THE forecasts unveiled by the Bank of England when they raised interest rates last Thursday were a stark reminder of why there is currently a strike wave taking place in this country. The forecasts themselves were truly chilling.

The Bank’s forecasters reckon that inflation is far from the peak and could run over 13 per cent. That is now close to becoming the consensus after one of the leading think tanks had previously forecast price rises peaking at 15 per cent. The Bank also believes inflation will be above the current level of 9 per cent this time next year.

At the same time, it now predicts a prolonged recession. On this analysis the slump is set to last more than three years and unemployment will rise to well over 6 per cent before the end of 2025. 

This is the dreaded “stagflation” that economists often discuss but is actually, and thankfully, quite rare. It is disastrous for workers, for anyone on benefits, for people on fixed incomes such as pensioners and for the army of people who will be made newly unemployed.  

This is a desperately grim outlook and naturally forms the key backdrop to the wave of strikes we have already seen. 

These strikes are a direct response to the drop in real wages caused by the surge in inflation. In many cases the response of employers has been to push the existing workforce even harder, with the threat of job losses and worse terms and conditions in addition to real pay cuts. 

Although the Bank has a far from impeccable record in forecasting, anything broadly on the lines of these projections will spell misery for tens of millions of people. 

This grim economic backdrop is likely to mean further widespread industrial unrest for months or even years to come. 

The simple fact is that millions of households are already severely struggling with the collapse in their living standards. This is before the energy price cap is raised again going into winter, or a series of administered prices such as transport, water and other prices are raised between September and January. 

Numerous reports show a surge in the numbers of people unable to pay bills or taking extreme measures to avoid paying for basic necessities. 

Even donations to foodbanks are drying up (because of course it is always average and low-income earners who provide the most charity).

As a result further major strikes are almost inevitable. The Bank forecasters were explicit in arguing that inflation will still be higher in a year’s time, so it is not a flash in the pan.  

This makes a mockery of some of the pay deals that are on offer. The worst I have seen is the 2 per cent made to firefighters, which is an insult to the women and men recently lauded as essential workers. There may be others that are even worse.  

The withdrawal of labour is one for the few but most powerful weapons that organised workers have in reply. As the crisis develops we should also expect to see unorganised workers taking semi-spontaneous action over pay, and getting drawn into organisation as a result.

In response to all of this, the remaining two Tory leadership candidates do not have a word to say about the cost of living. Heading in the completely opposite direction, they are focused on how to outlaw strikes or make them even much more difficult than they already are. 

The spurious grounds are that they are making strike action “democratic,” by imposing turnout and acceptance levels that would leave most constituencies with no MP after a general election. 

Their other tack will be to impose civil liabilities on unions for employers who can claim loss from industrial action. 

In a maddening irony, they may even allow “secondary losses” claims, from businesses that indirectly suffer, having of course prevented secondary industrial action for many years.

It is not the job of Labour MPs to tell trade union leaders how to run industrial disputes. But it is the job of Labour MPs to support all justified disputes such as these and to help build wider labour movement and public support for them, especially with clear demands and unifying policies. 

In this regard it is very striking how the common experience of plunging living standards has made the strikes far more popular than they sometimes are. Even BBC vox pops see hardly anyone prepared to attack the strikers.

First, we need to be clear about the cause of the problem. It is utterly false to suggest that the war is the source of the global price rise, as inflation began in the US about a year earlier.  

Like other Western economies, the US was coming out of lockdown in the spring of 2021. This was always going to be a moment of sharply rising consumer demand.  

Bizarrely the US authorities decided that this was the moment for a huge increase in the money supply and increased government consumption after a period when businesses had not been investing. Demand without supply led to a global surge in prices.

Yet this government is also responsible — with tax and National Insurance increases, reneging on the pensions triple lock and hiking the interest rate on student loans in the Spring Statement. 

Along with other measures, including a tax break for banks, this amounted to a vicious austerity Budget just as a cost-of-living crisis was already under way. 

It was austerity authored by Rishi Sunak, approved by Boris Johnson and applauded by Liz Truss and the whole Tory parliamentary party. They all bear a great responsibility for this crisis. 

Labour’s role is to offer a way out. That must begin by reviving our demand for a windfall tax on the energy companies which is used to cut bills, which is already highly popular and will become more so.  

More than this, we should propose an end to the billions in fossil fuel subsidies and switch to investment in cheaper renewables plus retro-fitting homes and improved electric public transport. These will cut prices, create jobs and help tackle the climate crisis.

If one or two more energy companies are lost along the way, so be it. The government’s model for the sector is a charter for chancers. 

If any of the strategically important companies are set to go under, they should be renationalised. This will be a long-term saving, both for consumers and for government finances.

This points the way for an overall response to the crisis. The profits-price spiral was unleashed because of what economists call supply shortages, a shortage of equipment, goods and labour.  

The government should lead an investment recovery, in equipment, goods and people. A national investment bank to invest in the productive economy and sharply higher wages to invest in recruiting and retaining workers, beginning with the public sector. 

And government should use every lever, changing our entire system of subsidies and taxes to penalise excessive pay and dividend payouts and buybacks, and encouraging or compelling productive investment — a programme to put people before profits.

Diane Abbott is member of Parliament for Hackney North and Stoke Newington. She served as shadow home secretary from 2016 to 2020.