District Matters

Cushion the impacts of national trends

May 2022

There's a storm coming. That seems to me to be the only way to describe what appears to be coming down the track for us at the moment. Inflation is raging and projected to get above 10%, a level unheard of in a generation. The economy seems to be heading for stagnation, if not outright recession. Far too many people believe that the Government will protect them from the consequences of these difficult times. This is not facing up to reality.

Energy prices are set by world markets and the Russian invasion of Ukraine, sanctions and the Russian response are making the situation worse. I have heard projections that the energy price cap will increase by another 40% in the autumn which gives total increase of over 100% in about six months.

Food prices are also increasing rapidly; the war in Ukraine has closed all their Black Sea ports making exports of food difficult. Unhelpful weather in other parts of the world is exacerbating the situation. It is interesting that in the 21st century we are back to having to keep a close eye on the quality and quantity of harvests and the state of the weather.

Both energy and food are basics. The impact of price increases in these will be felt most heavily by the poor and those on fixed incomes. Obviously, this will impact people on benefits. Pensioners, however, may also be badly affected. The days when a great many pensioners were on index linked final salary pension schemes are fading rapidly, except in the public sector. (It is interesting to note that the last reported figure I saw for the total deficit on public sector pension schemes was a mere £2.4 trillion). Inflation at 10% will rapidly eat into the value of pensions. As a District our age profile is skewed to the elderly. Inflation will, therefore, bite hard locally.

I would expect to see an increase in people contacting our Council as the first port of call when they hit difficulties. Our teams will do what they can to help, but our capability to provide a great deal of direct assistance is heavily constrained by our budgets. Central government provides funding support for dealing with specific issues, such as Syrian or Ukrainian refugees, but less so for general needs. This is not a criticism of support for refugees. It is merely pointing out the way things are.

At some stage we may have to make difficult decisions given our scarce resources. For example, do we prioritise helping those people hard hit by inflation or do we prioritise tackling the climate emergency? This is not a choice most people would want to make. We will doubtless be criticised by many people who would run a mile if faced with the need for such decisions.

Interest rates are also on the rise. The uncomfortable truth appears to be that almost all central banks are well behind the curve when it comes to dealing with inflation. They have hesitated for far too long in putting up interest rates and ending quantitative easing. (In simple terms this is the equivalent of printing money). The result is that they are probably going to have to increase interest faster and they will end up higher than would otherwise have been the case. There are serious commentators in the USA who think the Federal Reserve may have to increase its discount rate to 5-6%. The Bank of England may be forced to follow suit. Many people appear slow to learn that ducking tough decisions in an attempt to protect people usually means that it just postpones the inevitable and makes things worse.

This may not be a good time to take on big levels of debt. Those with existing high levels of debt may find life becoming more challenging. This may have serious repercussions for the housing market.

Despite the increasingly bleak outlook, we are continuing our efforts to support economic growth and business development in the District. Recently I visited the Porterbrook Rail Innovation Centre at Long Marston. They have some serious plans for investment and development of the site. I reassured them that we would do everything we could to help.

We also had discussions with a developer who has some interesting and appropriate ideas for development in Stratford-upon-Avon. We will attempt to make these a reality.

Our aim is to cushion the impacts of national trends by being proactive locally. We are focussed on job creation and encouraging prosperity.