{"id":28095,"date":"2025-10-15T03:07:18","date_gmt":"2025-10-15T03:07:18","guid":{"rendered":"https:\/\/naijaglobalnews.org\/?p=28095"},"modified":"2025-10-15T03:07:18","modified_gmt":"2025-10-15T03:07:18","slug":"the-guardian-view-on-the-imfs-warning-britains-economy-runs-hot-for-profits-cold-for-pay-editorial","status":"publish","type":"post","link":"https:\/\/naijaglobalnews.org\/?p=28095","title":{"rendered":"The Guardian view on the IMF\u2019s warning: Britain\u2019s economy runs hot for profits, cold for pay | Editorial"},"content":{"rendered":"

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B<\/span>loomberg\u2019s headline said it all: \u201cUK Faces Worst G-7 Inflation and Flat Living Standards, IMF Says\u201d. The International Monetary Fund warns that inflation will be higher in the UK than in any other major advanced economy \u2013 including in the US, where Donald Trump\u2019s tariffs are driving up costs for American consumers. This while GDP growth per head crawls at 0.4%, the weakest of any major economy. Real wages have stagnated for 11 months. Meanwhile, official figures show that unemployment has climbed to 4.8%, the highest since spring 2021. Forget talk of Britain\u2019s \u201cupgraded growth\u201d; the economy, under Labour, is running hot only for those collecting profits.<\/p>\n

The Joseph Rowntree Foundation (JRF) projects that by 2029 average disposable incomes will be \u00a3570 lower than today, a fall of 1.3% \u2013 the sharpest drop in living standards since records began in 1961. This isn\u2019t a simple case of prices getting ahead of demand. What Britain faces is profit inflation: prices are rising while wages stand still. As Lord Keynes noted, this is\u00a0a\u00a0transfer from labour to capital \u2013 an increase in mark-ups, not in productivity.<\/p>\n

The Treasury takes the opposite view. Despite the evidence, it thinks total spending is about right to buy all the goods and services that the economy could produce at full employment. It sees inflation as evidence of overheating because of \u201cwage stickiness\u201d and rising import costs. This reasoning has become increasingly difficult to sustain. In August the Bank of England broke ranks to say that the lack of jobs was partly down to a \u201cweakness in underlying demand\u201d. Britain\u2019s household saving rate \u2013 around 11% \u2013 is the highest, bar the pandemic, since the early 2010s, signalling not exuberance but caution. Consumer confidence is falling.<\/p>\n

Britain doesn\u2019t need more belt-tightening. It needs more spending targeted at helping those who are in need. This means a budget deficit big enough to substantially offset our trade gap \u2013 otherwise the squeeze just lands on families and firms. There should also be a shift in spending \u2013 via higher benefits and better-funded public services \u2013 towards households, not asset holders. As Mathew Lawrence of the Common Wealth thinktank argues in the Guardian, the state should intervene to make essentials such as energy, housing and transport\u00a0affordable.<\/p>\n

There is a moral argument for redistribution. But it is also an economic necessity. The JRF is right when it says security is productive. Families with a financial buffer can invest in skills and take risks; those living month to month cannot. Yet Labour is fixated with the idea that rising asset values will make Britain properous. In opposition, Rachel Reeves promised to review \u00a3174bn of tax reliefs, many of which channel \u201csocial spending\u201d into asset prices \u2013 such as pension subsidies and capital-gains exemptions. She should keep that promise, and look at wealth taxes.<\/p>\n

Labour risks ending up in a position where it is defending fiscal rules that undermine voters\u2019 livelihoods. Polls suggest that the public are already unimpressed with the government\u2019s performance on raising living standards. A record of falling real wages and rising prices rarely wins elections. The alternative is simple enough: less help for balance sheets, more help for pay packets. We\u2019ve tried pushing growth through rising asset prices before. It ended badly in 2008, and led to a Labour\u00a0government losing power. That ought to make ministers think again.<\/p>\n