UK inflation has again skyrocketed to nearly 12 per cent, now reaching a 40-year record high, according to the latest data from the Office for National Statistics (ONS).
The ONS published figures today (June 22) that show the retail price index (RPI) measure of inflation rose to 11.7 per cent in May, while the consumer prices index (CPI) measure of inflation, which excludes housing costs, rose to over 9 per cent in the same month.
The ONS said increases in inflation reflected the on-going rising cost of fuel, as well as food and non-alcoholic drink, which are rising at their fastest rate since 2009.
Separate figures from XPertHR showed on Tuesday (June 21) that pay growth stalled at 4 per cent in May, failing to break the 4 per cent mark in pay deals in the three months to April. With RPI inflation now at nearly triple 4 per cent pay growth in May, this translates into decided pay cut for the vast majority of workers who are being hit harder and harder by runaway inflation.
Unite, which published its ground-breaking report into profiteering last week, said the latest figures, with pay lagging far behind inflation, is further evidence debunking the myth of a so-called wage-price spiral, which purports that increasing wages are fuelling inflation and so justifies pay restraint.
Hitting back at these further calls for pay restraint, Unite general secretary Sharon Graham said, “It’s not hard-pressed workers who are driving inflation; it’s whole swathes of corporate Britain who have lined their pockets. Runaway profits are driving the inflation that is threatening a national pay cut and yet the vast majority of politicians remain silent.”
Indeed, Unite’s report, ‘Corporate Profiteering and the Cost of Living Crisis’, exposed the shocking extent to which profiteering – the practice of companies increasing prices over and above the level of rising costs to add to already sky-high profits – is the main driver of inflation, not wages.
The report found that FTSE 350 profit margins for the UK’s biggest listed companies were 73 per cent higher in 2021 than pre-pandemic levels in 2019. Even removing energy companies from the tally, average profit margins still jumped an astonishing 52 per cent.
Unite’s report highlighted ONS figures that show that company profits soared 11.74 per cent in the six months from October 2021 to March 2022, while over the same period labour costs fell by 0.8 per cent, accounting for inflation.
Unite found that after analysing all the latest figures, the jump in UK-wide company profits is responsible for nearly 60 per cent of inflation in the last half year – as opposed to just over 8 per cent due to labour costs.
And just as profits have soared, so too has executive pay. Between 2020 and 2021 average pay for the highest paid directors of the UK’s biggest listed companies leapt a colossal 29 per cent, from £2.01 million in 2020 to £2.59 million in 2021.
There is now a quickly growing consensus – influenced significantly by Unite’s report – that wages are not causing inflation to rise, and that pay restraint will only further damage the wider economy.
Last week, more than 60 top economists signed a letter to prime minister Boris Johnson highlighting that a ‘wage-spiral’ is not a threat that will further increase inflation.
“Suppressing wages is the exact opposite of what is needed in response to this current wave of inflation, and risks fuelling dramatic increases in poverty and hardship, and ultimately a recession,” the economists wrote in their letter.
“There is no ‘wage-price spiral’ in the UK,” they asserted. “In fact, wage growth has lagged far below the increase in prices.”
They urged the government to tackle the real reasons behind skyrocketing inflation, including by “using all the tools at its disposal to hold down energy costs” and “clamp down on excess profits”.
University of Greenwich economic professor Ozlem Onaran, who was among the signatories to the letter, told The Mirror that asking workers to pay for the cost of living crisis “will only further deepen the crisis”.
“After a decade of wage squeezes we need to change course, with a higher minimum wage, pay rises in the public sector, boosting social security and giving trade unions the power to negotiate decent pay rises for all workers,” he said.
Unite general secretary Sharon Graham reiterated that Unite will continue to demand pay rises to tackle the cost of living crisis.
“While the Governor of the Bank of England and the Prime Minister want workers to think it’s irresponsible to demand that their wages keep pace with prices, they won’t lift a finger to do anything about the ridiculous wealth being amassed by the rich and powerful,” Graham noted.
“The truth is that corporate profiteering is out of control,” she added. “CEOs are hiking prices while shareholders rub their hands and workers struggle to make ends meet.
“Unite makes absolutely no apologies for demanding that employers that can pay, do pay. Wage restraint, absolutely not. It’s time for profit restraint.”
By Hajera Blagg