Workers' Weekly On-Line
Volume 52 Number 1, February 6, 2022 ARCHIVE HOME JBCENTRE SUBSCRIBE

The cost-of-living and energy crisis:

The Public Must Have the Final Say over Pay and Prices

Living standards are an essential measure of how the economy is serving the interests of the people. A decent standard of living is a right that must be guaranteed by changing the direction of the economy so that it serves the needs of society.

A key factor determining the standard of living are the prices of essential necessities. As the economy is currently organised and directed, prices are controlled by the global monopolies and oligopolies through "market forces", which amounts to cartel price fixing. The power to set prices must be taken out of their hands, and instead the people must be empowered to control prices of essential services, utilities and goods.

Inflation is at its highest rate for 30 years, with the CPI having risen to 5.4% and the RPI to 7.5% in the 12 months to December, driven largely by rising fuel, energy and food costs [1].

Ofgem announced on February 3 their scandalous, arbitrary decision to raise the energy price cap by an unprecedented 54% to £1,971 a year in April, adding nearly £60 per month to typical bills. The 4.5 million people on prepayment meters, mostly made up by those on the lowest incomes and students, will see an even bigger increase to a cap of £2,017. When Ofgem last increased the cap in October last year to its then highest level ever of £1,277, British Gas immediately increased its Standard Variable tariff by a huge 12% to match that cap, and other suppliers did likewise. Analysts are openly speculating that bills could increase further, by hundreds more pounds, as they expect Ofgem to raise the cap again in October. Millions will be pushed into fuel poverty, and the consequences for those already in such poverty will be devastating.

Chief executive of Ofgem, Jonathan Brearley, merely had this to say: "We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can. The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem's role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas. Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future."

Prices are rising so quickly that pay is not keeping up. In the year to November 2021, total and regular pay fell by 0.9% and 1.0% in real terms respectively, according to calculations by the Office for National Statistics (ONS). Indeed, wages have been held low for many years with pay freezes and below-inflation increases. Pensions have not held up and the triple lock has been overruled by government. Students have had to face severe rent increases. Increasing numbers of people are missing meals and need to rely on food banks.

The financial oligarchy, the banks and various big business interests, have the total say over inflation and its regulation at present. Yet, as with all aspects of life at present, they are losing the ability to predict and control, and inflation threatens to spiral out of control and into chaos. Control of prices must switch from those that cause price increases to those these increases affect, which is the majority in society, via a new public authority. To ensure that this authority operates in a manner consistent with the conditions and does not get usurped by powerful private interests, that authority itself requires direction by a modern system of democratic arrangements that directly embody the popular will.

The disinformation coming from the regulators, government, business and media is that, even given these price surges, wages must be suppressed as any generalised pay rise will cause further inflation. There is actually no such direct link. With prices set scientifically according to the price of production, reflecting the work-time embodied in the product, there is no link to wages, which are a claim by the workers on the new value they contribute to the product at every stage of production and distribution. Other claims are taxes, made by governments, and profits, made by the owners of capital. One could just as well assert that increased taxes or increased profits cause inflation on the logic that argues for pay restraint.

Under present conditions, however, businesses attempt to offset their falling rate of rate of return by any means they can find. The largest especially use their position of power to immediately offset any competing claim, and this can be through price rises, creating tension with the fundamental laws of the economy and thereby fuelling crisis and chaos in the economy. Greggs, for instance, has raised the price of some of its food products in order to cover what it irrationally calls "labour costs".

Out of necessity, the past few months have seen workers make exceptional wage demands against employers and taking strike action to enforce their demands. Workers are demanding above-inflation pay increases to compensate for years of pay restraint and to cover the current ever-rising cost of living.

The nub of the problem is how the socialised economy operates and to what aims it is directed, and the neoliberal market system that is holding it back. To change the direction of the economy, key aspects such as the distribution of goods, supply chains and the means of increasing supply of essential products need to be under public decision-making control, as are the quantity and quality of investment in social programmes and the manufacturing base. If more is put into the economy than is taken out by private interests, then supply meeting demand is made possible. Prices should be taken out of any control by monopoly and oligopoly cartels. A modern public authority would restrict the assumed rights of the monopolies to maximise profits through price manipulation and enforce a scientific price of production that allows a sustainable rate of return, diminishing as it should in proportion to advances in productivity. People must constitute themselves as the authority via new democratic mechanisms that enable them to effectively direct the economy, including incomes, social programmes and prices, so that solutions to the standard of living crisis can be found.

Whose economy? Our economy! Who decides? We decide!


Notes

1. See Office for National Statistics, Inflation and price indices
https://www.ons.gov.uk/economy/inflationandpriceindices#publications
Inflation is measured by the ONS, which notes the prices of hundreds of everyday items called the "basket of goods". There are in fact various measures of inflation: the Consumer Prices Index (CPI), the Retail Prices Index (RPI) and others. How each index is defined and what they are aimed at illustrating, and how goods are chosen and weighted for each, are all subject to change. These indexes are therefore arbitrary in the sense that workers are left out of the discussion as to the aim and definition of the measure of inflation.


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