Breathing Room

Andy Burnham today announced his policy to give “breathing room”. This turned out to be a cut of the 5% tax on electricity costs. The BBC notes this will save a typical house £45 a year. This is to be funded by the cancellation of the digital ID, which itself is an interestingly unfunded policy (as Darren Jones pointed out earlier today). At the moment they are pulling money out of thin air.

While this policy works on putting money back into the hands of the public, it is unlikely to make a significant difference to the finances of Britain’s households. A cut to standing charges could have been a more progressive way to target those who need it the most as this would be a fixed amount to all households.

The policy is likely to be beneficial for businesses struggling from the exceptional energy costs in the UK, as it will knock 5% off the prices, reducing pressure.

With the growth of AI data-centres and their significant electricity demand, the removal of VAT does remove the ability for the treasury to raise income which in turn could help funded the subsidies that incentivise energy generation.

Policies of the day

Similarly to yesterday here are a few more policy options that could help Britain function better:

1. removal of stamp duty on shares, which may make the British stock market more favourable to companies looking to raise the capital they need to grow, and avoid home-grown companies looking for another stock market to list on.
2. Initiation of a digital portal to help to centralise right-to-work checks, likely alongside tax, self-employment and other important working functionality, aiming to reduce the legal administration burden on companies. This may sound like the digital ID… and it is a minimal version of it focusing on the benefits it can provide to employers and employees.
3. Give the regulators more teeth to fine companies that violate the social contract, for example water companies that pump sewage into the rivers. If this makes these companies net-debtors to the UK government, then it may be time to nationalise them.
4. When the government provides subsidies to industries, we should ensure the public benefit from any returns. We should start to build a sovereign wealth portfolio based on shares or some form of return mechanism if these companies begin to generate a profit.

Cost of living solved?

Expectedly, Andy Burnham has not made a significant dent on the cost of living this early on in his prime minister role, though he will have raised his political capital. As he’s only had a few days which is not enough time to wrap the head around the restricted nature of the public finances, he can’t shoulder much blame yet.

One of the most significant impactors on the cost of living is house prices and rent. If Andy Burnham’s wants to make a more meaningful dent in the cost of living, he will need to make a quick start on his homes building program.