Waking up in Britain these days often means waking up to bad news. This morning, it was that inflation has hit another forty-year high, with CPI reaching into the double figures for the first time at 10.1 percent, higher than the figure predicted by the Bank of England’s short-term inflation forecast. Since poorer households spend larger proportions of their incomes on essential goods, this change itself is not felt equally: the Resolution Foundation estimates that for the poorest decile of households CPI inflation is 10.9 percent, versus 9.4 percent for the wealthiest.
The latest figures arrive in the run-up to Ofgem’s next energy cap announcement on 26 August. The cap is now expected to hit £3,500 in October, and by January could leave energy bills eating up one sixth of the average salary. Ofgem has abandoned any pretence it once had of being a ‘regulator’ as energy companies post massive profits across the board: Grace Blakeley noted in Tribune yesterday that Centrica, the owner of British Gas, had increased its profits fivefold in the first half of this year compared to the previous year; E.ON made £3 billion, Scottish Power nearly £1 billion, EDF £728 million, and the National Grid £3.4 billion.
This squeeze is now becoming suffocating. Back in May, a report from the Food Foundation found that more than two million adults had already gone a whole day without food in the prior month. Skip forward another three, and reports are now surfacing of food banks—themselves already evidence of a failing system—actually running out of food, incapable of juggling growing demand and the drain on their usual donations as previously secure households worry about putting meals on their own tables. The number of people facing eviction as a result of rent arrears, meanwhile, has reached its highest level since records began.
Even more desperate solutions are now being touted. Supermarket Iceland, in conjunction with charity Fair for You, is rolling out zero-interest loans to help people cover their food bills, to be paid back in weekly instalments of £10. Councils are setting up ‘warm banks’ to protect those who won’t be able to keep the heat on in their own homes this winter.
Amid this life-threatening reality, any talk of a wage-price spiral from figures like Boris Johnson and the Andrew Bailey should be seen for what it is: an attempt to legitimise the transfer of wealth taking place from poor to rich, by blaming workers for wanting to be able to keep themselves and their families alive. Besides cruel, it is simply untrue. Research from Unite indicates that it’s corporate profiteering driving inflation, not workers’ wage demands—a profit-price spiral Grace Blakeley has expanded on here. Figures published yesterday found that real wages in fact fell at a record rate in the June just gone, dropping 4.1 percent on CPI, and 6.2 percent on RPI.
This, again, is not felt equally: the gap between public sector and private sector pay is widening, while figures from the Centre for Economics and Business Research out last week found that the highest earners, like City workers in insurance and finance, enjoyed double-digit wage growth in the last year compared with just one percent for the lowest paid. And after falling last year, the pay gap between bosses and workers is set to widen again.