Food supply and interest rates are just as big challenges as energy bills - Andrew Brown

Rising energy prices are bad enough. Yet there is, at least, some prospect that the rises might be temporary if enough countries take serious steps to cut their use of gas and oil by simple measures like better insulation, wind, solar and lower temperatures in buildings.

The same is much less likely to be true of the other two problems that are starting to hit people hard in their pockets.

Food price inflation is at levels not seen since the worst days of the 1970s.

All the indicators suggest that there have been dreadful harvests in many different parts of the world and that food import costs are likely to carry on rising.

Putin’s horrible war in Ukraine isn’t the only reason for this or perhaps even the main one.

Europe has just experienced its hottest and driest summer on record and water has become so short that farmers in many areas haven’t been allowed to use it for irrigation. Crops are down there.

Pakistan has just experienced huge floods that have destroyed the harvest. That means that a nation of 220 million will be trying to buy a lot more food on international markets for at least a year.

Large parts of the United States and of China have also seen record flooding whilst others have been starved of water. The harvests there are also not looking good.

Put all that together and there is a risk of a serious reduction in the supply of food at the same time as demand is increasing because of risking living standards in former third world countries.

Importers from the UK are likely to face stiff competition from determined bidders in other countries as they attempt to secure supplies and that means even higher prices in the stores.

Supermarkets try hard to compete on price but they operate on tight margins and get most of their food via just in time delivery methods which are wide open to disruption at short notice. Genuine shortages on the shelves are possible.

Prices of oil, bread, butter, vegetables, meat and fish are already going up at frightening speeds.

Much of these problems with growing enough food to feed us all are the product of a year of exceptional climate chaos. Environmentalists have been predicting for a long time that eventually increasingly unreliable weather would hit food supplies. Few of them expected it to happen this quickly or this badly. Almost none of them expect the problems to do anything but get worse in an erratic and unpredictable pattern of slightly better years followed by even worse years.

High and rising food prices might be here to stay.

If that isn’t bad enough then there is the third problem to contend with. Higher interest rates.

The support that the government has committed to provide to energy consumers is not carefully targeted and is therefore incredibly expensive. It represents an open-ended commitment to keep the bills down for every single domestic consumer regardless of how rich they are.

The measure is so expensive that the new government daren’t even properly cost it. Paul Johnson the Director of the Institute of Fiscal Studies thinks it will be over £100bn a year.

That is more than the education budget. It risks exceeding the Covid bail out.

That huge sum of money doesn’t yet include the help that will be needed by businesses and the help that schools and hospitals will need.

Spending on those who really need it is understandable. Giving expensive government bailouts to the wealthiest isn’t. Nor is it easy to understand why none of this money is coming from a levy on those companies who have seen profits boom as prices have risen more than their costs. Or why almost all of it is being financed by debt.

It is hard to get economists to agree. Yet the vast majority of them will tell you what most commonly happens when a government takes on a huge new debt after making an open-ended commitment to fund consumer spending. The pound falls and interest rates rise.

That particular sting in the tail could deliver the hardest blow of all.

Those who see their mortgages or their rents rise as a result and those who see even larger increases in the cost of food imports might well have some serious questions to ask about the wisdom of a government policy that gives away unfunded support to the wealthiest at the risk of destabilising the finances of the nation, its business, its public services and its ordinary citizens.

Andrew Brown is a Craven District councillor representing Aire Valley with Lothersdale and the North Yorkshire councillor for Aire Valley.