In recent discussions about economic challenges, the issue of affordability has emerged as a central concern. Richard Murphy examines how deeply entrenched rentierism in advanced economies, particularly in the UK and US, complicates the pursuit of a solution. The impact of this economic model is particularly evident in housing costs and healthcare expenses, leaving citizens feeling increasingly constrained.
Despite Murphy’s insightful analysis, he neglects to underline the skewed distribution of wealth as a significant barrier to meaningful change. The entrenched interests benefiting from the current system present formidable obstacles, making substantial reform unlikely without a significant economic collapse akin to 1929.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future
Across the UK and beyond, politicians consistently discuss the issue of affordability, yet the situation remains unchanged.
Why is that?
Much of the blame is directed at inflation, but the core issue lies in structural income extraction. Rent, mortgage interest, utility costs, and various fees continuously siphon household income, limiting people’s choices in how to live.
In this video, I will outline how weakened regulations, compromised competition policies, and financialisation have created a framework designed to extract income, and why mainstream politics hesitates to address it.
The decline in affordability is deliberate, which explains why politicians are unwilling to speak candidly about it.
This is the audio version:
This is the transcript:
Affordability has become one of the most critical political issues of our time.
Keir Starmer is discussing this in the UK, while Zohran Mamdani is addressing it in New York, even prompting Donald Trump to mention it at his rallies. The way affordability is perceived shapes personal lives and societal futures.
This topic influences elections and political alignments, yet the framing around affordability is fundamentally flawed, which is the crux of the video.
The prevailing narrative attributes the affordability crisis to inflation, focusing on rising prices of essentials like food, energy, transport, and housing. Politicians conveniently point to global supply chain issues, allowing them to deflect blame and say, “Don’t blame me.”
They suggest that consumers should comparison shop and cut back, but this perspective is misleading. The reality is that even though inflation has eased in many areas, people continue to feel financially trapped, signaling that underlying issues contribute to the affordability crisis.
The actual affordability crisis hinges not on pricing itself, but on income extraction. Households are losing substantial portions of their income after taxation, leaving them with little control over their finances. This is at the heart of the affordability crisis.
Income is extracted through multiple channels.
High rents immediately diminish disposable income. Long-term mortgage payments compel households into financial commitments over which they possess no control. Furthermore, everyday expenses are often inflated by hidden interest costs, making essential services progressively more expensive regardless of individual income levels.
This phenomenon is not typical inflation; it represents a form of permanent extraction. Living standards suffer because costs consistently rise yet rarely decline. Payments for essentials become unavoidable, trapping households in financial strain.
This situation arises from policy decisions. Economic policies have shifted power toward capital, controlled by the affluent. Consequently, income flows upward through rents and interest.
Moreover, fees and subscriptions have proliferated. Previously, software was purchased outright but is now rented. Where once a single TV license fee sufficed, consumers now face multiple subscription fees for access to various channels, resulting in significantly higher costs.
These results are not accidental but rather the outcome of deliberate choices.
Housing exemplifies this issue, representing a significant portion of household budgets. Rent continues to climb, and mortgage interest essentially mirrors rent. Interest payments channel wealth from borrowers to lenders, strengthening banks’ influence and providing interest to depositors.
Simultaneously, supply is deliberately constrained; there aren’t enough houses available for purchase or rent. Many builders possess plots of land but choose not to develop them, revealing a systemic design aimed at extracting income from people.
Housing is not alone. The mobile phone market also suffers from limited competition, with only a few companies controlling prices. Regulated utility companies function as monopolies, with regulations ostensibly ensuring profitability rather than consumer affordability.
As a result, consumers are subject to unwarranted price increases, often justified by companies on the basis of market conditions when, in actuality, their costs have not risen proportionally.
Moreover, financialisation has made its mark, as many products come bundled with unnecessary financial add-ons like warranties and insurance, which may appear protective but are primarily profit-generating mechanisms.
Consumers lack effective countermeasures against this ongoing extraction. While inflationary pressures may subside, the mechanisms of income extraction persist.
This understanding reveals the essence of the affordability crisis we currently experience.
It is critical to acknowledge that this situation does not stem from inflation.
Politicians avoid discussing the permanent charges burdening households, leading to sustained financial pressure.
Structural challenges surrounding affordability point to political failures, explaining why leaders often refrain from addressing them directly.
Government policies allowed this system to flourish, often placing investor oversight above consumer protection. A once-functional competition policy has eroded over time.
Historically, the UK maintained effective competition policies and price regulations, which safeguarded consumers. This system ensured that essential services remained affordable.
The unfolding affordability crisis is predictable, resulting from the trajectory of antisocial neoliberalism.
Yet, we possess the capacity to change these policies.
Affordability could once again become an objective of economic policy.
Rents could be controlled, and interest rates lowered—actions well within the government’s capabilities.
Effective regulation could initiate this process, particularly concerning essential services like electricity and gas, where current regulations often prioritize profit maximization over consumer benefit.
This approach is not radical; it merely calls for a return to effective policies that once existed and proved beneficial.
Focusing on economic viability, we must reject the radicalism of inaction that perpetuates these issues.
We can restore affordability.
We can eliminate ongoing profit extraction.
Restructuring societal power dynamics to favor the public is feasible.
While the solutions are clear, political will is lacking.
Zohran Mamdani may grasp these concepts, but do Keir Starmer and Donald Trump understand? Most mainstream politicians seem oblivious.
Alternative political groups, such as the Greens or SNP, may possess some awareness, but we currently must seek answers outside the traditional parties.
The crisis continues, fueled by the choices of politicians driven to maintain the status quo, neglecting real solutions to the challenges we face.
The affordability crisis is set to dominate discussions in 2026, and transformation is possible if we address the underlying power dynamics affecting our economy.
What are your thoughts?
