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Chapter 1: What is the proposal to cap food prices in supermarkets?
Somehow the supermarkets would limit those prices in return for the government waiving certain restrictions. Having talked to the supermarket bosses, they almost all say this is completely and utterly barking mad.
Clear message to people, isn't it? The government is going to make your shopping bill not get any bigger. The reality is it probably would put it up.
Andy Burnham is the messiah. He's going to solve everything. And this has been a problem with water privatisations, why it should never have been privatised in the first place.
The process, this kind of essentially deregulation has cost £134 million. Will it reap the rewards that you want?
Chapter 2: Why do supermarket bosses find the price cap idea ridiculous?
It's a sh** show, quite literally. Support for this episode comes from Octopus Energy and the founder and CEO, Greg Jackson, is with us now. And I want to ask about oil prices. Obviously, they're very high at the moment. What's your advice for a company worried about them?
First of all, if you use a lot of electricity, it may be possible to get electricity tariffs where you get charged less at certain times of day. And a lot of businesses have been able to benefit by shifting their electricity consumption. They still use as much energy. They just pay less for it.
Of course, things like heating space can be very expensive, and finding ways to do that more efficiently by heating to maybe 18 degrees rather than 21 can make a very big difference.
Chapter 3: How does inflation impact living standards in the UK?
But of course, look, the real solution is that Britain needs to escape from this dependence on the global fossil fuel price. And that means more electrification, disconnect our electricity price from the gas price, and ultimately get more of our electricity from British resources.
Nice one, Greg. Thanks for explaining that. Right, we're going to go to the episode. Hello and welcome to The Rest Is Money with me, Steph McGovern.
And with me, Robert Peston.
So loads to talk about today. We want to bring you up to speed on Reeves' plan to cap food prices in the supermarkets. We've got the latest on inflation. What does this all mean for rates and mortgages? And what is going on with Andy Burnham and Manchesterism? You're going to explain it to us, aren't you, Robert? I'm going to try.
I mean, there's some very interesting ideas that are floating around about what a Burnham... if that comes to pass, would mean for how you manage the economy. So I'm going to look at one particular bit of it, which is when he talks about controlling energy, water, our most important public services, utilities. What does he actually mean by that?
Are we talking about old-fashioned nationalisation and an enormous burden Bill, you know, billions and billions, well, hundreds, you know, potentially well over a hundred billion of taxpayers' money being used to buy these businesses, or are we talking about something else?
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Chapter 4: What is Andy Burnham's vision for Manchesterism?
So that's what I'm going to look at.
Okie doke. So should we start, first of all, with this plan then to try and cap prices in the supermarket? So this is a Reeves idea, isn't it? To try and control what is effectively the cost of living going up so much at the moment.
Yeah, I mean, I don't know if you remember, but... We talked on this podcast when we saw the astonishing price shock from Putin's war in Ukraine about how other governments around the place were panicking putting the lid on the costs of essentials.
And in particular, if you look at a country like France, there was a sort of deal with the supermarkets there to limit the prices or to cap the prices of some Because obviously, you know, when you have these price shocks, the impact, particularly on those on lower incomes, is really severe.
And so one of the things that the government has been looking at, and just to be clear, you know, we are recording this before COVID. the Chancellor makes her announcement about what she's doing in terms of trying to help those on lowest incomes as a result of the price shock from Trump's Iran war.
But what is going on, I've talked to supermarket bosses about this, is this idea that somehow the supermarkets would volunteer To limit the price of a number of essentials like milk and eggs and those products that we regard as absolutely core to nutrition. Limit those prices in return for the government waiving certain restrictions.
So, you know, some of the things that the supermarkets, as you know, complain about is that the... Regulations on packaging or the regulations on promoting, well, not promoting unhealthy foods, they find quite expensive and restrictive.
And so the Treasury has been floating this idea of a sort of voluntary pact between supermarkets and the government, that on the one hand, the government would reduce some of these burdens in return for supermarkets to... And essentially saying they will try and ease the price pressures in these important food categories and help, therefore, those on lowest incomes.
And before we get into it in detail, I should just say, having talked to the supermarket bosses, they almost all say this is completely and utterly ridiculous. Barking mad. And, you know, I mean, first of all, let me just ask you what you think of this as an idea. And then let's drill down a little bit.
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Chapter 5: How does Manchesterism differ from traditional nationalization?
And then, you know, even just the price... structuring in terms of payments on the system and okay it's much easier because it's digital now but still there's a lot of things that need to happen in order to reduce the prices or cap the prices in the way they want and a lot of questions that need answering and essentially who is going to take that hit and so I
think it's just a bit rich to keep going at businesses to be the ones that have to try and make the cost of living better for people when let's face it a lot of the reasons why we've had you know unemployment rising and businesses not investing as much is because of the hit they've taken already on the 40 billion pounds worth of taxes they all got in Rachel Reeves's first budget and so therefore I guess my answer is no.
I don't agree with it. So certainly the boss of a very big supermarket chain agrees with you. I'm going to read what he texted me this morning. He said, my advice to government would be to go back and look at all the regulatory burdens that customers are already paying for and the trade union rights bill, which will lead to a boom in human resources bureaucracy across Britain.
So he definitely agrees with you. I mean, I suppose my take would be this. There are issues around quite how... competitive the supermarket sector is. I have to say on one measure, it looks pretty competitive because the margin, that's the profit that supermarkets make as a percentage of sales is lower than in many other countries.
And that's normally some kind of measure of how competitive they are. But actually, my view is simply this really, that if the government
thinks that there is price gouging going on or that prices are being kept too high and that profits are too high, the way to deal with that is to properly assess whether essentially super normal excess profits are being made and then tax those excess profits and
And then plough the money that you raise from those excess profits into either grants to people on low incomes or simply into subsidies for the foods that you think are important. The problem with what has been discussed, and look, if I'm honest with you, I think it's very unlikely it'll see the light of...
day in the end, because it seems really very messy and complicated, but let's wait and see. It's definitely bureaucratic. There are all sorts of issues like, well, are you saying that it will only apply to Asda and Tesco and M&S and Sainsbury's?
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Chapter 6: What challenges arise from controlling utilities like water and energy?
But if you're a small shop, you can charge what you like. If it became widely known, which it would do if this happened, that prices of these real essentials were way lower in Tesco and Sainsbury's, then if you're a smaller shop, actually you're sort of in trouble at that point because you think there's going to be massive traffic away from you to the supermarkets.
I mean, so from all points of view, it feels to me like a sort of government intervention that could distort and actually have unforeseen consequences consequences of a negative sort. So as I say, if the government genuinely believes that there is excess profits, then just tax the excess profits and put the money back into lowering prices.
Yeah. And it just feels a bit gimmicky, doesn't it? It feels like a desperate... It's a clear message to people, isn't it? The government is going to make your shopping bill not get any bigger, but the reality is it probably would put it up.
Now, it comes, of course, against the backdrop where today we actually saw a fall in inflation at a time when everybody's been warning inflation is about to go through the roof. What did you make of the figures, Steph?
Yeah, well, it's because we're seeing this energy cap come in. So, you know, we've just been talking about not doing a food cap because it'll make no difference. But what genuinely has made a difference in terms of how much the cost of living is going up by is this energy cap. So, you know, we saw... The price of energy for not well, this is where it gets complicated, isn't it?
We're not saying people's bills have necessarily come down. It's that the fact that they're not paying as much as they could have been had they not been the cap.
I mean, what happened, as you know, is that the government removed certain essentially green levies from the bills that we all pay. And that then allowed the benchmark... the price that we pay to be lower than it would otherwise have been. And as you say, that is reflected in today's inflation figures.
But the rising price of energy in wholesale markets, the expected rise in food prices, we haven't yet seen what you might call the shock, the genuine shock of Trump's war in Iran. And that shock... is undoubtedly coming. I'm afraid it's like you can sort of see, it's not quite a tsunami, but I'm going to use it as a metaphor.
You can see that big wave on the horizon and you're looking out to sea and it's coming towards you. And that is, as I say, it's not going to be a tsunami. It's going to be a are worrying for many people, rising prices, not as devastating, I think, as Putin's war in Ukraine was to our living standards, but it will be significant.
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Chapter 7: What are the implications of rising mortgage costs?
And as you said, as soon as this energy price cap changes again in July... It's going to go up by 200 or 300 quid at least. And so there's going to be a lot of pressure. So that's still because, you know, there's a lot of conversation around this again about what happens with interest rates. What are the Bank of England going to do?
And I've been looking at mortgage costs recently, which it's really fascinating what's happening with mortgage costs, because obviously, as things stand, no one has changed. No central banks have changed their interest rates yet. But. People are pricing it in. The lenders are trying to price it in.
So if you look at what has happened with mortgage costs, it is across Europe and North America they have risen sharply.
Could I just before, because I think this mortgage cost issue is really, could I just make one other just very quick important point about where we are economically? And I have to say where I am is just a bit confused, right? Because on the one hand, We saw something that was positive, which was the IMF upgrading a little bit, the growth forecast for this year.
And yet we also saw unemployment figures, which were worse already than we were fearing. So it is quite difficult to judge whether the economy is sort of weaker or because of what we're seeing on unemployment, than we hoped it would be, or a bit stronger than we thought it would be.
And that, of course, feeds into what you want to talk about, which is what's going to happen to interest rates and mortgage costs. Because right now, it is really quite difficult to see whether the biggest overwhelming... impact of Trump's war is to damage our confidence, economy slowing down, in which case the Bank of England would be barking mad to put up interest rates from where they are now.
So my current view remains what it has been recently, which is interest rates are just going to stay where they are for quite some time rather than being increased or lowered because the picture is just so uncertain.
Yeah, yeah. And your point being that if it's about confidence, if that's our biggest hit, that'll stop people spending and that will bring inflation down.
And it also means that people will not have the negotiating power to demand higher wages, right? And we've seen a little bit of softening in wage settlements in the latest figure. So, as I say, it's a very confusing and mixed picture.
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Chapter 8: How can local governance impact public services and utilities?
On the basis of rates not changing in that time, this is an assumption that things are going to get tougher. A lot of the lenders had priced in rate cuts that they thought were going to happen.
Well, that was the point. In February, before Trump bombed Iran, the presumption was that interest rates were falling. This is just another manifestation of how much damage Trump has done to us, right? A war that we've stayed out of.
But also to himself as well, because in the US, if you look at what's happening with mortgage rates there, a 30-year mortgage rate is 6.36% there. And that is back where it was before the Fed started cutting rates. So, you So they've had rate cuts since then. I think they've had three, haven't they? Quarter point rate cuts.
And yeah, the rate now for a mortgage there is back where it was before all those rate cuts come in. So that's going to be interesting how it plays out for Trump, because that is a tangible cost for American people going up. Yeah, we've talked about oil and fuel prices and things, but that is another biggie is the cost of homes. And, you know,
Bringing us back to the UK, the other thing that's been going on in the housing market, which hasn't had that much coverage because of all the other drama, is the change in renting. So the Renters' Rights Act came in in May. And this is huge for the housing market. So this is the legislation in England that means...
Well, it overhauls the private rented sector and it fundamentally shifts power towards tenants getting rid of the Section 21 no-fault evictions, ending fixed-term contracts, restricting rent increases to only once a year, and a whole host of other things. And in that time, landlords have been selling up. So you've got... concerns there about the supply of rental properties.
So all of this together is going to be tough for homeowners potentially off the back of this legislation that's come in, but also what's happening in America. And again, putting more pressure on the cost of living. So yeah, I mean, this is all just adding more pressure on labour as well in terms of the cost of living and things getting tough for people.
But don't fear anyone out there because it turns out that Andy Burnham is Brian. Or what do I mean? When I say Brian, I mean the Messiah. He's going to solve everything. Maybe after the break, we could explore... One of the most interesting and intriguing slogans I've ever heard from a politician.
He put out what was, I thought, actually quite a compelling initial campaign video a couple of days ago. But the punchline is Manchesterism is the end of neoliberalism. I mean, my God, they're going to be talking about that in the pubs of the Red Wall every night. from now till the by-election actually takes place.
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