Instead of increasing the pain on Vladimir Putin, we are lessening it
The news came in hot this week, one item after another: cancellation of the fuel duty rise, plans to cap supermarket prices,relief for Russia. Each instance was obviously intended to address rising prices.
And each instance did so in the most cack-handed way imaginable.since the war began. Russian strikes have targeted substations, power plants and the electricity network, depriving Ukrainians of energy. Bitter cold rolled in behind the missiles. With wind chill, the temperature outside hit -19°C. Inside people’s homes, the temperature was around 5°C. Residents would try to insulate by sealing their bedroom with bubble wrap or create warmth by heating building bricks on a gas stove.
The impact of persistent cold, like hunger, is to extract the human capacity for determination. When your bodily needs are challenged in this way, you are reduced to need and little else. And yet somehow, Ukrainians have remained utterly committed to the battle for their homeland. They have shown the price which a free people can inflict on those who would occupy them.
Russian casualties are estimated at around 30,000 a month. There are insufficient new recruits to make up for those who are killed. The latest Russian offensives have stalled. Ukrainians are enjoying advantages in drone warfare.
Battlefield losses are triggering economic calamity. A shortage of men, combined with a frenzied demand for defence production, has produced a chronic labour shortage in Russia, which has led to high inflation and high interest rates. Its GDP shrank by 1.8 per cent in January and February. , we are lessening it.
On Tuesday evening, the UK government quietly announced that it would loosen sanctions on oil from Russia which had been refined in third countries for jet fuel and diesel. Of course, the US is the market leader in this approach. It introduced a waiver in March on Russian oil, which it has since extended twice. But Britain was supposed to be different.
We are perhaps the single most consistent supporter of Ukraine on the planet. We have led international efforts to put economic pressure on Russia. Even on Tuesday, we were signing a G7 statement reaffirming our “unwavering commitment” to impose “severe costs” on Russia. And then hours later, we were betraying our values.
The Chancellor is cancelling a rise in fuel duty due for September. Politically, the Treasury and No 10 will have considered this unavoidable. But economically, it is simply mad. The price of fuel is rising because supply has been disrupted.
The Strait of Hormuz was once open. It is now closed. That is a real thing that is happening in the real world. You cannot just close your ears and pretend it isn’t so.
Allowing the fuel price to rise lets the increase work its way through the system. Yes, it hurts, but it is meant to hurt. It gives people the signal that a bad thing is happening and the incentive to reduce usage. Instead, we are going to shield this signal from them, refuse to encourage rational behaviour, and watch usage continue, exasperating the ultimate cost to the country.
A similarly baffled response is visible in the Government’s flirtation with the idea of price caps on key supermarket products. This was informally proposed earlier in the week only to be hastily walked back this morning when the scale of opposition became clear. How this idea was ever even contemplated is bizarre. Supermarket prices are rising because the Strait of Hormuz is closed.
That is creating a supply shock to oil, which is used to transport goods, liquified natural gas and fertiliser. This has a major impact on food. It hit the US spring planting window for corn and soybeans, the Sri Lanka Maha rice harvest, the Bangladesh Boro rice season, the India Kharif season. Capping supermarket prices is not just ineffective, it is self-defeating.
If a capped price does not cover costs, supermarkets will simply stop selling the product, leading to empty shelves. Or they might simply act to offset the price cap by raising prices on non-capped products, triggering knock-on adjacent inflation. These three policies all fail in different ways – morally, economically or logically. But taken together, they share the same basic failure.
This is a complete absence of political leadership and communication.. What has the Government done to prepare the ground? Nothing at all. What has it done to level with the public?
Not a thing. Probably out of fear of a panic buying, it has conspired to prevent any meaningful awareness of what is going on. It could have urged businesses to implement work-from-home programmes wherever possible. It could have encouraged people to walk, cycle or carpool.
It could have promoted electric cars, or at least advised people to reduce car weight and inflate tyres. This is not utopian. It has been done in countless countries since the crisis began. Just not in the UK.
– to explain what has happened, what will happen next, and what will be required of us. Because we lack that, we resort instead to what we saw this week: half-thought-out ideas which either fail to solve the problem or even exacerbate it. Shame and ineptitude, arriving one after another, in rapid succession.
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