The Financial Fairness podcast

Guest: Miatta Fahnbulleh

July 2022

Inflation has sky rocketed, almost daily, headlines outline the difficulties people are encountering in the face of increasing prices. How have we ended up in this situation? 

Miatta Fahnbulleh, Chief Executive of the New Economics Foundation, joins Mubin to discuss how inflation got so high. Miatta is a regular panelist on the BBC’s Question Time and Politics Live. Prior to joining NEF she was Director of Policy & Research at the Institute of Public Policy Research. Before this, she was a political advisor to the Leader of the Opposition and led on the development of policies ranging from devolution to local economic growth, housing, energy and climate change and transport. She spent eight years at senior levels in the Cabinet Office, including as Head of the Cities Policy Unit, where she was responsible for driving forward the Government’s economic devolution agenda in England. Prior to this, she was Deputy Director at the Prime Minister’s Strategy Unit, leading on localism and local economic growth for No 10. Miatta has a Masters and PhD in economic development from the LSE and a BA in PPE from Oxford. 

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Transcript

Mubin: Welcome to the Financial Fairness Podcast with me, Mubin Haq.

Today we’re talking about inflation. Now I can see your eyes are starting to glaze over but trust me – this is worth listening to.

UK inflation is at its highest rate for 40 years, hitting 9% in June, and is set to climb even further. Households are facing severe pressure from rising living costs, with record prices for petrol and the soaring cost of food.

What’s causing prices to rise? Do wage rises just fuel inflation? And how does the UK compare to other countries?

Joining me today is Miatta Fahnbulleh, Chief Executive of the New Economics Foundation. Miatta is a regular panelist on the BBC’s Question Time and Politics Live and has a wealth of experience in generating new ideas and reshaping our economy, inside government and out.

Miatta, welcome to the podcast.

Can we start by defining what inflation actually is?

Miatta: Inflation measures the increases of price that we see at any particular time. So, we often think about inflation over a quarter. And then we try and look at how much prices have increased over the course of a year. And the best way to think about how we get to that number there is a basket of essential goods, things that most people rely on. And essentially, you're assessing how much the prices of that basket of goods is going up in any particular time.

Mubin: And what kind of things are in this basket of goods? I mean, I've heard all sorts of things about sports bras and a coronation chicken sandwich being in there, what's actually in this basket?

Miatta: So it's things like energy, it's things like food, the cost of clothes, everyday household essentials, like your furniture. The best way to imagine it is if you take a typical household, what are the things that they rely on day to day, and it tries to essentially capture that and tell you how much the prices of those things are going up.

Mubin: And they do this across 1000s of retailers, don't they?

Miatta: They do. But it's interesting, because at the moment, there is a very live debate about whether that basket of goods is actually representative. And one of the things that's playing out is that there's a bit of a bias that, if you like, reflects the basket for, perhaps, middle income families, but doesn't necessarily reflect the basket for poorer families. When we look at things like basic lines recently we've seen quite a big increase in those prices that aren't being captured in the inflation numbers, because they're not really representative of the things that the Office for National Statistics looks at, when it thinks about a typical basket of goods.

Mubin: Yeah, that's pretty important, isn't it? And it's one of those issues that over food campaigner Jack Monroe has been arguing with in relation to the ONS and how it can better capture those prices. And we also have these different measures, don't we? RPI, CPIH, CPI - can you just again, explain to the audience, what is meant by all of these different acronyms? And what do they measure?

Miatta: Very, very, good question. So, the Consumer Price Index, which is CPI, essentially, tries to reflect the sorts of things that a typical household would buy. And that's the thing that will take you to food, energy, day to day essentials. And that's slightly different to the Retail Price Index, which particularly looks at retail goods and services. And therefore, you tend to get slight discrepancy between those. And then the final bit is whether you basically include the cost of housing within that or not. So, you get slight variations, most people will tend to focus on the Consumer Price Index, because that probably tells the story of what a lot of households are experiencing.

Mubin: Now, we've got the highest rate of inflation since the Falklands War, which seems a very long time ago, what's the main items of expenditure going up? I mean, we've heard a lot about energy prices, but what else is really increasing significantly?

Miatta: We're now at 9.1%, which is a pretty hefty number. And the big drivers of that is energy, because we've had a massive energy price shock, so we can talk about the things that are driving that in a second.

But the other big thing that we're increasingly seeing is food prices. So, energy and food prices are a big driver. But we're also seeing price rises across everyday essentials. So clothing, household goods and appliances are all going up. They're going up in their own right, but because you have to use energy to produce all those things, that energy impact is having a secondary impact on prices. And so, it's a combination of that. And I think why this feels so challenging is that it's not just one thing. We're seeing price rises across the piece, which is why it's so challenging I think for households.

Mubin: And is there anything that's going down or not rising in the same kind of way, or is it as you're saying, just across the board, it's all increasing.

Miatta: We're seeing it in the things that people need. We're seeing it in food, we're seeing it in fuel, we're seeing it energy, we're seeing it in clothes. We're seeing it in household appliances. So that key basket is pretty much going up, which will be the things that most people are buying, most people are relying on. I think there's probably some decreases due to seasonal factors. So when, for example, there's lots of stuff being flooded in the markets, like, for example, fresh fruits and vegetables, then you might see a slight shift in those prices. But that is way offset by the fact that everything else is going up.

Mubin: Yeah, and 9% is pretty high really. You've alluded to this in terms of what's fueling these price rises. Can you just talk to us about what some of those main factors are?

Miatta: Yeah, so there are lots of different things that have just come together to create a perfect storm. So, the first of it was, if you like, the aftermath of the pandemic, and over the course of the pandemic, when lots of different countries shut down their economies, we had a big disruption in supply chains.  When economies started to open up after lockdown, there was suddenly a big surge in demand, suddenly people wanted a whole load of things that they didn't want when they were locked down. So, you had an increase in demand at the same time as we had the supply disruptions. And that was one of the big drivers. So, what happened? The prices of goods went up.

The second driver - and this is global, then I'll speak about the UK specific one in a second - the second driver is then what we're seeing in terms of the war in Ukraine. And that's having two impacts, it's having an impact on energy, because Russia is such a big producer of oil and gas. And as countries have decided to put sanction regimes as the war has disrupted Russia's own supply chain, what that's meant is that the oil and gas in the global market is suddenly that bit more expensive, which is what we in the UK buy oil and gas from, so we're seeing that energy shock. It's also having an impact on food, because a huge amount of grain is produced in Ukraine and in Russia, and those supply chains are being disrupted. So those are the kind of big drivers of both what we're seeing in terms of food prices and energy.

And then there is a Brexit impact, which we don't really talk about, because it's all muddied in amongst everything. But one of the impacts of Brexit and we knew this at the time, is that we know that goods and services, some will have tariffs, relatively low tariffs, but added on to them. In addition to that, because a lot of businesses are now having to have additional costs as they work through the red tape of not being in the European Union, that's also increasing prices. So, we've got this perfect mix of global factors. And big internal shock, that's now having a huge impact on prices across the piece.

Mubin: Can you also talk about labour shortages and what impact that's having. So, if we go back around a year, we started looking at shortages in HGV drivers, and we had ongoing problems in relation to social care, the hospitality industry had lots of problems. And more recently, with the airlines, we've seen them really gripped by these labour shortages. Is this having an impact on wages and driving those up too?

Miatta: There are two different impacts of the labour shortages that we're seeing. And actually part of the labour shortage does come back to Brexit because actually, there was lots of European labour and many of them have gone back home. And so, on one hand, what it means is, it's suddenly much more expensive for producers to be providing certain things. They are having to pay some workers more. So, we have, for example, seen an increase in wages for HGV drivers, and that's filtering through to prices, but it is very mixed across the economy. So, there are a lot of people that are saying - look, inflation is being driven by some of these wage increases that we're seeing. I don't really buy that. Because when you look across all sectors, actually, that's not the story that we're seeing. We're seeing it in particular sectors. But what's quite interesting is the thing that employers are doing is they're giving one off bonuses. So, a signoff bonus to enter a sector, which isn't necessarily sustaining its way into wages. So there's definitely an increase in wages in some sectors without a doubt, that will be feeding through to prices. But then that's offset by the fact that in other sectors, we're seeing a decline in real wages, which is why in aggregate, when we look at the last quarter, for example, regular wages when you take away bonuses, fell by about 2.2%. So yes, there was a wage impact in all of this. But it's kind of offset by the fact that in other parts of the economy, we're not really seeing that.

Mubin: Okay, so I'm going to ask you to use your crystal ball a bit here – Mystic Meg, Mystic Miatta style really..

Miatta: I’ll take that, I like mystic Miatta.

Mubin: It's like an X Factor tag you can have. What's your best assessment of how long this period of high inflation might continue for?

Miatta: So, I think anyone's guess is good. At the moment, where a lot of analysts are, is there are two things that there seems to be consensus around. We are definitely going to be hitting double digit inflation. So, the Bank of England at the moment has revised its forecast to 11%. I think that's probably still an underestimation, I think it's going to go above that. And then a lot of people are thinking that this is with us for the next year to 18 months. So, there will be a peak that we haven't hit yet, it will be sustained, and then it will start coming down. And I think we're probably looking at sort of two, two and a half years before we go back to levels that will feel normal. So, there is a very painful medium-term squeeze coming. But that assumes there are no other shocks to the system. When the only shock at play was supply chain disruptions because of COVID, a lot of people thought this is transitory, this is quite short term, we'll have to bear this out for about six months, and then we'll be okay. You throw in Ukraine, it's suddenly extended that. Any more shocks to the system, and that 18-month prognosis starts expanding out.

Mubin: Yeah, that's a long period. And I don't think for many people, they'll be thinking that this is something that's going to be around for about two and a half years, I reckon their timeframes are much shorter, so this is something we definitely need to factor in.

But staying with a mystic Miatta concept here. Ultimately, if prices continue to rise, people just stop spending on non-essentials, and those at the bottom really cut back and face considerable hardship. That leads to a contraction in the economy. So, is it inevitable that we're heading for a recession? Or is it that we're going to just get really weak growth, , what's commonly termed stagflation. What's your thoughts there?

Miatta: I think the risk of recession is very real. And if you look at the numbers and our growth numbers that were coming out in the last quarter, it looks pretty anaemic. So, there is genuine concern. I don't think it's inevitable. The OECD came out quite recently, and it looked at advanced economies and said, look, the UK is on course to have - other than Russia - the weakest growth amongst advanced economies next year. And the risk of recession is real, and was imploring the government to put in place a fiscal stimulus, pump prime your economy to get it going. And so, for me, the extent to which we end up there is very bottled up in what the government does. And a lot of people are saying the fact that, for example, the chancellor intervened a few weeks ago with his cost of living package - that essentially has given the economy a bit of a boost, that's put money in people's pockets which they will spend, so perhaps has staved it off, and whether we end up in recession, in my view depends on whether the government chooses to continue intervening, or it tries to pull back and it tries to either start cutting, or it tries to start pulling back support. Because if you don't support the economy, we will inevitably go into recession.

Mubin: Yeah, that's a pretty strong steer for the government there. You've touched on international comparisons with Russia and other countries. But how does our rate of inflation compare to other similar countries, because I've seen some very different numbers in relation to inflation, so it doesn't feel like it's completely global. Is that right?

Miatta: Yeah. So, I think the first thing to say is, most countries are feeling some sort of price pressure, but it varies in terms of the scale. So again, if we look at the advanced economies, right down at the bottom is Japan. France, again, has seen increasing prices, but they're sort of 5% and then we are towards the top alongside the United States. So, there is definitely variation you know, at 9%, were at the top of this, others are at the bottom, and then you've got a whole cluster of economies that are sort of in the middle. So, the government is right when it says that this is a global phenomenon, it absolutely is. Everyone is feeling this to some extent. But there is quite a range. And for me, what explains that range is partly your exposure to some of the global things that were happening, but it's also domestic action. So, I think France is quite interesting because they're relatively low. And when I say low 5% is like quite high. But they're relatively low by comparison to our 9%. But that's because their government made a massive intervention in the energy market, and essentially said, we're not going to increase energy bills for consumers to the level that it should be, we're going to ask our provider - because it's a state-owned provider - to take a massive hit, and essentially absorb the cost and cushion that. And so rather than the huge increases in energy bills, we've seen -  54% in the case of the UK – they only saw a 4% increase because of that intervention. So, , where we are on the pecking order of the bite of inflation is global exposure, but it's also action that's been taken domestically, to just blunt price rises for people.

Mubin: That's a really stark comparison in terms of energy price rises, 4% versus 54%. What are some of the other measures which governments are doing, which you think have been really useful in terms of driving down inflation from the real highs that we're facing here?

Miatta: So, the other intervention that I found quite interesting. You can sort of basket up the things that governments are doing, they're either putting in place measures in order to support or boost or protect people's incomes, or they're putting in place measures that are essentially intervening in prices in some way or cross subsidising prices in some way. They're broadly in those two baskets. Or the third one is that they are then subsidising particular things. So, you accept that price rises are happening, and the state steps in and says - look, we will take the hit on the cost of this.

And one of those examples for me is what Germany are doing. So, in the context of fuel prices going up, they've essentially said we're going to massively cross subsidise public transport. And you can now travel across the public transport network for nine euros a month, any mode of transport, and that is a massive intervention because essentially, it's another subsidy by the state. But rather than supporting people's pockets, which they have done, they've said we're going to subsidise something that we know is expensive. And for me, I think it's a really clever intervention. And clever because it helps. Clever because it means that people aren’t exposed to the fact that, it's costing so much to fill your tank up. But it's also really clever, because if people are going to have to change their behaviours in response to price rises, why not get them onto public transport, because you need to do that anyway for net zero. So, it's a very, very clever intervention that has a cost-of-living impact, but also has a long-term impact as well. And those sorts of measures, I think are the kinds of things that we could potentially be learning from.

Mubin: I think it's a really interesting measure. And I read that with real interest when it came out. But you might get some people saying, well, look, it's not very targeted at those who really need it most.  What would you say to that?

Miatta: I'd say that's true. But I think that when you're looking at the sorts of price rises that we are, you probably need to have some more expansionist interventions that are a bit more universal in nature, as well as targeted. And the key point for me is the ‘as well as targeted’.

So, when I'm thinking about the things that would work, - well, you’ve got to help people on low incomes. And the best way to do that is to just put a lot more money in their pockets. So we've seen, essentially a measure that put somewhere between £1000 - £1200 as a one off payment to families on benefits, which I think is very welcome. But I think is inadequate to the scale of the challenge, you need to boost people's incomes. And you do that in a targeted way that focuses on those that are really at the sharp end of this.

 But then you will also want to do things that just blunts rises for everyone, partly because there's a big chunk in the middle. They're not particularly well off. They're feeling real pain, but they're not on Social Security. And capturing that group is quite hard without also often helping those in the top 20%. And so, the balance you have to make is well actually a clean intervention that's easy to do - like for example, we’re just going subsidise transport, or we're going to freeze energy bills, and the state basically covers the cost of it. Trying to tailor that, so you're only capturing, say, the bottom 70%, who are really hurting, is really hard to do. And the transactional cost of doing that probably leads you to say, let's just do a universal intervention. But you have to do that alongside helping those that are feeling the pain in quite a phenomenal way at the moment.

Mubin: Yeah, and I think what you capture there really well is actually this pain is, in many ways, much greater than just those at the very bottom. They’re feeling it the most but actually, we need interventions for a much wider gradient of the population than would normally be the case. And so yeah, I totally agree with that, given where we are at in terms of trying to support people on low to middle incomes at Financial Fairness.

Miatta: And, the one thing I would add is, remember that those in the middle have experienced essentially wage stagnation. So, the need for intervention is particularly acute at the moment, because had we had this price shock, in say, 2005, when the economy was doing pretty well, we'd seen living standards going up, wages going up, people would have a little bit of cushion to absorb it. Why it feels so challenging is that we're getting on for 15 years, where living standards broadly haven't budged. Wages have had periods where they've grown but in the round have broadly been stagnant. And then if you take, for example, public sector workers who are relatively well paid compared to those at the bottom, but they've seen real wages going down by 4%. Against that backdrop, this feels really challenging, which is why I think it's quite hard to get away without trying to provide some support that helps cushion those in the middle as well.

Mubin: Yeah, and I think why it may have taken the government quite a long time to get round to a response was, they probably had the assumption that lots of people have saved during the pandemic. And they can shoulder this burden fairly easily. And it's true that a number of people did save but very much more at the upper end of income and wealth spectrum than it was for those at the bottom. So that lack of detailed analysis may have been playing into this

Miatta: 100%. I mean, I think the thing that we have all got to be really mindful of is the pandemic exacerbated and entrenched inequalities. It was an awful time. But some people that were able to manage it and manoeuvre through it, could work from home quite comfortably, could make quite big savings. And then there were a lot of people that that just wasn't the case for, they either had to go into work, or that were pushed into really precarious situation and weren't able to save. So, you already had that chasm building there. And then there is a risk that in this cost-of-living crisis, we see that expanding further. And we're seeing it in terms of wages, actually wages at the top kept up with inflation in the round, when you include bonuses. So I think what you're probably going to end up seeing pay restraint at the bottom, pay increases at the top, exacerbating the inequality that we knew was there anyway. And I think that is the thing that we have got to be really mindful of. And when the government's thinking about designing interventions, it's got to do that, with that in mind.

Mubin: Yeah, and that's definitely reflected in the work we did with High Pay Centre recently on high pay ratios where we saw during the pandemic, actually, CEO pay, reducing, and then it has rebounded quite sharply to new highs post pandemic, and that's probably reflected in other elements of senior pay. But it'll be interesting to see that evidence as it pans out.

Now, you've touched on some of interventions for government, we saw this really big intervention by the Chancellor recently in terms of giving additional money for those particularly at the bottom, but also people further up. What's your assessment of that? And what else do you think he needs to do?

Miatta: The fact that he acted, I think is a good thing. And it was quite interesting because I think there was quite a sort of spectrum of views. Some people were really very effusive about the intervention, whereas we were a little bit harder on the government, not because we like being hard on the government, but because, you take that £1000 to £1200 for people on benefits, it will be an absolute lifeline, there is no doubt about it.

My problem is when you factor in the fact that £20 uplift was taken away last autumn, which by the way, we said we needed before we saw inflation at 9%, all you've done is compensate people for something you took away. So, we've gone back to that baseline. And that baseline was never enough, because Social Security has been hacked away for a decade. So I think, even with that £20 uplift at the time, it only compensated for something like, I think a third of the cuts we've seen to Social Security, which is the reason why people are so precarious, and they're on the edge. So given that - it doesn't feel like it's enough. So, we've been quite pushy in terms of what we think should be given to those at the bottom. My goal is that I think we ought to be trying to boost benefits by something like 17 billion, because that would begin to restore the safety net, there would begin to take us closer to the sorts of levels that we had in 2010, which even those levels against the price rises we're seeing would feel challenging, but it wouldn't be putting people in a position of crisis where they're having to rely on food banks, or they're just doing that and not heating their homes. So for me, that's the first thing.

I think the second thing is, those on modest incomes in the middle. And all we got was £400 through our energy bills,when energy bills are going up by £1500 alone,  it doesn't feel adequate to the scale of the challenge.

And then for me, the third thing is, why on earth are we not going big on energy efficiency, particularly if we've got an 18-month trajectory in our heads. We know that we could do this really quickly. And if the government was to put in £12 billion, which is what we've been calling for through this Great Homes Upgrade campaign. That would allow them to do large scale, a national programme, a national effort of retrofitting with local and regional authorities - just to bear down on bills. Those are the sorts of short-term interventions I'd like to see. And then there is a bigger piece that says, how on earth do we protect ourselves against this happening again? What is our reform agenda in the energy market? What are we doing in the labour market to ensure that wages are at a level where people aren't so precarious? How are we bolstering Social Security for the long term so that people have the resilience? And for me, I want to see all of that, alongside the short-term measures of the government, in my view, has no choice but to do.

Mubin: I feel as if you've done an interview for the job at Number 11, in terms of a strategy, definitely. Now, I think partly why people are so effusive with the Chancellor’s statement was actually, we were expecting so little, and people are just so desperate, given the scale of a challenge. But I think you're right, that actually, what he's done is probably bought some short-term relief. And I'd be quite surprised if this doesn't come back within a very short space of time as being a real challenge for the Chancellor and for the government. Is that what you're expecting too?

Miatta: 100%. Not least because, for me what was very telling is that £1000- £1200 boosts to those on benefits could have been done through the benefit system. And if you did that, you're building long term resilience. It's a one-off payment that deliberately avoids the benefit system. And so yes, there's a short-term intervention that gets people through and in my view compensates people for the fact that, we took a grand off them that we shouldn’t have taken off the last autumn - so, we're going to give this to them as a one-off payment - doesn't do anything. Early indications are by the end of the year, the price cap will go up to £3000. If we see that, you’re going to have to come again. We're expecting a big surge in food prices over the summer. He’s going to come under quite a lot of pressure. And what I'd love is, just don't do one off sticking plasters, try to build some resilience with an 18 month window. Now if we're lucky, this might shake out and prices plummet next year because something has changed in Ukraine or something has changed in the balance of things that are driving this. But I'd much rather you plan for the medium term and build some resilience in the system. And then if there's an upside, then we can respond to that.

Mubin: We've touched on wages. And there's been a lot of talk about if we actually increase wages, it's just gonna fuel inflation. It's that assessment, right?

Miatta: So I'm really skeptical of this wage price spiral argument, because I think, in part, what people are doing is that they look at the other period of high inflation we had in the 70s. And they see a position where prices went up, higher wages were negotiated, which drove up prices, and they think the same thing will apply.

And I think for me, there are two things that suggests that that's not the case, partly what we're seeing at the moment. So, you know, prices have been going up over the last year, and yet wages are not going up. And there is no indication that will continue to play out - in part because the labour market is very different.

And one of the big differences is that when we were in the 1970s, about 60 - 70%, of wages in the economy, were determined through collective bargaining. Because the unions were really powerful. It's now about 23%. And actually, for a lot of people, they are quite atomized, their power is pretty anaemic, their ability to negotiate inflation busting, pay raises is just not there. So, the dynamics of the labour market feels to me very, very different, not all for good reasons, because I think workers ought to be more powerful, should be able to negotiate better deals, but they're not. And particularly for those at the lower end, on lower incomes, that's just not their reality. So, I don't see this playing out in the way that the government is worried it's going to play out. And actually, for me, the bigger risk is not that wages will lead to spiral inflation, it’s that if we don't increase wages and put money in people's pockets, we are then in recession territory, and rising prices due to global factors primarily, plus stagnation or recession is like a nightmare scenario. And if I were the government, that's the thing I would be trying to mitigate against.

Mubin: You touched on earlier about the great investment that's needed in terms of longer-term measures like energy efficiency, but generally it feels like it needs really much greater investment, the economy seems to have real structural problems. We've got this concept of levelling up. How serious do you think the government is in relation to that investment and in relation to levelling up?

Miatta: This is one of my biggest frustrations, all the indications are we invest less than other European countries, and we have for a really long time. So, we know that there are structural weaknesses in the economy. And by the way, our productivity figures are one of the biggest indications of that, which is essentially consistently lagged behind other European countries and our own historical trajectory over the last 10, 10 plus years. And we know that the investment bottleneck is part of that, we look at things like our infrastructure investment, we look at investment in R&D, we look at investment in people in skills, we are way below others. And this isn't something that's just said by those on the progressive side, it's stuff that said across the political spectrum, and yet the government, to be fair has increased investment and capital investment, as well as investment in things like skill over the course of the decade, but not to the levels that it needs to, particularly to compensate for the underinvestment.

And if I were the Chancellor, when the economy looks so precarious; when there are big opportunities around the transition to net zero that will require investment; when I've made levelling up the core mission for government - if we look at other examples of where divided economies have managed to close that divide, and you know, Germany's the classic example that's used between East and West, that did not happen without a huge injection of investment. And why you don't invest now, when interest rates have been low, for years and years and continue to be low - yes, they're going up, but they're still low by historical standards. The failure to invest for me while the interest rates where rock bottom is something that I think economic historians and economists will look at for years to come and say, ‘What were we thinking, this was the time we should have invested to do the transition’.

And we still have time, because even with the projections in interest rates, we're likely to see as the Bank of England acts hopelessly to try and combat inflation by increasing interest rates, which I don't actually think helps that much. It's still historical low standards. So, borrow now to invest in things like infrastructure, capital, even in things like social infrastructure. But giving that a big boost now, to just give you economy lift up, as we come out of a really challenging period feels like a no brainer. And I think there's a whole set of ideological reasons, and a sort of natural conservatism when it comes to fiscal, which I think, it's a legitimate - it's not my position, but it's a legitimate position, I can understand -that seems to be a barrier to doing that. But I think we will look back, and I think we'll regret not doing that.

Mubin: We didn't seem to have a same fiscal constraint during the pandemic, and you were one of our leading voices saying, we need to build back better. Is this what you were expecting?

Miatta: You know what. I've been reflecting on that quite a lot. In the heat of the pandemic, when we saw everything that we saw, and I think across the political spectrum, just all the inadequacies of our economy, the unfairness of our economy, the things that we valued and didn't value, but perhaps we should have flipped it around, all of that was laid bare. And it genuinely  felt like there was a consensus that we couldn't go back to what we had before. I spent a lot of time talking to people from across the political spectrum. And it felt like there was genuine consensus that we've got to do better.

And so, if I think about myself in that window, compared to what I'm seeing now, is this where I thought we'd be absolutely not. And for me, the two things that I have found quite worrying in the last year to 18 months, is some of the things that I thought we'd achieve consensus of seems to be fracturing.

So, there was consensus on investment. Let's take something like furlough where again, across the piece people where like - we've got to do this. The lesson of furlough is that at points of crisis, if you support people's income so they don't fall into crisis, and then start spiralling - they bounce back. And our labour market was able to bounce back because we had that intervention, which by the way, was the experience in Germany after the 2008 financial crisis, which is what we nicked this from. And I thought those lessons would play across to how we thought about Social Security. Because actually, the analogy is very, very similar, and yet it hasn't. So areas like that, where I thought there were the types of interventions that would shift the way we thought about the role of interventions and solving problems and building our resilience - I don't think the consensus that I thought existed still holds. Consensus on public investment as a good thing to help an economy when it's ailing.

And, you know, for me, the pandemic was a crisis. But the crisis we're seeing now is no less profound. And yet the fact that there's a debate about whether we should be investing to support the economy feels completely mad, given everything we've learned.

And then the third for me is, you know, the pandemic was a natural crisis that completely blew up our world. And I hope that the thing that we took from that was, natural crises, like climate change, can change everything, unless we act big to respond. And yet, we're at a point now, where climate action has been questioned by certain quarters. It's not where I thought we would be.

I think my more optimistic self says, the lessons we learn, don't lock in changes in the way that we do things or paradigms or mainstream straightaway. It's often a 10,15-year percolation, from the horror of the moment, we are still in the horror of the moment where a lot of things are up in the air as people are firefighting. And I hope that there is a slow change that's happening that maybe doesn't feel immediate to me now. But in 15 years will mean the paradigm, the consensus, the settlement that comes out on the other side of all of these crises that are interlinked, will mean that we're looking at a very different settlement to the one that we have now. And that's the thing that I hold some hope for. Even though it doesn't feel that way, at this moment in time.

Mubin:  It's always good to end on note of optimism. One reflection I have is, 10 years ago, it was all about austerity, and we definitely have moved away from that mindset. It is now more on the space of investment even if that feels a bit like an uphill struggle, but at least it's not about making lots of major cuts, that feels like a real change.

Miatta: 100% I agree.

Mubin: Miatta, I could talk to you for probably another hour. You've been a fantastic guest. I think you've really brought to life what inflation really means for people. So, thank you very much Miatta for your time, it's been a really interesting conversation.

Miatta: Thank you for having me.

Mubin: You have been listening to the Financial Fairness podcast with me Mubin Haq

Thank you again to Miatta and thanks to all of you for tuning in. Join us again next time, when we’ll be looking at another big issue which affects our financial security and living standards.

Until then, thanks for listening