Skip to main content

The fat cats' inflation con

The coalition was quick to take credit for a small drop in inflation recently - but prices are still rising faster here than almost anywhere else. And that's no accident, argues RICHARD LYNCH

The coalition made great play of last month's half-point fall in inflation and was quick to claim credit for it.

But ministers forgot to remind us that their record on inflation over the past three-and-a-half years has been appalling, that we now have the highest inflation in the European Union and that recently announced price rises for gas, electricity, rail fares and other necessities will soon drive inflation figures up again.

In its recent consumer price inflation bulletin the Office for National Statistics showed the retail prices index for the year to the end of October falling from 3.2 per cent to 2.6 per cent and the consumer prices index falling from 2.7 per cent to 2.2 per cent.

It also showed two new experimental statistics falling, with the CPIH - which takes account of housing costs, unlike the CPI - down from 2.5 per cent to 2 per cent, and the RPIJ which is being considered as a replacement for the RPI down from 2.5 per cent to 1.9 per cent.

These bigger than expected falls in the figures were explained by a reduction in the cost of petrol and diesel as a result of a decrease in wholesale prices and price cuts by several major supermarket chains.

Air fares and education costs also increased by less than last year and this helped push the annual figures down as well.

But the rising cost of many of the necessities of life over the past year made a mockery of the overall figures.

For example, the price of bread and cereals rose by 3.9 per cent, meat by 5.2 per cent, fish by 4.9 per cent, fruit by 10.2 per cent and vegetables by 5.3 per cent.

In addition there were other above-inflation increases in the prices of water and sewerage (4.4 per cent), electricity (8.6 per cent), gas (8.3 per cent), transport (4.4 per cent), postal services (6.3 per cent) and newspapers and periodicals (7 per cent).

The coalition was quick to claim that price increases have moderated. But CPI inflation in this country is still the highest in the EU and higher than in most competitor nations.

Even at 2.2 per cent it is well above CPI inflation in Spain (0 per cent), France (0.7 per cent), Italy (0.8 per cent) and Germany (1.2 per cent). It is also higher than euro-area inflation (0.7 per cent), EU inflation (0.9 per cent) and inflation in Switzerland (0 per cent), Japan (1 per cent) and the US (1.2 per cent).

And it's not just a question of our current inflation being higher than that of others. It's been higher for years, as a recent Sunday Times article pointed out.

Using figures from an Ulster Bank economist the newspaper compared price increases in the UK with those of the Republic of Ireland over the past six years and found that:

Food and drink prices increased by 35.6 per cent in Britain over the six year period, while prices in Ireland increased by only 1 per cent

Gas and electricity prices increased by 61 per cent here while prices in Ireland increased by a much lower 28 per cent

Overall inflation increased by 20.7 per cent here while Irish inflation increased by only 3.2 per cent

But these huge differences didn't apply just to Ireland.

The same pattern was repeated in other countries as well. For example, our 20.7 per cent CPI increase over the six years was well ahead of CPI increases in France (10 per cent), Germany (10.2 per cent), the US (12.4 per cent), OECD countries as a whole (13.4 per cent) and Italy (13.5 per cent). In Japan inflation fell by 0.5 per cent.

Inflation during the three-and-a-half years of coalition rule has also been far higher than inflation during the previous 13 years of Labour rule. The RPI has been at or above 5 per cent during 13 months under the coalition, when it reached that level during only two months under Labour. And the CPI has been at or above 4 per cent during 12 months under the coalition when it reached or surpassed that level during five months under Labour.

Indeed, you have to go back to the Major and Thatcher governments to find inflation as bad as it has been under this coalition.

This level of inflation is particularly hard for working people to bear when Office for National Statistics figures put regular weekly pay at £447 and show wages increasing by only 0.7 per cent a year, or 0.8 per cent when bonuses are taken into account.

This means that inflation is rising three times faster than wages and the living standards of those who can least afford it are being cut year after year.

Yet chief executives of FTSE 100 companies are being paid an average of £4.4 million a year - £85,000 a week - and directors in the same companies are getting an average of £3.3m a year or £63,000 a week. So much for all of us being in it together!

 

But why is inflation so much higher in this country than in other comparable nations?

It's not because of current exchange rates, because the value of the pound has been high relative to other currencies for several years now and that has had the effect of pushing down the cost of imports.

It's not because prices are rising significantly in developing nations, as British clothing retailers and others have had no shortage of poor people to exploit in pursuit of cheap clothing and other goods for their stores.

And it's certainly not wage increases that are driving up prices, as they are now lower than they have been at any time this century.

The few economists and commentators who bother to look at this question rarely get far in explaining why Britain has become a high-inflation nation.

But the reason is staring them in the face. Big companies are pushing up their prices to boost their already high profits and to give their fat-cat executives such lavish remuneration packages.

And the coalition is not only allowing them to get away with this but is encouraging the process, including by outsourcing more and more public services to conglomerates like Capita, G4S, Serco and others so they can also boost their profits at our expense.

And the coalition's decision to increase VAT from 17.5 per cent to 20 per cent in 2011 also made a huge contribution to pushing up prices and inflation, which affects us all.

Most big companies are getting away with this exploitation of ordinary people by telling us they are doing everything to keep prices increases down while, at the same time, working with others to push prices higher and higher. The big energy companies, for example, are almost all now driving prices up by between four and five times the rate of inflation.

Big supermarket chains are offering tempting promotions to distract us while each drives prices up as much as the other.

And the rail privateers do the same, grabbing their subsidies and boosting their profits while they increase fares by around double the rate of inflation to the highest in Europe.

Not for nothing did Adam Smith say in The Wealth of Nations that "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices."

Not only are we being fleeced by inflation, we are being taken for fools by the people who are creating it so that they can transfer cash from our pockets to theirs and increase inequality in income and wealth even further.

It's time we stopped letting them get away with it. It's time we started fighting back.

 

Richard Lynch is a GMB accompanying representative

OWNED BY OUR READERS

We're a reader-owned co-operative, which means you can become part of the paper too by buying shares in the People’s Press Printing Society.

Become a supporter

Fighting fund

You've Raised:£ 10,322
We need:£ 7,678
8 Days remaining
Donate today