Sunak’s £15billion spending spree will help Britain avoid Japan’s fate

I was pleased to see the government respond to the cost of living crisis. This is a crisis that threatens to dramatically drop the standard of living for people on fixed and low incomes, including pensioners who rely on savings.

No one under 40 has ever experienced double-digit inflation. No business leader today has had to manage inflation at this level. The last time inflation was this high, I had just started at the Treasury as a junior economist.

Prior to the Chancellor’s statement this week, I had argued that the government needed to respond to the cost of living crisis with the same ambition it had tackled the pandemic – at scale and pace. Given the urgency and gravity of the situation, an exceptional tax on energy companies – although imperfect – is a reasonable and valid measure to help pay for the necessary support.

Last week’s £15billion package should therefore be welcomed. This puts money in the hands of those who need it most – those who would find it hardest to afford rising energy and food costs, especially in light of the estimated ‘Ofgem says energy bills are set to rise another £800 in October.

Together, the planned increases in the energy price cap in April and October would amount to the equivalent of 10 pence on the basic tax rate for someone on an average wage.

According to the Resolution Foundation, the average gains since last week’s announcement are £823 for the poorest fifth of households, compared to £500 for the fifth of households and £296 for the wealthiest households.

The increased income will help many people working in retail, including the 78,000 partners who work for John Lewis and Waitrose (we call ourselves partners because we own the business and have no outside shareholders ).

As a company, we have doubled the money we make available to partners who find themselves financially vulnerable. Since April, we have been paying the true Voluntary Living Wage to our partners in the UK. We have a long-term partnership with the charity Fareshare to tackle food poverty.

Since 2017, we’ve donated 10 million meals to people in need. We also offer free food surpluses to our partners. Every Waitrose store accepts customer donations for local food banks, primarily through our partnership with the Trussell Trust. We have donated £1million through our stores to charities and organizations to help children in poverty during the school holidays in 2021. We will be doing this again this year to help to have a healthier summer.

The government package will also help our customers, who are not immune to the cost of living crisis. We’ve already seen a drop in grocery spending in the UK with food sales down 1.8% in the three months to April – before the start of the energy price hike – and people spend less on big items like furniture, electricity and other household items.

As a partnership, we – like other businesses – are facing intense cost pressures from rising energy, raw material and freight bills and we are working hard to protect our customers from increases. of price. But they cannot be completely avoided.

After the 2008 financial crisis, we saw a flight to trusted brands like ours. We make available more of the quality products our customers expect at prices they can’t.

Essential Waitrose is the most economical range in any supermarket and does not compromise on quality. All of our pork, including essential Waitrose sausages and bacon, is British and comes from animals raised to industry leading standards. We are doing everything we can to support our farmers in this difficult time as well. We recently announced a £16 million financial support package for our pig farmers to help them through the crisis.

Our Anyday range at John Lewis is proving a hit with customers who want to mix and match clothing and home furnishings at the lower end of the price scale.

But there’s no denying that after two years of Covid, these unprecedented inflationary headwinds will make for a tough year for retail and businesses in general.

There has been much debate since Thursday over whether the package – most of which will be paid for by higher borrowing alongside the windfall tax – will itself stoke inflation. For my money, I think the risk is low.

What the package does is help tackle what I believe is the very big risk to the economy and our collective prosperity – little or no growth. This is the situation that has obsessed Japan for years. Recent indicators of consumer confidence and business investment intentions have shown that they are weakening rapidly.

By putting more money in the hands of those who need it most, the government is also helping to provide a much-needed boost to confidence that should support consumer spending and business investment.

The cost of living crisis is unprecedented and demands unprecedented action.

Dame Sharon White is Chair of the John Lewis Partnership