We await the autumn budget next week with bated breath here in the UK. Will Labour raise income taxes and break a key manifesto pledge?
Bond market instability over the past few days reflects the volatility and unpredictability that have become a feature of economic policy under Labour. It also reflects the general vibe of institutional and infrastructural decline for which Keir Starmer’s government can no longer blame its predecessors, the Tories.
Jobs and inflation data continue to be worrying, while economic growth is in reverse after a series of bad policy decisions. Most notable of these has been Labour’s increase in employers’ national insurance contributions, which pushed up payroll costs and inadvertently shed jobs.
UK consumers rightly feel they simply cannot tolerate a further income tax increase when so much of the math doesn’t math in the current UK economy. The cost of living crisis in the UK is increasingly unsustainable. Rent and food inflation are becoming intolerable.
Many Londoners in particular feel they are barely able to breathe. While inflation has been high globally following the pandemic and the start of the Russia-Ukraine war, here it feels menacing. The cost of olive oil, butter and meat sometimes doubles in the space of a month.
In London it is sometimes hard to know if it is just “greedflation”, with shops opportunistically price-gouging. I bought a small takeaway cappuccino in Mayfair recently, and the barista charged me £7 (R160) with a straight face.
I understand that many purchases here reflect the madness of the high-concept, peak-capitalism age we live in now, with its distortion of Maslow’s hierarchy of needs of our matcha lattes and reformer pilates classes, but honestly, this is getting out of hand. The cappuccino tax is real — I no longer have coffee out in this economy. I wish we could borrow Zohran Mamdani from New York.
London has always been a pretty expensive place to live, but it feels about as expensive as Zurich or Oslo here right now. This is made worse by comparatively low UK salaries, making it nigh on impossible for the average worker to build wealth, especially with declining property prices.
The average UK salary is about £35,000 (R787,000) and about £49,000 (R1.1m) in London, with a monthly take-home pay of about £2,300 (R52,000) and £3,200 (R72,000), respectively. But according to Rightmove data, the average rent in the UK is £1,354 (R30,000) a month and £2,712 (R61,000) in London.
The rent prices do not take into account broadband, energy, water and council tax of about £250 (R5,600) a month. Using public transport in London costs about £10 (R250) a day, which in a city of this size is unavoidable unless you live in the centre (but then your rent would be unsustainable). Just leaving the house sees money haemorrhaging out of your pockets.
So what is the average UK person living off? The answer is consumer debt, which is now substantial in the UK. Total household debt exceeds £2-trillion (R45-trillion), with average unsecured household debt at about £14,300 (R322,000), mainly credit cards and overdrafts.
UK salaries and living standards have traditionally been low in comparison to its Group of Seven counterparts, but the argument has been that this is balanced by a stronger social safety net. But with the decline in the National Health Service and other public services, what are people paying taxes for exactly?
If the government raises taxes next week directly or through stealth, Starmer and his administration are likely to be forced out swiftly — yet another change in political leadership that the UK can ill afford after the multiple defenestrations of the past five years.
• Dr Masie is a visiting senior fellow at the London School of Economics’ Firoz Lalji Institute for Africa.
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