Wages are not the problem – excessive profits are.
A remarkably (even for the Conservatives) tin-eared contribution from an advisor to the Chancellor ruined my day this week when she explained on the radio that the 13th straight increase in interest rates – and the more that are certain to come – was needed to make people ‘less confident’ and too fearful of their jobs to demand better pay.
Saying the quiet part out loud for once, she airily repeated platitudes about the need for ordinary people to ‘throttle their spending’ and insisted that a recession caused by interest rate hikes was the only way to ‘beat inflation’.
The Prime Minister reinforced the message by calling on us to ‘hold our nerve’ as if they are risking only a balance sheet of unproductive assets rather than our homes and the security of our families.
For people in Wokingham Borough, particularly families with young children who have bought at the edge of affordability, often at a variable or short-term rate, in order to live in a friendly and prosperous community, the decision will cause real misery. Misery will also be passed on to those in the private rental sector as landlords pass on their increased mortgage costs to their tenants.
This pain is needed, we are told, to avoid a wage-price spiral where people seek improved wages to cope with increased costs and thereby continually fuel inflation. Eventually, we are told, unemployment, wage cuts and housing insecurity will lead us to the Promised Land of prices rising at only half the rate that they currently do.
But this is simply not true. Wages for 90% of workers are not rising above or even close to inflation and for those earning below £26,500 and in sectors like retail, hospitality and wholesaling they are effectively being cut relative to the rise in costs – and this after a 15-year stretch of flattened wages – something unprecedented in modern British history. Unbelievably, eight million younger workers have never experienced a rise in living standards.
Now the government is signalling that it will override the official pay review boards to block pay rises for teachers and other public sector workers and impose effective pay cuts on the workers who maintain the health, education and infrastructure services that we all depend upon.
This will do nothing to address inflation and will only trap us all in a doom loop of falling demand, insecurity and lowered investment.
Because the Conservative approach is not only cruel and socially corrosive but simply wrong.
The inflation experienced in 2023 is not caused by wage increases but by a stunning and indefensible spurt of profiteering. Energy companies have reported stratospheric profits, supermarkets have doubled their gains as shortages caused by the aftermath of Covid and by the war have given producers the power to push through price increases that are far in excess of short-term blips in the price of energy.
Even the International Monetary Fund recognises that rising corporate profits have been the largest contributor to Europe’s inflation over the past two years – and here, under the Conservatives, shareholder payouts have grown three times faster than wages.
Instead of acknowledging the situation for what it is – Sellers’ Inflation – the government has fallen back on the most tired and insulting of cliches – that it ‘only works if it is hurting’ and the people who deserve to be hurt are those who rely on work rather than wealth to survive.
People in Wokingham Borough deserve a government dedicated to the pursuit of prosperity through investment in technology, research and development skills and entrepreneurship. And they deserve stronger employment and pay bargaining rights to ensure an economy works that for all.
Cllr Marie-Louise Weighill is a Labour member for Norreys ward on Wokingham Borough Council
