This spike in domestic gas bills will arrive at the same time as the planned increase in national insurance contributions and council tax rises. And this was happening before the impact of Russia’s invasion of Ukraine began to play out. Oil prices have surged to more than $100 a barrel, whilst the price of natural gas in Europe shot up 62% in the first days of the Russian offensive. As sanctions begin to bite, and Russia’s trade in oil and natural gas is dented, further price spikes are likely.
How Russian invasion of Ukraine could impact on cost of living:
* Energy price cap could hit £3,000 in October
* Food prices could rise by 8.2% in April
* Petrol prices expected to rise to more than £1.70 a litre
All of this culminates in households across Britain facing a dramatic squeeze in their living standards by Easter – the worst people will have experienced, in most cases, for many decades.
But paying workers less won’t solve the crisis, as BoE governor Andrew Bailey claimed recently. It will just mean most people’s finances are even more squeezed. Instead of cutting pay packets, it should be big companies’ profits – which official figures show are at an all-time high – that are taking the hit.
The government is doing nothing.
Far from being driven by workers demanding more money, these price hikes are the result of the after-effects of the Covid lockdowns disrupting supply, and environmental crisis, now joined by the impact of war. Gas prices across Eurasia have shot up over the last year. Food prices have been hit by extreme weather and droughts, which have damaged crops fromCanada toBrazil. A nurse or a cleaner asking for more money in Britain will do nothing to change these realities.
Chancellor Rishi Sunak is attempting to absolve the government of responsibility in its management of the crisis by blaming these “global factors” over which, he claims, it has no control – the implication, then, being that workers and consumers must continue to pay for the crisis. But, of course, this isn’t true.
Financial Times columnist Martin Sandbu got to the heart of the issue when he asked: “Why does the governor of the Bank of England encourage restraint in wage demands but not call for restraint in businesses’ attempts to protect their profit margins?”
He’s absolutely right. We couldbe squeezing profits instead of pay. Plenty of companies can afford it – just look at Shell and BP, which made $40bn in profits last year. Ultimately, who pays for rising costs is a political decision; it could be bosses and their profits; it could be workers and their pay packets. Politics, not economics, is the determining factor.
Some socialists claim that France was able to limit electricity price rises because its main power company, EDF Energy, is part-nationalised. But this isn’t the real reason the French government moved so quickly. EDF is a massive profit-generating business, currently being “restructured” by the government in what unions fear is a precursor to full privatisation. EDF workers in France have struck repeatedly against the plans over the past year, whilst their counterparts in Britain launched a strike last September in a dispute over pay. In this way, EDF’s behaviour is indistinguishable from other big capitalist enterprises.
The real reason behind the French government’s response then is that it lives in fear of a second round of the so-called gilets jaunes protests, which saw hundreds of thousands of people take to the streets in every part of France, initially against the rising costs of petrol.
The French prime ministercancelled a planned rise in petrol taxes in December 2018 as a result of the protests. However, unrest against the broader rise in the cost of living continued throughout 2019, halting only because of the coronavirus pandemic. It is this fear of the protestors’ return to the streets that is driving the French government to try to strictly control the price of household energy.
On the other side of the Channel, it is the Tories’ lack of fear of such dissent that is making them so blasé. If the government wanted to halt the rise in energy costs due in April, it could do so, with no need to nationalise anything beforehand: the price paid by domestic gas customers is determined by the regulator, Ofgem, which is charged by the government with setting the price cap every six months. Ofgem’s decision to radically increase the price of domestic energy is one taken to protect the profits of energy suppliers at the expense of millions of households. It should not go ahead, and a basic demand for the movement should be to halt the increase.
Of course, in doing this, some of the smaller energy companies, lured into the market in the early 2010s by the Tories, will not survive. That said, one of them, Bulb Energy, has already been brought into public ownership by the business secretary in order to protect its customers’ energy supplies. The law is in place to allow such nationalisations to happen quickly and easily. It could act as the model approach for the crisis,as this Bulb worker has argued. Ultimately, the whole privatised gas industry should be brought back into public ownership.
Whatever the intention, this risks handing the government and big business a blank cheque for future price rises. It means any future price hike in gas or oil or some other essentials – or perhaps even future tax rises – can be justified by reference to the war in Ukraine. But if some companies are making fat profits from these high prices, they are essentially profiteering from the crisis. In this context, the British public should not be paying a single penny more to companies like BP.
If Labour won’t take action on this, it will be up to activists to defend the standard of living in Britain. Demonstrations by the People’s Assembly, which took place up and down the country earlier in February, are a start – but only a start. As the crunch worsens over the next few months, a new movement must take up the challenge. Linking up with workers demanding pay rises will be important, as well as rubbishing the idea that price rises for the 99% are natural or inevitable.
After all, it’s not only the French who know how to protest. Britain has its own, centuries-long tradition – from the peasants’ revolt to the poll tax – of righteous protest in defence of an acceptable standard of living for ordinary people. It’s high time we resurrect it.
James Meadway is an economist and Novara Media columnist.