Energy Prices, Business Rates, and the Chaos Ahead
According to Steen Jakobsen, the Chief Investment Officer at Saxo, the cost of living crisis isn’t going away in 2023. If the government keeps trying to tame the rising prices, we may see energy fees and business rates climb even higher.
Jakobsen’s Take on the Current Situation
- Jakobsen warns that the UK’s inflation reached a 41‑year high of 11.1% earlier this year, fueled by the global spike in oil and gas demand following Russia’s invasion of Ukraine.
- He argues that governments wasting time on short‑term fixes will actually accelerate inflation rather than slow it down.
- “If we keep pushing price controls and rationing ahead of time,” he says, “the next thing we’ll see is a dip in the standard of living.”
Historic Precedents and Modern Spin
From the Roman emperor Diocletian setting price caps in the 3rd century A.D. to the rationing wars of the 20th century, governments have repeatedly tried to clamp down on prices during crises.
Now, governments are leaning into:
- High taxes on windfall profits for energy companies.
- Subsidies aimed at capping heating and electricity bills for consumers.
- Plans to curb Russian energy pricing from December 5, hoping to starve Russia of revenue and lower global crude oil costs.
Jakobsen sees this as a “command‑and‑control” approach that merely delays the inevitable inflation and weakens consumer confidence.
The Price War: The U.S. & UK Playbooks
He predicts that 2023 will bring even more aggressive price and wage controls. Some speculate the establishment of a “National Board for Prices and Incomes” in the UK or the U.S. will be the next big move.
However, he warns that:
- National controls may cause resource misallocation.
- They might discourage production by deterring workers from taking on roles that could drive innovation.
- In the long run, these measures can damage the social fabric by lowering overall living standards.
In a Word: Let the Market Speak
Jakobsen calls for a market‑driven approach, saying that only free‑price competition can unleash greater productivity and efficiency. It’s a stark reminder that “the law of unintended consequences” often wins the day when governments intervene in price‑controlled or rationed systems.
Bottom line: buckle up—2023 is shaping up to be a roller‑coaster of rising costs and policy battles that might just test our patience for another decade.
