Britain’s cost of quiche crisis

Afternoon all,

The bunting’s out, the quiches are in the oven (see COTW) and I’ve had to fight my way into Resolution towers all week amid ever growing tourist/police numbers in Westminster. The coronation is very much on. I know there’s a bit of scoffing at genuine enthusiasm levels, but I was down in Kent last weekend and the villages were plastered with enough Union Jacks to host a Keir Starmer local election victory press conference. So it must be real.

Luckily it’s not treasonous to fit some reading in between street parties, so tuck in to this week’s offerings ranging from disappearing taxes, whether rent controls turn people into NIMBYs, and the really big news: women overtaking Johns in the chief exec league tables.

Have a good weekend, whether you’re being crowned, celebrating or cringing.

Torsten

Building Bidenomics. A new speech by US National Security Advisor Jake Sullivan is getting lots of attention. Rightly. It’s an impressively clear explanation of how the administration sees its domestic economic objectives (reindustrialisation/lower inequality), geopolitical agenda (China…) and climate coming together with a single answer: Bidenomics. The key domestic plank is a sectoral industrial strategy (chips and green industries) where big public investment guarantees American domestic capacity. Internationally (warm words on WTO multilateralism aside), the vision is an American-led ‘coalition of the willing’ stretching from Europe (i.e. the EU, we’re entirely absent) to rich (Japan/Korea) and emerging Asia outside China (India/Indonesia). The integration of the political/economic/security considerations is impressive even if the difficult questions are largely ducked. Can US/China really remain highly economically integrated while competing militarily? How much new capacity in key industries is additional rather than displacing other manufacturing? Can we upscale green investment at a lower fiscal cost? Can this prevent a Trump triumph in 2024? We’ll see.

Not NIMBYs. Everyone loves talking rent controls so the core arguments – pro (lower rents!) and anti (fewer rentals getting built) – are well rehearsed. But a new paper takes a different angle, focusing specifically on whether rent controls turn people into NIMBYs or YIMBYs. Using the Berlin 2019 experience of freezing rents (and lowering them for a fifth of households) researchers use surveys to understand the impact on attitudes to new building in, or migration into, their neighbourhood. Being more secure in your tenancy could make people more like Lib Dems home owners – opposing further developments. But the opposite happened – the greater security of rent controlled living seems to have made people feel less exposed to displacement pressures, with rent controlled Berliners 37 percentage points more likely to support local construction. Whatever we think about rent controls, we should all be thinking yay for YIMBYs.

Changing CEOs. It turns out while we were busy Brexiting, 2016 in the US saw a different landmark: it was when the number of female chief execs finally overtook the number… called John. I enjoyed learning that in a short blog (just have a look at the first chart). A look at the  FTSE 100 shows that women CEO numbers exceed those of any single men’s name. Less impressively there’s only nine of them – enough to crush the six men called Simon, six named Andre/Andrew/Andy or five labelled Steve/Stephen/Stefans, but not to think the glass ceiling’s been smashed just yet.

Bust Banks. While we’re on the interesting charts/graphics I’ve seen this week, check out this graphical representation of US bank busts to give you a bit of context to the latest (First Republic’s) collapse. It tells you two things. 1) US banks failures are more common than we’re used to (522 banks in the US have gone bankrupt in the past 20 years) partly because the US has LOTS of banks. 2) The three banks that have died this year are big (First Republic, SVB and Signature Bank are the second, third, and fifth largest US banks to go bust by asset value since records began). That should be enough to teach a lesson to those who ludicrously swiftly forgot the financial crisis and argued for bank deregulation (the New Yorker has a piece on exactly this). But it won’t – they love repeating the same mistake over and over again.

Climate Cashflow. We’re doing net zero. At least in theory. But what about the impact on the public finances? A new OBR working paper concludes it could be a big deal, showing that three-quarters of UK emissions are linked directly or indirectly to tax revenues – highlighting the need for our fiscal forecasts to pay attention to the pace of net zero progress. We shouldn’t panic given the relevant taxes amount to 5 per cent (£50 billion) of revenues, but the paper reminds us of the big ticket item here: how we replace fuel duty in an electric vehicle (EV) world will need answering swiftly by whoever wins the next election. We’ll set out our answer in new Economy 2030 research next month. But the more interesting take in some ways is the tension between wanting to tax emissions (via the likes of the Emissions Trading Scheme or Climate Change Levy) and the reality that the more we rely on such taxes the bigger the fiscal risk from decarbonisation. Carbon taxes are fundamentally meant to be temporary taxes.

Chart of the week coronation

Sorry in advance for this one, but here goes. You can’t avoid two things at present: the coronation and surging cost of food (spotted by 97 per cent of you!). As the two come together this weekend we’re going to find we’re living through a… cost of quiche crisis. We’ve done our most technical embarrassing analysis ever – drawing on the ONS’ excellent new food price interactive tool and the recipe for the official coronation quiche to show that its cost has increased by a whopping 30 per cent since September 2021. Making this regal delicacy will now set you back £4.70. The spiralling cost of cheddar is doing a lot of the damage – accounting for around a third of the cost of quiche crisis, and probably spiralling numbers of coronaries in the years ahead given how unhealthy the whole thing is.