“How can it be that whilst company profits are booming and corporate dividends are off the chart, the vast majority of people in this country are getting significantly worse off?”
By Jon Trickett MP
Much of the discussion amongst the British Elite focuses on pay for workers. We hear almost ad nauseam commentary about the need for wage and salary restraint.
But is there another side to the national economic story? A side about which we hear very little among the commentariat. I think there is. Because very little is said about corporate profits and shareholder rewards. Maybe it is time to enquire into this aspect of our economy?
And what we can see almost immediately as we begin digging is a tale of two nations. Whilst many wage and salary earners are facing financial difficulty, the other part of the nation is rolling it in, as they say where I come from.
Figures released by the Office for National Statistics show that UK business profits have increased considerably this year.
The net rate of return for manufacturing companies increased from 8.4% in the fourth quarter of 2022 to 8.8% in the first quarter of 2023. Services companies, which make up around three-quarters of all UK economic activity, increased their net rate of return from 15.7 to 16.1% over the same period. Despite much of the rhetoric about ‘hard times’ for businesses, the truth is that some of our biggest economic sectors are more profitable than ever.
Some analysts have predicted a new all-time annual profits high of £275 billion in 2023. This would be considerably higher than previous records of £194 billion in 2018, £179 billion in 2011 and £153 billion in 2007, just before the global financial crisis hit.
Now let’s take a little look at how these profits are being used. The investment company, AJ Bell, released forecasts in July showing predicted dividend payments for the following years.
They forecast that the FTSE 100 index’s total dividend pay-out will reach £83.8 billion in 2023, compared to £76.1 billion in 2022 and £78.5 billion in 2021. Next year they forecast that payments will reach £89.4 billion.
These are astounding sums of money being paid out from just 100 companies, which will line the pockets of some of the already richest people on the planet. The super-rich have quite literally never had it so good.
Yet this year was forecast by the Office for Budget Responsibility to see the biggest drop in workers’ living standards since records began. How can it be that whilst company profits are booming and corporate dividends are off the chart, the vast majority of people in this country are getting significantly worse off? Really it should come as no surprise. The two are directly linked.
To put it bluntly, dividends are high because wages are low. Company bosses are choosing to maximise their profits by keeping wages down and are then paying out almost unprecedented sums in dividend payments to shareholders. They are choosing not to put the same money towards their workers’ wages.
So why are we talking about wage restraint and not about restraining corporate profits and dividends? The truth is that we are living through a ‘cost of greed’ crisis. This has been facilitated by a Tory government who’s policies have been crafted to protect the wealth and privileges of the richest in society.
This is one reason why I have strongly supported many trade unions in their industrial disputes in recent years. Across the board, workers need and deserve a pay rise.
This is also why I have strongly argued for a wealth tax. These record dividend payments line the pockets of real life people. It’s time we taxed the super-rich properly. They have no God given right to accumulate such obscene levels of wealth at the expense of millions of working people.
The issue of wealth inequality will not go away, despite some politicians’ hopes that it can be swept under the carpet. Until action is taken to stop excessive amounts of the nation’s wealth being swallowed up by the super-rich, industrial disputes will continue to proliferate and the calls to tax the rich will only get louder.
- Jon Trickett is the MP for Hemsworth and a regular contributor to Labour Outlook. You can follow him on Facebook, Instagram and twitter.
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