Britain's new PM faces an 80s playlist: recession, unrest and runaway prices

[September 02, 2022]  By Andy Bruce and Kate Holton

RUNCORN, England (Reuters) - Britain's prime minister in waiting Liz Truss models herself on Margaret Thatcher, judging by her photo ops echoing famous images of the country's first female premier.

If Truss becomes leader of the ruling party on Monday as is widely expected, she'll need all the grit and guile of the Iron Lady as she walks into a scene straight out of the 1980s: a looming recession, industrial unrest and urban decay.

In a sign of the times, an area straddling the River Mersey near Liverpool that was once an industrial heartland now has a less illustrious claim to fame: families there are seeking protection from creditors at the fastest rate in the country.

South of the river in Runcorn, where business parks and logistics centres stand alongside boarded up shops and churches asking for donations for desperate families, ex-soldier Eddie Thompson is taken aback by what has become of his hometown.

Returning after 38 years in the military, Thompson quickly volunteered to manage food banks as the sight of so many people sliding into destitution, unable to cope with soaring food and energy prices, took him back to the bitter days of the 1980s.

"I think it's shocking," the 57-year-old told Reuters.

When Thatcher came to power in 1979, she inherited a stagnant economy, surging inflation and waves of industrial unrest that she crushed in the following years, bringing in the free-market policies that defined her legacy and endure today.

Rising through the party ranks, Truss has been photographed in a tank, wearing a Russian hat in Red Square and sitting astride a Triumph motorcycle, all resembling photos of Thatcher.

If Truss beats former finance minister Rishi Sunak in an election to lead the ruling Conservative Party and becomes prime minister, she will face similar strife.

Surging wholesale gas prices, driven higher by the Ukraine war, are hitting countries across Europe but Britain is particularly dependent on gas for electricity and heating, pushing its inflation rate above all other major economies.

Growth is stalling and workers smarting from years of non-existent real wage growth - from train drivers to barristers to nurses - are spoiling for a fight for higher salaries to compensate for inflation running at 10%.

On the campaign trail, Truss has said she will provide help but has not given details, beyond saying she prefers tax cuts to "handouts", while Sunak says support should be more targeted.

'THEY WILL BE PRAYED FOR'

The cost of the turbulence is evident in places such as Runcorn, where former soldier Thompson distributes emergency parcels to six food banks in the town helping those who cannot make ends meet - many of whom are in full-time employment.

"I have witnessed people who haven't eaten for days on end and the only reason they've crossed that threshold is because it's starting to affect their dependents," he said.

Runcorn's food banks catered for 3,295 people in 2017/18 but four years later that figure hit 5,881 - similar to the workforce once employed locally by Imperial Chemicals Industries (ICI), which dominated the area through the 20th Century.

The St Michaels and All Angels Church in Runcorn urges its congregation to buy one extra item in the weekly shop for donations - deodorants, shower gels, period products, baby food.

Bethesda Church offers tea and prayer to those collecting emergency food parcels. "Not everyone will accept the offer, but that's OK. They will be prayed for anyway after they have left," it says on its website.

Food bank staff say many people arrive in tears. One hospital worker wore sunglasses to hide her eyes.

"She was in work," said Anne McPoland, chair of the food bank's board of trustees. "But she was like, 'I'm so ashamed, I don't want anyone to see me.'"

Usually visits to food banks reduce in summer as people spend less on energy, but this year demand has stayed high.

The biggest threat to households now comes from the surging price of energy. Average annual bills are set to jump by 80% in October to 3,549 pounds ($4,130), before an expected rise to 6,000 pounds in 2023, decimating personal finances.

The Trussell Trust, which supports a nationwide network of food banks, says it sees a spike in applicants every time the price cap on energy bills rises. The removal of a 20-pound weekly boost to welfare benefits, introduced during the pandemic and scrapped last October, led to a similar jump.

A general view of products available in the Runcorn and District Foodbank in Old Town, in Runcorn, Britain August 12, 2022. REUTERS/Craig Brough

The National Institute of Economic and Social Research think-tank, meanwhile, estimates that one in five British households will have no savings left by 2024.

Finance minister Nadhim Zahawi has warned that people earning 45,000 pounds ($52,000) a year - well above the median of 31,285 pounds for full-time workers - may struggle to pay their bills.

BREATHING SPACE NEEDED

Thompson's efforts at food banks in Runcorn are being replicated throughout Britain amid the biggest hit to livelihoods since records began in the 1950s, threatening low- and middle-income families alike.

According to the Resolution Foundation think-tank, the top 10% of households in Britain are richer than those in many European countries, but middle-income homes are not.

They're 9% poorer than their counterparts in France and the poorest fifth of households in Britain are now more than 20% worse off than their peers in France and Germany.

While millions of people in Britain have benefitted from rising house and stock market prices, driven higher by rock-bottom interest rates, those without such assets are going into the downturn with little financial protection.

That 15-year change in fortunes has also combined with a global financial crash, four British elections, highly charged referendums on Scottish independence and the European Union, and a global pandemic, to create a sense of near-constant crisis.

In Runcorn, the downturn is likely to hit hard. The local authority of Halton, which includes both the port town and Widnes across the River Mersey, was already ranked as the 13th most deprived in Britain in 2019.

In recent months, the council has seen an increase in demand for a scheme that provides breakfast at schools so children don't go hungry. And debts are rising.

Halton has the highest rate of applications in England and Wales for a new "breathing space" scheme that gives debtors up to 60 days of protection from creditors.

The two lawmakers representing Runcorn and nearby areas in parliament say they are getting more and more messages from families and businesses who can no longer pay their bills.

"I'm getting more emails in capital letters, which is always a bad sign," Mike Amesbury of the opposition Labour Party said.

'FRACTURES IN SOCIETY'

Derek Twigg, who has represented Halton for Labour for 25 years, said the difference between now and the 1980s, when he worked for the local council, was the number of middle-income families approaching him for help.

"I can't recall, apart from that time in the 80s, that there has been such a traumatic period, from the pandemic onwards," he said. "Inflation is causing real financial hardship. It feels like those fractures in society are happening again."

Halton's ability to respond is limited by a 31% cut to the borough council's budget over the last decade, imposed as part of national austerity measures in the wake of the fallout from the global financial crisis.

And more cuts are on the way, forcing a greater reliance on charities. FareShare, which distributes surplus food from retailers and farmers, has handed out 40,000 meals in Halton so far this year.

So far, the government has responded to the energy crisis with a 37 billion pound package in May, which included a 400 pound credit for energy bills from October and a one-off payment of 650 pounds for 8 million low-income households.

Since then, energy costs have more than trebled.

The gap between people's wages and their cost of living has already led to widespread industrial action nationwide and Runcorn was hit by the fallout when bus strikes made it harder for people to get to food banks.

Thompson said local businesses were hugely supportive but he still felt the country was heading back to the 1980s.

"From the litter on the streets to the strikes, to the unrest and to the suffering of people in food poverty and fuel crisis: they cannot keep up with the cost of living," he said.

($1 = 0.8593 pounds)

(Reporting by Andy Bruce in Runcorn and Kate Holton in London; Writing by Kate Holton; Editing by David Clarke)

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