“Price caps would mean we are putting the right of people to eat and to be warm ahead of corporate profits.”
By Richard Burgon MP
When Bank of England boss Andrew Bailey, who earns eye-watering £575,000 a year, again called for ‘wage restraint’ to tackle inflation this week he highlighted once again how the powerful in our society want workers to pay for this crisis.
Rishi Sunak’s Treasury has also warned public sector workers that higher pay awards could fuel inflation. More widely, a deliberate misrepresentation is circulating in parts of the media that seeks to blame inflation on higher workers’ wages.
The reality, as the TUC have made clear, is that we are in the longest squeeze on wages in 200 years. Average wages are still below the levels they were before the 2008 financial crisis. Real wages are set to fall by £600 this year alone.
The idea that inflation is due to workers having so much income that they are forcing up prices is laughable given the social emergency we are living through. People are struggling to buy the essentials. We have pensioners riding buses to keep warm and millions of parents skipping meals to feed their kids. In the world’s fifth-biggest economy, 1.5 million households have food and energy bills greater than their disposable income.
It’s blindingly obvious that higher prices are not caused by excessive demand from workers. Inflation is being driven by big problems in supply – a result of post-Covid trade disruption and of the war in Ukraine – but also by rampant profiteering by major corporations. Higher prices mean someone somewhere is making huge profits.
Energy is a case in point. An estimated 8m people won’t be able to heat their homes this autumn, according to the End Fuel Poverty Coalition. Yet oil and gas giants are making £900 per second!
So instead of demands from the powerful that wages be effectively capped, surely prices and profits should be capped?
The public backs this idea – one recent poll showed 71 per cent of voters would support price controls that “place limits on the prices that companies can charge for certain goods and services, such as energy, housing and other essential goods” including essential foods. That even included the overwhelming majority of Tory voters.
Other countries are doing just that. In France, people have been protected against soaring energy bills by a cap that limits price rises to just 4%. Last week, the Spanish and Portuguese governments approved a cap on energy bills to lower electricity bills.
In contrast, our energy price cap system is totally weak. The cap was raised by 54% as gas prices soared and so it failed in its basic duty to properly protect people against higher prices.
We should have stricter caps here that keep energy prices low. This would be a real measure to tackle inflation and profiteering. And why not extend this principle to other essentials to ensure people have the basics during this cost-of-living crisis? Price caps could be imposed easily enough by the government to limit prices on rail, water, food essentials and other key utilities so that people can afford them.
Price caps would lead to a straightforward trade-off: lower profits for big corporations in exchange for more affordable essentials for millions. At the moment, our system does the exact opposite: people face soaring bills while corporations make super-profits.
In cases where high prices on key essentials were not the result of profiteering, then taxes on the very wealthiest and those sectors making superprofits could cover the difference between the high market price and the price paid by the consumer. That way we can ensure that people do not go without the essentials during this cost-of-living crisis.
As well as on energy, the calls for price controls on housing costs are growing. It is very welcome that Labour’s London Mayor Sadiq Khan has called for the government to give him powers to impose private rent controls in London. He estimates that doing this for two years would save tenants an average £3,000. New York already has such rent controls.
Rent controls were first introduced in Britain during World War I to prevent landlords profiteering from war-time housing shortages. Rent controls continued for decades afterwards, with the 1977 Housing Act the last time they were included in government legislation. That Act limited how much a landlord could increase rents by and how often they could raise them. But Thatcher repealed this important measure in the 1988 Housing Act.
Wider price controls were in widespread use in the US and the UK during the Second World War when again, for obvious reasons, there were serious issues with supply.
In raising the demand for price controls, we could take inspiration from the mass movement in the United States during the 1970s. The group “Consumers Opposed to Inflation in the Necessities (COIN)” movement brought together social movements including environmentalists, women’s organisations and trade unions to demand action against price rises in key necessities — namely food, energy, housing and health care. Their mass movement even led to a meeting with President Carter who said he would work with COIN “to hold down inflation in the sectors of the economy that provide the basic necessities of life.”
Of course, alongside this we should keep fighting for energy, rail, water and other key utilities to be publicly owned and run for people not profit – just as our NHS is. That is the best way of ensuring a permanent end to profiteering.
But in the meantime, price controls can ensure people can afford the basics. Corporate greed is helping drive this crisis. We need to put an end to it.