Part 2: Present consumer price hikes and the environmental cleanup.

There are similarities between what happened in 2016-’19 in Britain and the Netherlands both in economics and politics and in the people’s perception and polling reaction.

In 2016-’17 the EMU (including us Dutch) was crawling out of the banking and Euro crisis, and Britain was relieved that the Kladderadatsch announced during the EU referendum campaign didn’t materialise substantially. But while the economy recovered (Holland) or stayed even (Britain), people saw that their buying power flatlining, while trusted big high street store chains (V&D here, see https://en.wikipedia.org/wiki/V%26D, dozens in Britain) collapsed, and while big problems in health care (caring at home for the elderly in Holland and Britain; winter A&E crises in the NHS) and a chronic social housing shortage (Holland & Britain) couldn’t be stopped from worsening.

The Dutch 2017coalition government agreement contained the first rise in decades of the low VAT tariff (from 6 to 9%) in 2019 for primary necessities (like food) sold in supermarkets, on the high street. At the time the agreement was published and debated in parliament, nobody minded much, because a cut in direct taxes and other advantages were promised to protect everybody’s spending power, even slightly improving it. So the people in Holland implicitly said: “we’ll weather it”, and it wasn’t a big negative in opinion polls.

However, then, in December 2018, Dutch energy prices were hiked on the back of the VAT rise, shops used the VAT rise to recoup costs they hadn’t passed on until then, and the concept plans for Climate Change combatting policies promised further costs and inconvenience for the Dutch. Result: the VAT hike was very unpopular, even after the pay slips of every working person last week showed that indeed the buying power was maintained or slightly improved. Support of the coalition government tanked to a Trump-like low (35%) in polls last Sunday and Monday.

In Britain a similar picture: Brexit price hikes and the future cost of cleaning up your cities’ air.

Coincidentally, Monday’s sudden warning from big supermarkets, KFC, etcetera about hiccups in their just-in-time delivery mechanism for fresh fruits and vegs, and structural price hikes (https://www.bbc.com/news/business-47028748 ), came at the same time as news that the continuing British price wars among the big supermarket chains will result in a new wave of reorganization and mass layoffs (including in the fresh fruit, veg & fish departments) at Tesco. Combine the two items, and the logistical problems and price hikes in supermarkets could disrupt the sector as a whole, leading to new layoffs, budget cuts and maybe shops closing. The only positive thing I can see is that bike-delivery food stores like Uber Eats will have logistical (and food quality control) problems so that they won’t win automatically in the increased competition.

The logistical problems may be temporary or moderate, but the price hikes will be structural. Michael Gove’s DEFRA says British agriculture is well placed to expand; but, in case of a No Deal Brexit, EU workers on the fields will instantly lose all securities the EU offers them. They will consider repatriating to secure conditions. Won’t that undermine the expansion potential of British agriculture?

In the BBC evening news of Monday, 28th of January, agricultural importer Dave Catt told John Pienaar he is “petrified” by No Deal Brexit ruining his business. His brother, farmer Catt, hoped Dutch exporters could make up the shortage; but both Dutch and British truckers are telling everybody that main British roads are saturated with import & exporting trucks as it is. Moreover, the government program of adding other British seaports still has to get started and is untested.

* Bernard Aris is a Dutch historian (university of Leiden), and Documentation assistant to the D66 parliamentary Party. He is a member of the Brussels/EU branch of the LibDems.

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13 Comments

  • David Evershed 30th Jan '19 - 5:20pm

    What is the issue to which this article provides the answer please?

  • nigel hunter 30th Jan '19 - 5:43pm

    As I have said before will we end up with rationing and a siege mentality cos of a disasterous Brexit?

  • Bernard Aris 30th Jan '19 - 8:00pm

    My thinking in writing and posting both articles is:
    *) the consequences of Brexit (food price rises, severe logistic disruptions and structural higher logistic costs; increased uncertainty now a prime minister known for creating a hostile environment only appeases Rees Mogg but ignores the economic and social contribution of EU citizens to the NHS, to agriculture =food security, and the hospitality business: hotels, foreign restaurants) hitting a Britain already struggling with severe problems (housing, NHS, uncertainty about high Streets and supermarkets) will hit every Briton harder than they thought a Brexit would do.

    *) Just like the VAT hike and its follow-up in the Netherlands: a Trump-like slump in polls and with confidence in government generally, Brexit and concurrent negative conditions and trends will replace bravado talk of stiff upper lips toughening the Brexit slump out, with concerned talk about pushing weak regions and city districts even more into distress.

    And desperate manoeuvres like demanding the scrapping of the backstop opens up a box of Pandora, with Gibraltar, French and Dutch fishing claims, Irish resentment; that will unnecessarily burden talks for a trade deal. Just look at “Brexit rapporteur” Guy Verhofstadts anger today in the European Parliament, and Dutchman Timmermans’ resoluteness against reopening Brexit treaty talks. Poles repatriating won’t make Tusk more amenable to May. So don’t expect a speedy trade deal with your most important foreign market alleviating the just as unnecessary negative consequences of Brexit.

  • Laurence Cox 30th Jan '19 - 8:11pm

    I guess that you don’t have many Lidl and Aldi discount supermarkets in the Netherlands. Here in the UK they have been taking market share from Tesco, Sainsbury, Asda and Morrisons: https://www.managementtoday.co.uk/why-aldi-lidl-will-keep-growing/article/1386497

    Combining low prices with quality as good as the Big Four supermarkets by the simple expedient of limiting the range of products they offer, they are a classic disruptor in the retail sector.

    Companies like Tesco have grown fat on lack of competition (their great innovation was the Tesco Clubcard which gave them information on the products that each of their customers was buying each week, allowing them to target their offers precisely). All we are seeing now is the creative destruction that is a characteristic of capitalism.

  • Bernard Aris 30th Jan '19 - 8:53pm

    Aldi and Lidle sure shook up the Dutch supermarket sector, but established brands like Albert Heijn (https://en.wikipedia.org/wiki/Albert_Heijn ) fought back and now everybody has its own segment (Aldi & Lidl pricefighters, with the Dutch Jumbo chain https://en.wikipedia.org/wiki/Jumbo_(supermarket) as main competitor; Albert Heijn somewhat more upmarket and including the A brands).

    But pricefighters are even more vulnerable to rising costs than chains with a varied and A brands assortmernt and various kinds of shops. So the logistical costs and food security uncertainties carry bigger risks for the Aldi-type of supermarkets.

    it being creative destruction does’nt obliterate the fact that big numbers of jobs go with it; and social liberals have been striving from their very start to correct and limit the excesses of both Industrial, and shopfloor capitalism. So we should worry about those layoffs, especially if brought about by crazy policies born out of internal Tory feuds more than sound economics and the humanitarian ideals about Free Trade Cobden and Bright started out with.

  • Ed Shepherd 31st Jan '19 - 7:06am

    At this rate even HP Sauce will close down its factory in England and move abroad.

  • It already has Ed, they moved to Holland, but I suspect you already knew that.

  • I am very enthusiastic for the European project, but I am unwilling to blame our present problems entirely on the referendum. To me there is overwhelming evidence that the government has been following a careful plan. They decided not to engage in serious negotiation with the EU, or as it still is the rest of the EU. The aim was to put the country in the position that of a choice between doing what the government wanted and an unplanned for exit from the EU.
    So here we are in the endgame.
    I think it is very valuable to contrast now to the 1940s.
    Then there was food rationing. There was a lot of reliance on locally grown food. Locally grown meat. Sweet rationing. Free health care.
    Now we have plentiful food, often flown half way round the world. Readily available ready meals. No sugar rationing. Steady introduction of payments for health care.

  • David Evershed 31st Jan '19 - 11:09am

    Bernard

    In response to my question
    What is the issue to which this article provides the answer please?

    You reply
    “My thinking in writing and posting both articles is:
    *) the consequences of Brexit ………………………………………………………… will hit every Briton harder than they thought a Brexit would do.

    So I am still unclear.

  • Peter Martin 31st Jan '19 - 6:10pm

    @ David Evershed,

    I’m unclear too!

    Part 2 doesn’t seem to have any discernible connection to Part 1. It doesn’t seem to follow on at all. Why not just two separate articles?

    I’d mistakenly thought that you’d be going to say that if the Dunkirk spirit doesn’t and has never existed that we can’t rely on it to see us through Brexit. Which would have been a cogent enough argument – even if some of us may disagree.

  • Bernard Aris 5th Feb '19 - 4:19am

    OK second attempt a explanation.

    In the first article, I tried to indicate, using Marrs books as source, that the “Dunkirk Spirit” is part myth, that there were political divisions about fighting on in British society. It was more a continuation of the very polarized prewar situation with an elite continuing to eat venison, and a substantial underclass continuing to survive stubbornly (which government propaganda from the 10th of May onwards coloured as a “determination against the Jerries”: it was more the age-old determination to survive very unequal relationships, the old class war). The black market was an enlargement of the informal economy you Always see among poor populations.
    In the second I tried to point out the parallel: people are sanguine about bad times in the future, but that changes quickly if those times are upon you. My point being that the “For Gods sake get Brexit over with so we can start living again” will switch very quickly into: “help, we’re drowning”. To paraphrase the Beatles: “I’m feeling not so self assured; help me get my feet upon the ground; I appreciate the EU being ‘round”.

  • Bernard
    I get what you were trying to say. The problem is that whenever anyone “demythologizes” Britain’s involvement in WWII it can sometimes end up looking a bit odd. This is because the one bit that isn’t mythology is the expansionist actions by Germany and the reality that without British involvement there would be no American involvement, thus no liberation of France or Belgium or anywhere until maybe the Red Army did it. Also class divisions exist pretty much everywhere. You could have much the same kind of article demythologising the French Revolution, America as the land of the free, the fairness of post-war capitalism, the notion that equality exists within the EU and the very idea of work. This is because there is always an unequal relationship between wealth and power and the masses. As the old joke goes: The boss walks into the factory to address his workers, “Look lads, see that Porsche out there? If you work hard enough I’ll be able to update it”.

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