Should the state be subsidising everyone, or just those most in need? Asks Tom Harwood

It might take bravery to say people on average incomes could get by with no handouts – but it might be what is needed to save the country from further problems

Published

Mid-August may be ordinarily the quietest time of the year for political news, the time of the year we are traditionally treated to stories of condemned alpacas, fantasy imminent national governments, or even CCTV footage of a woman putting a cat in the bin. Remember that one?

Well this year the traditional silly season seems rather less silly.

We are thundering through August in the midst of a global energy price shock, an inflation crisis unknown to this generation of political leaders, a grain shortage, extreme heat warnings, the rise of radical Islam in Afghanistan and the West, rivers drying up abroad and water shortages at home, a new global health emergency declared by the WHO, war in Europe, unprecedented indebtedness, the highest tax burden in 70 years, and to top it all the collapse of our government, and the campaign to install a new one.

It is not a quiet summer.

And it is in this context that we have finally heard from the Labour Party.

Labour is today announcing their plan to tackling energy costs – a freeze on that mischievous energy price cap.

It sounds potentially logical, and more than a little tautological. Freezing a cap? Isn't the cap supposed to cap the price in the first place?

Well, synonyms aside, the reason the cap keeps rising is because the UK Government cannot control the global price of energy.

There is more demand for energy than supply of it, which is why – as those well versed in economics will know – energy is increasing in price.

As the Institute for Fiscal Studies said this morning, quote: “Suppose every government in the world tried to freeze the price of energy, in the end it would be self-defeating, as the reason energy prices are going up is that demand is going up more quickly than supply."

But that aside, in the short term, is a freeze of the sort of policy that is workable or desirable?

Well, Labour say this will cost £30billion pounds every six months. For context, furlough cost £23billion every six months.

Yes, if you thought furlough was cripplingly expensive. You ain't seen nothing yet.

Why is it so much more expensive than the massive furlough scheme? Well, furlough was targeted. It went to those who may have lost their jobs.

This energy policy from the Labour Party is, however, not targeted. So by definition half of the tens of billions it costs would go to households on above average incomes.

And I suppose this is where we need to ask ourselves: is that what the state should be doing?

Should the state be subsidising everyone, or just those most in need?

I sense this will become a significant political dividing line in the months to come.

It might take bravery to say that people on average incomes could get by with no handouts. But it might be what is needed to save the country from further problems of debt and stagnation down the line.

The question that must be asked is: Should the state be providing the same level of support to those of us who might have to for example forgo a holiday to pay for bills this year, compared to those who are literally choosing between heating and eating?