As UK firms rake in huge profits, one senior economist tells workers to accept their lot

There’s evidence that it’s not demands for higher pay that are causing rising inflation, but businesses seeking huge profits.

However, to curb inflation, now at around 10%, Bank of England (BoE) chief economist Huw Pill says people should stop trying to get higher wages. Pill, whose annual salary is around £180,000, added that people should simply accept they are poorer.

‘Cost of profiteering crisis’

A report from Unite the Union showed that according to the FTSE 350, “profit margins for the first half of 2022 were 89% higher compared to the same period in 2019”.

Unite added that Tesco, Sainsbury’s and Asda “made combined profits of £3.2 billion in 2021, nearly double pre-pandemic levels”.

Soaring food prices and foodbank usage

Meanwhile, overall food inflation is estimated to be around 17%. But the way inflation is calculated can be problematic. Food author and anti-poverty campaigner Jack Monroe explains:

The system by which we measure the impact of inflation is fundamentally flawed – it completely ignores the reality and the REAL price rises for people on minimum wages, zero hour contracts, food bank clients, and millions more.

The overall statistic doesn’t provide a complete picture, given prices of certain food items are increasing more rapidly. For instance, a Which? survey showed that:

• The price of cheddar cheese increased by an average of 28.3%.
• Porridge oats price increased by an average of 35.5%.
• The price of white bread increased by 22.8%.

Monroe further points out that food prices at the top end of the market don’t change much, compared to non-luxury items. She commented: “We’re either all in this together, or we aren’t. (Spoiler: we aren’t)”.

In late April, the Canary reported on the increase in foodbank usage in the UK:

The nearly three million parcels were distributed from the Trussell Trust’s more than 1300 food banks nationwide. Of these, more than 760,000 people used a food bank for the first time in the past 12 months. That’s 38% more than in 2021-22.

The “B” word again

Meanwhile, BoE policy maker Catherine Mann reportedly blames Brexit and the massive red tape that followed the UK’s withdrawal from the EU for the rising costs of food.

Richard Hughes, chair of the Office of Budget Responsibility (OBR), argued that Brexit was:

a shock to the UK economy of the order of magnitude to other shocks that we’ve seen from the pandemic, from the energy crisis.

Liz Webster, chair of campaign group Save British Farming, is also clear that the main cause of food supply problems is Brexit. Another factor is the shortage of labour supplies Brexit has caused.

Isn’t the UK supposed to be wealthy?

Politicians and economists are fond of referring to the UK as the sixth or even the fifth largest economy in the world. It sounds impressive, maybe even comforting. But in reality, what do those figures mean – and are they accurate?

According to one measure of gross domestic product (GDP), the UK is the “fifth-largest global economy, behind the United States, China, Japan, and Germany”. But try telling that to the people of Liverpool, or Middlesbrough, or Blackpool, or Stoke-on-Trent, or Rochdale, or the many other towns or cities where deprivation is widespread.

There are numerous other ways of measuring a nation’s wealth, none of which necessarily represent many people’s lived experiences. They also return wildly different outcomes for the UK’s relative rank in the world. However, a 2023 report by World Atlas applied three metrics to measure such wealth: PPP (purchasing power parity), GDP, and GNI (Gross National Income). That report places the UK as 26th on the list.

Poverty is rife

Regardless of rankings, the picture of the UK that emerges is of a nation plagued with huge inequalities.

As the Canary reported, 29% of children in the UK for the period 2021-22 were already living in poverty. That’s according to the Child Poverty Action Group. For Black and minority ethnic groups, the figure for the same period was 48%. Moreover, 71% of children in poverty are in a household where at least one person is working.

So it’s not workers who should show restraint to reduce inflation, but greedy companies who are exploiting workers.

Charles Dickens’ Ebenezer Scrooge was asked by two do-gooding gentlemen to give money to the poor. He famously retorted, “Are there no workhouses?”. Today’s workhouses are not buildings, but a so-called welfare system that provides incomes barely enough for anyone to live on. The alternative is no better: low-paid, zero-hour contracts on meaningless work. Either way, it’s a system designed to ensure people remain trapped in a cycle of endless poverty.

Indeed, the entire economic system institutionalises poverty, leaving many people destitute or, at best, marginalised.

Nor will such conditions improve simply by a change in government. What we need is a revolution.

Featured image via YouTube/ ITV News