Ben Cooper column: ‘Labour must intervene to tackle the causes of the cost of living crisis’

For more than half a decade, Britain has been stuck in a cost-of-living crisis. Life’s essentials have become relentlessly more expensive, as people devote more of their income to housing, energy, food, water, insurance and the internet. The conflict in Iran is set to make this worse. 

But while global economic shocks are often a cause of rising prices, they are not the sole reason. We are also more dependent on a set of poorly regulated markets for these essentials, which exacerbate economic insecurity here more than in other countries. 

Businesses can use unfair practices to overcharge millions, rip-off ordinary consumers, and grow company profits. The Chancellor recently warned against profiteering at the petrol pumps caused by the recent conflict. But these practices are widespread and long-standing in other markets too. For example, millions of people are charged extra simply because they do not switch essentials provider regularly – a so-called ‘loyalty premium’. According to Citizens Advice, loyal customers end up paying more, and this is not driven by rising costs but by businesses simply exploiting consumers for profit.

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Furthermore, people on low incomes often end up paying more for the same service actually because their income is so low or because of where they live. For example, car and home contents insurance costs over £400 more if you live in a poor neighbourhood and pay monthly. 

When major businesses report record profits while millions struggle with the cost of living, it is easy to see why the public have little faith in the markets they depend on. Even before the war in Iran, More in Common found more than half of voters thought the cost of living crisis will never end. People are, understandably, sceptical about a system that creates unnecessary, additional pressure on family finances. They feel powerless; worn down by years of financial anxiety; and with no one on their side. 

The political consequences are significant. Economic competence will always matter for Labour’s chance of re-election. But it is a mistake to just focus on GDP growth or public debt. People feel the cost of daily life much more acutely – especially when high prices are seen as unfair or they undermine security. That’s why the government’s focus on living standards is so important.

Because if hardworking families are being exploited and the government isn’t seen to be fighting their corner, voters will reject the government’s handling of the economy. And they will turn to alternatives. That is why Reform and the Greens are doing well with low-income and economically insecure individuals. In particular, Zack Polanski is positioning himself as someone who will ‘rebalance the scales’ towards ordinary people and end ‘rip-off Britain’. 

Labour must seize the initiative from Reform and the Greens by focusing on the cost of daily life and consumer exploitation. The government is right to prioritise financial support to those on the lowest incomes. But this would leave in place the root causes of high and rising prices and the lack of control people feel over their cost of living. 

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There is strong public demand for a government that intervenes in the markets for essentials like water, energy and housing. For example, Fair By Design found more than two-thirds of voters supported action to ensure that poorer households don’t pay more than richer households for the same essentials.

Over the next year, the government should fundamentally reshape the markets that supply our essentials, to cut costs, allow people to keep more of their own money, and promote economic security. 

Over the next few months, the government should announce a comprehensive ‘Cost Cutting Plan’ to help families afford the essentials. They can start with action on the loyalty premium, an end to charging more for insurance to those who pay monthly, and reduced barriers to the discounts offered by loyalty cards and online shopping. They should set out specific interventions, rather than rely solely on regulators like the Market and Competition Authority. 

The war in Iran is set to create even more financial hardship, but it must also focus our attention on a set of markets that don’t work even at the best of times. And crucially, the government should unashamedly own this agenda. Labour has a long history of taking on businesses that exploit vulnerable consumers for profit. This Labour government must continue that tradition.

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