has quietly approved food migrant workers from Indonesia, Vietnam, Kyrgyzstan and Kazakhstan instead of Ukraine and the EU. Good luck to them but the government hypocrisy reminds us food labour markets are a policy mess. The list of food crises is long.

Across the entire agri-food system, NGOs and academics really ought to be coming up with ideas for serious food planning from farm to plate. The lack of English government food policy is troubling, as is the silence from the Opposition. This is an opportunity for civil society to test out ideas. And to win public support if government remains deaf.

Covid reminded us that a functioning state is important. So does the cost of food crisis. We cannot ignore the state. Nor do we have to accept normality as acceptable. No longer part of the EU but still signatory to the European and UN human rights declarations, UK citizens have fewer channels for reprieve or appeal on other matters such as food costs. The cost of living crisis forces us to face ourselves. The good news is there’s no shortage of divergent, creative voices from Scotland, Wales and the regions. The kind of thinking reflected by the Food Research Collaboration needs amplification and cohering. British society must not be allowed to ignore its problems. In these grim times, we need more deep and long-term food thinking. We need to face what we see in the mirror.

Tim Lang is Emeritus Professor of Food Policy at the Centre for Food Policy, City, University of London, and a Special Adviser to the Food Research Collaboration.

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