Prices are political. On one level this is a statement of the obvious. Of course the price of goods or services is political. Voters get worried or angry about how much things cost. Leaders who want to win elections must take note. Except that for the past three decades, the price of things is not something voters have got especially worked up about.
The most notable exception was the fuel dispute of 2001 when the Labour government conceded ground on petrol prices while appearing to stand firm. But on the whole since 1979, when leaders sought to please voters they have tended to focus on income tax cuts, rises in benefits or reductions in the so-called tax burden on businesses. An era of low inflation took the politics out of prices.
This is changing, and changing fast. Two examples from the early months of this year illustrate the degree to which price is becoming political again. In January, a seemingly doomed Ken Livingstone announced that he would cut fares in London if he were elected as Mayor. He promised to do so by this autumn. To the surprise of all those who had watched the contest closely, Livingstone suddenly moved into an opinion poll lead, having been miles behind Boris Johnson.
A pledge to cut fares was the equivalent of waving the conjuror's wand. After other heated controversies unrelated to policy, polls suggest Johnson has regained a significant lead, but the only reason Livingstone has, or had, a chance was because of his pledge to make the demands on the Oyster Card less painful.
We should not have been surprised. The cost of travelling in London has become a common talking point, always a sign that an issue is acquiring deep political resonance. When the fares went up in January to mind-boggling levels, the talk intensified. "I spend £50 a week to travel four miles on overcrowded Tubes" is a common exclamation. When a candidate promises to take action, they get a hearing at the very least – and cause a degree of alarm in the office of the incumbent Mayor, who had anticipated a relatively easy ride towards a second term.
The second recent episode that reflects the new focus on prices is the furore over the Cornish pasty. The frenzy was largely manufactured and trivial. But that is the point. The issue would not have taken off in previous decades, when prices were less politically sensitive. Even now, in these austere times, we can generally cope with the rise in the price of Cornish pasties, including those of us who buy them. As the occasional purchaser of home-made vegetarian pasties in St Ives, I can assure everyone losing sleep that they remain a good buy. My assurance does not matter. We have all become alert to a price rise, however silly.
In between these two examples, there are plenty of others. Energy prices, the cost of petrol, and exorbitant train fares are all politically charged. The Government and other leaders, such as a mayor, cannot do much about food prices, but in the form of tougher regulation, taxing less or subsidising more, they have considerable control over the price of these other goods or services.
In the 1980s, 1990s and the first decade of this century, leaders showed no interest in pulling levers. Other than pulling them in the opposite direction. One of Margaret Thatcher's first acts was to increase VAT. George Osborne did the same. The Labour government showed little concern about rising train fares, accepting that the passenger should pay more of the costs and the state less. The current Government has moved even further towards the passenger meeting the full costs. In the meantime the energy companies have made hay with high bills without politicians paying very much attention. Price regulation is light.
The new focus on price raises thorny questions that have been largely ignored. Should travellers pay close to the full cost of public transport even if the economy as a whole benefits from a modern network? Can private monopolies charge less and deliver more? Have governments become too dependent on taxes from purchases, not least in relation to fuel duties?
Take the case of trains. As the demand for rush-hour services has grown, the response of train companies is to put up fares to the point where some travellers seek alternative forms of transport. The companies reduce demand by making fares unaffordable. In most other European countries the response to increased demand is to provide more trains. If I am right and fares have reached a tipping point, the privatised monopolies will no longer have the option of sitting back and taking the money. One way or another, they will have to meet the demand by providing a better service.
Similarly, in relation to high fares in London, Boris Johnson has responded with a valid argument. There is a need still for massive investment in the ancient, antiquated Underground. Who is going to pay for it if fares are cut? In other countries the government or the city's governing body would recognise the value of investment and make a higher contribution. This will have to happen here, or the decrepit Underground will rot further.
We are much closer to the 1970s than we are to the decades that followed, with an economic crisis and a hung parliament. In 1974 Harold Wilson won two elections promising to cut the price of bread. No one is advocating such pointless acts of intervention now, but Nick Clegg is on to something as he announces that energy companies must inform customers of the lowest tariffs available. And Ed Miliband is on to something bigger when he promises, albeit vaguely, to regulate train and energy companies more robustly, so that prices fall. Those children of the 1980s and 1990s, David Cameron and George Osborne, will need to adapt too.
At the next election, like the two in 1974, pledges to cut some prices are likely to be at least as appealing to an anxious electorate as the income tax cuts that propelled the Conservatives to victory in the very different landscape of the 1980s.
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- Boris Johnson
- Conservative Party
- Fuel Prices
- Income Tax
- Ken Livingstone