WORKERS FACE the biggest cost of living squeeze for a generation. The RPI rate of inflation stands at a 30-year high of 7.8% but that doesn’t even come near the impact on working class households, with energy, transport, housing and food costs rising even faster.
Needless to say, wages have not risen by anything like the same rate. The headline figure is of an average 4.2% increase, though most of this comes from bonuses and last year’s raising of the minimum wage to a miserly £9.50 an hour, while public sector pay increases are much lower, hovering between 1.5% and 3%.
None of this has stopped the capitalist press calling for ‘wage restraint’ as if wages were the cause of inflation. In fact what they mean is that profits must not be made to suffer, so workers’ living standards must.
The raising of the energy price cap from 1 April will add another £700 to the average household’s bill. According to the End Fuel Poverty Coalition, more than one in four UK households will be in fuel poverty once Ofgem’s latest energy price cap rise comes into effect.
The war Russia has unleashed on Ukraine has immediately caused gas and oil prices to jump again. Since the two countries also account for 30% of the world’s wheat exports, the price of staples, like bread and pasta, will also be marked up by bosses determined their profits will not take a hit from for the war.
Even before this terrible development, the average food bill was set to rise by £226 this year. Last year a record 2.5 million people depended on food banks, a phenomenon that barely existed a decade ago. Imagine the clamour for basics when food prices go through the roof.
On top of this, the government’s hike in National Insurance Contributions will see workers’ take-home pay cut by an average of £254 a year. Remember that this is a flat rate tax, so workers will feel the most pain.
Councils are also preparing to raise their taxes on households by up to 5% after the Tories refused to bail them out after two years of pandemic and 12 of austerity. Both these tax rises kick in on 1 April.
Origins of the crisis
The accelerating rise in prices has its roots in the measures taken by governments to combat the Great Recession (2008-11) and the expansion of state spending during the pandemic, without any commensurate increase in taxation.
The IMF and liberal economists argue that inflation is caused either by a ‘shock’ in the supply side, leading to reduced production, with prices rising because goods are scarce, or a sudden increase in pent-up demand which outstrips supply.
Clearly covid restrictions accounted significantly to this process by limiting supply of goods to the market. But the release of ‘pent-up demand’ on their lifting has only accelerated price rises as ‘pent-up supply’ has not followed.
Moreover Marxist economist Michael Roberts argues that the initial supply-side shock at the start of the pandemic was ‘really a continuation of the slowdown in industrial output, international trade, business investment and real GDP growth that had already happened in 2019 before the pandemic broke’.
In other words a recession was already on its way, caused by falling rates of profit across the capitalist world; profitability had already dropped to near-historic lows. The real crisis is therefore a crisis of capital. The boom and bust cycle, which saw barely a glimmer of rising living standards on the way up, is set to make workers bear the consequences of its downward journey.
As long as mainstream economists continue to emphasise ‘excessive demand’ as the cause for the crisis, they will posit keeping wages low as the answer, ostensibly aimed at preventing a wage-price spiral. As Roberts adds pointedly, ‘in other words, the task must be [to] create unemployment to reduce the bargaining power of workers’.
To stop the real spiral of rising unemployment and falling living standards, the workers’ movement must increase its organisation and fighting capacity. Fortunately that task has already started, with local strikes that continue to win significant wage improvements, many above the rate of inflation, but now we have to step up a gear or two.
Organise the movement
The frontline of the fight against inflation will be strike action against below-inflation pay claims, which exacerbate the erosion of workers’ wages since the Great Recession. To continue, spread and deepen the current spate of strikes they need solidarity, coordination and a plan to spread the action to other parts of the same company, same area and same industry.
The election of Sharon Graham and the turn of many activists towards the trade unions since the collapse of Corbynism has had positive effects on trade union militancy, with a proliferation of disputes in many key industries, like transport and logistics.
But we cannot expect a general offensive against inflation to succeed unless there is a massive increase in workers’ organisation in both workplaces and communities.
To fight back against the whole crisis will require not just mobilising trade unionists for workplace action, but we will also need a mass political campaign against government policies designed to make workers pay for the crisis of profitability, like the energy price cap.
A start to this was made on the 12 February, when thousands of people joined the first national day of action against the cost of living crisis, with demonstrations in over 40 towns and cities.
In London, an open organising meeting the following week saw a range of climate, anti-poverty and socialist organisations come together to discuss our next steps and agree to form a democratic coordinating committee.
In Manchester a People’s Assembly follow-up meeting plugged the 19 March TUC sponsored demo at the Tory spring party conference. In Leeds a similar meeting used breakout rooms, diminishing the returns in terms of collective agreements.
But in Bristol the PA meeting was much more productive as a result of proposals from the floor for a discussion on their demands and a plan of action for building the movement.
Everywhere activists from different traditions and movements worked together and agreed to continue to do so. The prospect of a real national campaign against the cost of living crisis is in the offing.
In the coming weeks, the movement should organise with the immediate goal of preventing the energy price cap rise, under the slogan ‘Keep the cap’, uniting the movement between now and April.
Local People’s Assemblies – or similar campaigns – should organise actions and demonstrations, but most importantly coordinate solidarity for local strikes. We need a steady flow of leaflets, articles and social media posts, monitoring the rising cost of living locally and nationally, as well as promoting local fightbacks.
These local groups need to draw unions into the campaign and agitate against every below-inflation pay claim, arguing instead for pay claims linked to inflation for all workers.
We need to remind the Labour leadership of its democratically agreed party policy for nationalisation of energy companies and demand that Labour, the TUC and all unions fight for a workers’ answer to the crisis:
• Spread and generalise the pay strikes: £15 an hour or 15%, whichever is greater, for all.
• Fight for a minimum 1% raise in wages, pensions and benefits for every 1% rise in the cost of living.
• Control rents and energy bills: For affordable levels set by workers’, youth and pensioners’ organisations.
• Work or full pay: Raise Universal Credit to the level of the minimum wage
• Make the rich pay: progressive taxation on all incomes, wealth and profits.
• Nationalise the energy companies without compensation, under democratic workers’ control.