Inflation is increasing, meaning that month on month, prices for everyday goods and services that we need to live are increasing. Many people are finding that the wage that they receive is buying them less goods and services, and that each month they have less money left over, if any. But why are prices increasing? What’s happening?
Here are couple of ideas;
The energy sectors profits have escalated due to their pricing, the first company that springs to mind is BP. Between April and June of this year, they made nearly £7bn of profit. That is their second highest profit on record. Pretty much, all of the other energy companies are doing the same. And they’re sending a lot of these billions of profit to their shareholders. In a nutshell, the price that you pay for petrol and diesel, gas and electricity are linked to companies like BP. That’s why your fuel, gas and electricity are getting so expensive.
An interesting statistic is that according to experts at the UCL (University College London) and LSE (London School of Economics), over the last 50 years, the oil and gas industry globally has delivered £2.3bn a day in pure profit. It was put that the industry could have the power to “buy every politician, every system”. It may give an idea as to why we are where we are financially, and environmentally.
The thing that is particularly sickening about BP is the fact that it used to be owned by the UK Government, but was sold off in 1979 for £7.25bn. Imagine how all of that profit since could have been retained by the UK Government and used to reduce the tax burden on us all. Or even reduce our energy bills. It was sold for a song.
The energy sector profits are so obscene, the UN Secretary General, Antonio Guterres referred to them as ‘immoral’ and stated that they were ‘being made on the back of the poorest people and communities and at a massive cost to the climate’.
That’s one big chunk of the inflation problem.
In UK, the majority of households use a supermarket for their day to day groceries. The big supermarkets have been doing particularly well, take the ubiquitous Tesco, for example. To the year end of February 26th 2022, their pre-tax profits trebled from £636m to £2.03bn. Every little helps, right? Well, a lot helps them. A lot. Another chunk of the inflation problem.
Still on the supermarkets, this time petrol prices. Last week, the RAC said said at the start of the week, the average petrol price at the big four supermarkets, Tesco, Asda, Sainsbury’s and Morrisons, was £1.74 per litre. Diesel was £1.86. Meanwhile the average for the delivered wholesale petrol price last week was £1.24, while diesel was £1.38.
After factoring in VAT, fuel duty and a “generous” retailer margin of 10p per litre, the RAC said “forecourts should soon be selling unleaded for no more than £1.62”. A couple of weeks later, here we are, it’s still not happening.
There’s a recurring theme here, prices are up, profits are up by record levels for the big companies. In fact, there was a brilliant segment on the Jeremy Vine Show in July where Eddie Dempsey from the RMT (you can watch it here) pointed out that the FTSE 350 top companies profits have gone up by 73% since 2019. To use his phrasing “The people at the top of the economy, they’re having a disco, and everyone else is being told that they’ve got to tighten their belts and carry the can. It’s not on”. Quite.
So, the main drivers of inflation are summarised above.
Back in February 2022, the Governor of the Bank of England Andrew Bailey said he wanted to see “quite clear restraint” in wage demands from employees to prevent an inflation spiral. I guess what he was saying was okay, prices are increasing, but hey, just suck it up and put up. In the meantime, UK households are taking an enormous financial hit, probably the biggest for almost four decades.
As I’ve blogged before, Andrew Bailey earns £570,000.
Any wage increase you’re going to receive is unlikely to make a difference to the inflation figures, only to your ability to be able to afford to live, or even exist.
Britain is broken.
