The question of who pays for inflation is fundamentally a distributional question. In other words, it’s about class.
When prices increase, that additional cost has to be absorbed by someone, whether by capitalists in the form of lower margins and profits, or by consumers in the form of higher prices. Those consumers are also workers, and if they win above-inflation wage increases, the cost can then be pushed back onto the capitalists.
Inflation in the UK has been above the Bank of England’s 2 percent target rate for two years now. That is sufficient time to give an assessment of which class — the capitalists or the workers — has absorbed the costs of inflation.
The evidence is clear. Every month from September 2021 to May 2023, real wages fell — a slump in British incomes not seen for over half a century.
In June 2023, real wages did grow by 0.6 percent, which was the first rise in twenty-one months. However, it’s estimated that by the time of the next general election, due to be held in 2024, incomes will still be 4 percent below their level when the last election took place in 2019. Working-class living standards are going backward. “Never in living memory have families got so much poorer over the course of a parliament,” as a report by the Resolution Foundation concluded.
The report finds that the situation is significantly worse for the poorest 25 percent of Britons, who are expected to see their disposable income fall by a further 3 percent up to 2024–25, as temporary welfare support is removed. This “would be bigger than (and additional to) the 2022–23 shock.” The number of people in absolute poverty is anticipated to rise by another three hundred thousand, with the number of children in absolute poverty surpassing one in four.
Meanwhile, UK energy and banking giants are breaking all sorts of records for profits. British Petroleum (BP) has posted a combined $35.3 billion in profits for the last six quarters — almost $6 billion per quarter.
With the price of oil and gas surging in the wake of the Ukraine war, corporate profit gouging has never been easier for fossil capital. In March of this year, the company’s gross profit margin peaked at over 30 percent. No wonder BP’s CEO Bernard Looney has compared his business to “a cash machine.”
Those surging oil and gas prices, a key driver of inflation, have been passed on to Britain’s privatized energy retail firms, which in turn have passed the cost on to consumers in the form of historic rises in electricity bills. This cost has been partially offset by government support with a £37 billion corporate subsidy for energy producers and retailers.
The government will claw some of that money back through its 25 percent windfall tax on oil and gas profits. Introduced in May 2022, this levy was raised to 35 percent in January 2023 and is now set to run until 2028. However, it will be scrapped if prices fall below $71.40 per barrel, meaning the superprofits of the oil and gas giants are going to be protected no matter what happens.
At the same time, the Bank of England has also squeezed workers with fourteen consecutive increases in interest rates, to a current level of 5.25 percent, raising the cost of household debt significantly. That’s good news for the banks, which are raking in bumper interest payments. London-headquartered HSBC made $21.7 billion in profit in the first half of 2023, while its banker bonuses in 2022 reached £3.4 billion. There’s no windfall tax on UK banks.
Even though inflation is easing, the Bank of England appears determined to keep up the pressure on workers. Bank of England governor Andrew Bailey has previously said workers should not pursue wage rises. In a speech delivered in July, he heavily implied that unemployment is still far too low despite the recent increase in levels of joblessness.
Bailey’s language might have been much more diplomatic than Australian property tycoon Tim Gurner’s viral rant about the need to kill off “arrogance in the employment market.” But the governor’s underlying message was the same: the solution to high inflation is to make the working class weak and desperate.
The Tories After Brexit
The Conservatives are the party of Britain’s ruling class, largely financed by the City of London, so it was never likely that the Tory government, now into its thirteenth year, was going to break with the core interests of the oligopolies that run British capitalism.
However, the tumult of Brexit — a fissure that the vast majority of the ruling class didn’t want — destabilized the party’s relationship with the City while reconfiguring its electoral support, pushing some pro-Remain voters in London and the southeast away while attracting some pro-Leave voters in central and northern England. This new electoral demographic at least complicated the party’s class politics. Boris Johnson declared the Tories to be “the workers’ party” after his 2019 election victory and promised to deliver for his new converts in Labour’s former “red wall” seats through “levelling up the economy.”
“Levelling up” was supposed to address the gaping regional inequality between London and the southeast on the one hand and the rest of the UK on the other — the largest such divide of any country in Europe. This would involve building infrastructure and attracting business investment to revive northern towns and cities that never recovered from the deindustrialization of the last Tory government forty years earlier.
While the “levelling up” agenda was largely rhetorical, to the extent that it did have substance, it came in the form of a break with the fiscal policy of the Cameron-Osborne years from 2010–16, promising to replace the age of austerity with an “age of optimism.” In practice, the pandemic subsumed Johnson’s plans, with a manifesto commitment for modest fiscal loosening dumped to allow for emergency spending on furlough, corporate bailouts, and an extremely corrupt COVID-19 health response.
All told, this package raised public spending from 39.5 percent to over 50 percent of GDP. While Johnson came out of the pandemic saying he was still committed to “levelling up,” the Treasury was worried about a public debt that was nearing 100 percent of GDP.
It was not the downfall of Johnson, but that of his successor, Liz Truss, that allowed Treasury officials to regain control of a Tory party with which they had been momentarily at war during the Brexit years. Truss and her chancellor Kwasi Kwarteng sought to introduce both tax cuts and public spending increases at the same time, an unorthodox move that led to an attack on UK government bonds from financial markets.
With UK pension funds threatened by the financial panic, Truss sacked Kwarteng and brought in Jeremy Hunt, a chancellor whom the Treasury could trust to do as he was told. That didn’t save Truss from having to resign. But Hunt remained in his post under the premiership of her successor Rishi Sunak, a superrich former hedge fund manager whose instincts are also toward fiscal conservatism.
Under Sunak and Hunt, any rebellious tendencies that emerged during the Brexit years have disappeared. After an emergency budget that promised a return to austerity, Hunt quickly moved to shore up support from the City, announcing a plan for the deregulation of the financial sector.
As inflation began to surge and strikes broke out, the government rolled out an anti-strike bill, the biggest attack on trade union rights since the Thatcher years. While Sunak claims that he remains committed to “levelling up,” he has cut funding for key Johnson-era policies like the “towns fund” and provoked anger among new Tory MPs in the former “red wall,” who increasingly look as if they will only serve one term in the British Parliament. No one speaks about the Tories being “the workers’ party” anymore — not even Tories.
As if to symbolize the degrading impact of thirteen years of Tory rule on Britain’s public services and infrastructure, when children returned to school from the summer holidays this year, it became clear that many were threatened by crumbling concrete. The government has confirmed that at least 104 schools are at risk from RAAC (reinforced autoclaved aerated concrete), although the final figure could be over five hundred.
The RAAC scandal reveals the dangers of austerity. The Department for Education’s former top civil servant, ousted in the Johnson years, has said that Sunak cut the school repairs budget in half in 2021 when he was chancellor, from repairing one hundred schools a year to just fifty.
Capital spending on schools last year was the lowest since 2009–10, the year before the Tories came to power, having fallen 50 percent in real terms since then. Despite the outcry, Hunt has refused to make any new cash available, saying that the money needed to fix the problem must be found from within the Department for Education’s existing budget.
Labour and the Class Ceiling
In the wake of Labour’s devastating election defeat in 2019, political scientist Chris Bickerton wrote that “as a party of working-class self-representation, Labour is already dead.” With Jeremy Corbyn gone, new leader Keir Starmer has gone about burying Corbynism in as deep a pit as he can dig, purging the Left ideologically and organizationally.
Starmer has had three years to build a rapport with the British public and has failed to do so, with his personal poll ratings at minus fourteen points. However, with the Conservatives imploding and the Scottish National Party (SNP) in crisis, polls suggest that Labour is still strolling toward a general election victory in 2024. With Brexit in the rearview mirror, is Labour defying Bickerton’s assessment and rebuilding its relationship with the working class?
A twenty-two-point lead for the Tories among the working class in 2019 has swung to a thirteen-point lead for Labour. However, that’s still four points short of the party’s overall polling lead, suggesting that some fragility still remains in Labour’s appeal to workers. More significantly than polling swings, Starmer has made no effort to structurally strengthen the party’s connection to the working class.
In fact, Starmer has weakened the union link through his refusal to even allow members of the shadow cabinet to support strikes, never mind supporting them himself, while refusing to commit to repealing Tory anti-strike laws. Some senior Labour figures, like the right-wing shadow health secretary Wes Streeting, seem to revel in animosity toward unions, attacking the British Medical Association (BMA) for being “hostile,” and promising to take on “vested interests” in the National Health Service if Labour come to power. “I’m not afraid to tell the BMA or other unions ‘no’ — and I think people respect that honesty,” Streeting added.
Until very recently, Labour’s pitch to the working class consisted solely of aping Tory language on crime and immigration, and of course their single biggest asset — not being the Tories. But in a speech in July, Starmer said that a Labour government would “shatter the class ceiling,” claiming to see this as “his personal cause.” The Labour leader told the audience about his “journey” from “an ordinary working class background to leading the Crown Prosecution Service and now the Labour Party,” and said that he wanted to ensure young people today could also have the chance to overcome adversity.
Social mobility is in decline in the UK as wealth inequality grows, meaning the assets of parents (especially property) are increasingly decisive for young people’s prospects. Yet in Starmer’s speech, he actively sought to play down the role of “structural and racial injustice,” instead emphasizing “a fundamental lack of respect, a snobbery that too often extends into adulthood, raising its ugly head when it comes to inequalities at work.” To address this, he advocated increased focus on improving children’s speaking skills at school.
A Brittle Project
Starmer’s attempt to disassociate cultural factors from their material roots makes sense if your only proposals are to tweak the school curriculum to prioritize soft skills. To seriously tackle the educational barriers to social mobility would require massive public investment in early-years education. This would include taking privatized childcare centers into local council ownership and significantly raising pay for early-years practitioners, as well as eliminating private schools and abolishing tuition fees at universities.
None of this is on the agenda. Even if it was, such measures would still only put a dent in the problem without steps to address the huge disparities in property wealth, which Labour has no plan to tackle either.
More importantly, the focus on social mobility — the movement of people between classes — is the most individualistic form of class politics imaginable. As Aaron Bastani has argued, social mobility has been an attractive issue for centrist politicians in the neoliberal era because it gives them a reason to talk about “themselves,” projecting their own journey as their vision for the country, rather than seeking to address the structural problems facing the working class as a whole.
Starmer’s message is that you can rise out of the working class, rather than rise with it. Even Guardian columnist Polly Toynbee had to admit, in an otherwise sycophantic article, that Starmer’s social mobility agenda “doesn’t herald the shattering of class as we know it. Inequality itself — a gap in danger of getting wider — is the true measure.”
But Starmer has given up on any agenda to tackle poverty and inequality. His shadow chancellor, Rachel Reeves, has ruled out increases on corporation tax, capital gains, and the top rate of income tax, as well as opposing a wealth tax.
At the same time, Reeves has stated that the party’s fiscal rules are “nonnegotiable.” Those rules require that day-to-day public spending must be matched by revenue, and that the ratio of public debt to GDP must be falling within five years. Given the dim prospects for growth, this is a recipe for yet more austerity, a grim outlook for the working class after almost a decade and a half of Tory rule.
As for industrial relations policy, deputy leader Angela Rayner threw workers a bone at the annual Trades Union Congress conference by committing to scrap zero-hours contracts and repeal the recent anti-union laws passed by the Tories. However, her promises come amid a general watering down of the party’s agenda on workers’ rights in recent months.
Labour has scrapped plans to create a single-worker status to tackle precarious gig-economy work and will not pursue proposals to prevent bosses from sacking workers during the probation period as Starmer seeks to “woo corporate leaders and discredit Tory claims that his party is ‘anti-business,’” according to the Financial Times. Most worrying of all, the party has now downgraded its most ambitious industrial relations proposal, to establish sectoral-level collective bargaining “across the economy,” in favor of piloting the idea in the social care sector.
Labour’s economic vision is thus even less ambitious than that of Bidenomics, while the party’s anti-strike stance means that it stands against the most effective means workers have to defend themselves as a class. Post-Brexit, Starmer had an opportunity to rebuild a durable relationship with the class Labour was created to serve, but he has chosen not to take it. While Starmerism is likely to be enough to get Labour back into power, the project is not built on the sort of solid foundations that could have allowed the party to dominate for a generation
Given the orientation of Britain’s two main parties of power, can class politics emerge defiantly from below? Beginning in the summer of 2022, the UK has seen a strike wave that gathered significant momentum up to the end of 2022, before stalling somewhat in 2023.
There are clear positives to take from that wave. First, strikes have become a major talking point in British society again, with railway union leader Mick Lynch emerging for a period of time as a popular voice for the working class through his TV appearances. Moreover, the strikes have been popular, with polls showing support significantly above that of strikes in previous years.
Secondly, not only have the strikes been high profile, they have also been substantive, with 3.7 million working days lost from June 2022 to April 2023 — the highest for any eleven-month period since that from July 1989 to May 1990. Many of these strikers, like the nurses, have won partial victories, while the huge sums spent by the government to break the railway workers’ strike have so far proved unavailing.
The strike wave has shown that workers can and do respond where unions are well organized. It holds out the possibility that higher inflation — which may well prove to be a persistent feature of contemporary capitalism — could give rise to a significant increase in class struggle.
That being said, we also have to be aware of the strike wave’s limitations. The strikes have largely been concentrated in the public sector and formerly state-owned businesses, and among workers that were already well organized long before the inflation crisis, albeit with some notable exceptions. Private sector union membership fell again in 2022, to a dismal 12 percent.
Also, while impressive rallies under the “Enough Is Enough” banner were held across the country in support of the strike wave, the industrial action has found no consistent political expression that could help draw in and inspire wider sections of the working class to revolt.
That’s why there is a need for independent political organization that advances a consistent class politics, defined by Tribune editor Ronan Burtenshaw as a politics that can “bring together a majority on the basis of material conditions that unite them, not divide the society into smaller and smaller segments and try to cater to each.” There are very few parties or even social movements in Europe today of any significant size that articulate such a politics, but the need for it is as clear as ever.