The first steps to take to tackle the UK's cost-of-living crisis

This figure is a “representative” number based on 700 goods and services, but once broken down the data is even more shocking. For example, gas prices have increased by 28%, whilst electricity is up by 18%. If you wish to cremate a loved one who has died during the pandemic, which is the cheapest kind of funeral, the price will have increased by 6%. It is fair to say that this promise by Unionists has been utterly shattered by reality.

The reasons behind these price rises are a mixture of Brexit, climate change, market power from big business, and severe supply shortages. With the cost-of-living crisis causing pain and suffering to the most vulnerable, urgent alternative solutions are needed.

READ MORE: Ros Altmann: This is what we know about pensions after Scottish independence

Conservatives first reaction to increasing inflation would be to raise interest rates, a policy tactic used by Thatcher after the Winter of Discontent. The idea of raising rates would be to slow down economic growth to reduce household spending, resulting in unemployment and potentially a recession.

When Thatcher attempted to reduce the UK’s money supply by 10%, unemployment doubled to a total of 3.1 million people in 1982. Further to this, mass privatisation allowed business groups to overcharge for private utilities, whilst wages lagged behind growing prices. Thatcher may have reduced high inflation, but working families and communities were left devastated with social and economic scars still visible to this very day. It is worth noting that the social and economic scars of raising interest rates disproportionately affect women, young people, and minority ethnic groups.

Despite the devastation of Thatcher’s policies, Tony Blair (above) and New Labour continued her legacy. Rather than seek full employment, New Labour allowed a “natural” rate of unemployment to exist to keep inflation below 2%. This policy is known as NAIRU, the non-accelerating inflationary rate of unemployment. Most central banks adopted this policy, but rather than wait for inflation to rear its ugly head, central banks raised rates when workers saw a socially inclusive pay rise. In other words, central banks overtightened rates before the problem even arrived, denying millions of workers employment.

So what are policy tools we can use without scarring the most vulnerable in our society?

One

The first and more obvious solution is for workers across the UK to receive a real living wage. The UK Government’s current minimum wage is £8.91 an hour, but this is below the real living wage which is calculated at £10 an hour. After a decade of both stagnant and falling wages, a real living wage would allow for more spending in the private sector, allowing for increased growth and employment.

Two

The second policy is a Job Guarantee Programme. Rather than tolerating unemployment, the Job Guarantee would make the government the employer of last resort, offering socially inclusive work and wages to those who seek it. Such a programme would be based on a worker’s democracy model, so that the employment offered would be led by local communities and funded by national government. Further, the Job Guarantee is key to creating price stability, increased productivity, and targeting high inflation.

This is a policy that has been adopted by the SNP, but is only possible if Holyrood has the full powers of a normal independent country. We at Modern Money Scotland have written a paper on this policy, which readers can find on our website.

Three

The third policy is to prevent excessive price increases from big business and wealthy individuals. Whilst prices are increasing on basic necessities such as food, housing, and energy, big businesses have more than doubled their profit margins. The government can either place downward pressure on suppliers, place price-regulations across the board or bring vitally important sectors into public ownership. One policy the SNP and Scottish Greens are developing is rent controls, which are set to be introduced in 2025. With young people barely being able to afford rent, let alone basic necessities, 2025 is simply too far away.

Four

The fourth policy is to increase taxes on the wealthiest in our society. Rather than allow the top 5% to increase their shares and assets, further locking out consumers from certain markets, higher taxes would reduce their demand. The excessive wealth built up by the top 5% has allowed them to manipulate and directly control the “free” market to their benefit, but with progressive tax brackets that power is significantly reduced.

Five

The fifth policy is to introduce a Foreign Investment Review Board (FIRB). Wealthy investors and buyers from outside of the UK have a large capacity to purchase domestic resources to use them as speculative vehicles, corporate sector leverage, or lobbying power to manipulate the political process. A FIRB would inspect these investments and only greenlight them if they would go on to benefit domestic communities. If an investment would deny the domestic population affordable housing, then a FIRB would prevent such an investment from occurring.

Six

The last policy solution is to establish a committee within the central bank to monitor and analyse output gaps and price stability within the economy. This committee would produce evidence-based policy analysis as to how spending and lending in different sectors of the economy would impact inflation levels and demand. In turn, this would inform our parliament as to the real impacts of spending, rather than sticking to the austerity narrative that scaremongers about the size of our country’s government deficit.

The policy solutions are there to grasp at any moment. The last question for readers to answer is this: which government is more likely to adopt these progressive solutions, an independent Holyrood or Westminster.