Inflation is falling. Now down from its high of 11.1%, it has dropped, according to latest figures, to 8.1%. As we have pointed out previously, the fact that inflation is falling does not mean that prices are following suit.
The political classes, with no remedy for runaway inflation, want you to believe that things are returning to what they call ‘normal’. As the wild fires currently gripping Greece remind us, putting out one fire simply fans another. The problems besetting global capitalism are very like a spate of wild fires. Every hint that we have brought one under control is destined to bring disappointment, as our celebrations turn to despair as another fire begins to consume us. Capital’s answer is predictably brutal. Destruction is always preferred to preservation of life. Misery for the many always promoted to provide a life of luxury for the few.
Our basket of goods (originally 14 budget items, now increased to 22 to be more representative) has remained steadfastly unmoving over the summer. Those goods, which include staples such as tea bags, digestives, pasta, fruit, cornflakes, fish fingers and burgers, together with essentials such as washing powder and detergent, which cost £34.05p at the beginning of August, had risen to £34.31p by last weekend.
The fact is that consumer prices remain high and are likely to continue to do so. But, although there is talk of the cost of living ‘crisis’, it has fallen off the front pages. Inflation, which a recent House of Commons briefing admitted was coming down partly through statistical effects, remains of interest to both politicians and their journalistic apologists.
It is clear that for ordinary people bills remain resolutely high. Without concomitant increases in their income, this means that their living standards will fall, unless they have sufficient savings to offset any increase in basic living costs.
Of course, groceries are not the headline, as we all know. This might well be because it is difficult to blame higher food prices on Russia. Energy, on the other hand, has a convenient scapegoat. Almost every news story about rising energy prices mentions the invasion of Ukraine, without explaining exactly how it caused your energy bills to rise. The implication is that, as a result of the invasion, gas supplies were disrupted and lower supplies caused higher prices.
In terms of classical economic models, that is exactly how supply and demand should work.The only problem is that figures from the world’s energy supply markets show that there has been no reduction in supply from Russia or Ukraine since the start of the war, or at least not sufficient to send your bills rocketing. Indeed, the country suddenly producing less crude oil than previously is Saudi Arabia, and they are doing so deliberately to push prices up.
It would not, however, be politic to criticise Saudi Arabia for being responsible for pushing your prices upward, would it? To be fair, we export around £4 billion a year in goods to Saudi and import around £3.5 billion. It is curious that, although it is widely reported that Saudi imports a large number of weapons from the UK, on the ONS figures for exports there is no category for weapons or military equipment. One might be forgiven for thinking that they were ashamed to be engaged in this particular trade. But this assumes that those profiting from the sale of weaponry which is designed to kill and maim have such a thing as a sense of shame.
In 2019 Amnesty International, based on information from the Stockholm International Peace Research Institute (SIPRI), estimated the total arms trade at around $400 billion, with the USA responsible for over one-third of military spending in 2018. The five largest arms exporters over the period 2014-2018, with 75% of the total arms trade between them, were USA, Russia, France, Germany and China. The largest arms importers over the same period were Saudi Arabia, India, Egypt, Australia and Algeria. It is likely that Ukraine has now been added to that list.
So, even if the invasion of Ukraine cannot be pinpointed as the reason for your higher energy and food bills, the profiteering of companies committed to the arms trade possibly can. As the productive capacity of the world is diverted into arms production, it is undoubtedly distorting the major economies. Whilst small arms production, particularly in the US, does aid the domestic consumer market, mostly weapons bypass the parts of the economy the majority of people can influence. After all, how many ICMs can one person store in their garage?
The consequence is that weapons manufacture, apart from its dubious moral foundation, is actually anti-democracy, in that our entire economic systems are being driven by a sector of the economy that has no beneficial effects for society, and this means that investment is being turned away from socially beneficial goods toward death and destruction.
It is an uneven linkage between the rise in your fuel bills and the obsession with warfare, but the linkage exists nonetheless. Not simply in the very simplistic argument that money spent on weapons could be spent on schools, or hospitals or other good things. Could be is not would be. Weapons offer better investment opportunities than public works. It is, in this case, better to destroy than to build.
Companies profiteer. It is what they do. But it is the fact that so many companies see the opportunity to profiteer that is responsible for destroying so many smaller competitors. Government attempts to prevent the profiteering of large multinational corporations are thwarted at every turn. These companies can move their HQs to avoid paying tax. And they do. They can dictate the terms on which they invest plant in a particular country. And they do. They can prioritise the dividends paid to shareholders over the financial pain they cause consumers. And they do.
In the UK we have all heard of the energy price cap, but, whilst this applies to the cost of the fuel provided, that is not all. Much of your energy bill has no relationship at all to the fuel you use. It is the standing change which is driving bills upwards. Neither the government, nor the opposition for that matter, has anything to say about this. It means that, if the price of crude oil or gas falls, the companies can be compelled to pass on the saving. But it also means that there is nothing to stop them from compensating themselves for any loss by increasing the standing charge. No matter how much you reduce your usage to keep your bills down, you cannot escape the standing charge. Although the combined cost of usage plus standing charges still cannot exceed the upper limit set by the government, it offers energy providers, who we should not forget have been posting record profits as their consumers have suffered record bills, an opportunity to offset any measures you may take to reduce your bill by reducing your usage.
According to energy companies the standing charge is there to cover the cost of providing the energy you use. But this is rather like having to pay a cost to your local pub on the basis that you may want to pop in for a pint one day and that, in order for it to stay open, you should bear the costs of maintaining the building. Some might argue, with more than a hint of justice, that the pub does not charge cost price for its beer but rather adds on an amount which allows it to pay for the maintenance of the building, pay the staff and, hopefully, provide a living for the landlord/lady. If you do not use the pub, it is not your responsibility to maintain it just in case in the future you want to.
Why should energy be any different? It might be different, of course, if your local pub was in financial difficulty and likely to close. Perhaps, even though you are an infrequent visitor, you would want to chip in to keep it open for that balmy summer night when you fancy a pint in their beer garden.
But, on the whole, energy companies are not losing money. Indeed, the opposite is true. They are posting record profits, which the government is encouraging through their manipulation of the market, to ensure that consumers are getting the worst of all worlds.
Energy companies might counter that it is not their job to provide a social service. They are, after all, private companies, and their first duty is to their shareholders. And there lies the rub. Since 1986, when Margaret Thatcher decided to create a share owning democracy by selling British Gas off at a bargain bin price, the idea that the provision of gas and electricity is part of the nation’s infrastructure rather than simply yet another opportunity to make profits has taken a grip.
Surely it is time to take energy back into public ownership? The 1.5 million people who bought up to 500 shares in British Gas in 1985 might sound like the epitome of the stock-owning democracy that Thatcher boasted of, but the cost for that 1.5 million was higher prices for the rest of us. Prices have increased exponentially recently, but have been on an upward trend since the 1990s. Of that 1.5 million small investors, there are now around 700,000 left. Many of those people were not buying shares for the first time. So the idea that this has spread ownership somehow is not even supported by their own data. And we should never forget we owned British Gas in the first place. Far from increasing ownership, privatisation of British Gas narrowed it from the entire nation to a handful of people prepared to profit at the expense of their neighbours.
Some things are too important to be left to private providers. Energy is one of them. If the companies running them were unwieldy, bureaucratic and sometimes seemed remote from the people they served, how much more is that the case now? It is nigh on impossible to speak to a human being if you try to ring with a problem. It really is time to put people before profits and to ensure that nobody is deprived of heat, water, electricity or light because they cannot, or believe they cannot, afford them.
Socialist of many years. Former Labour member. Currently presenter of The Socialist Hour.