The Tories and the bankers are lying to you about inflation. Is this the reason?
It seems the Tories and the Bank of England are starving you of money with a lie – to cause problems for a possible future Labour government.
Take a look at this – and listen to the clip:
Tory minister: "we have to be absolutely tireless in driving down inflation"
So will the govt be introducing price controls on essential goods, increasing wages & benefits, & taxing the wealthy & excess profits?
No? Oh I see. Just driving down workers wages then. pic.twitter.com/glB1AwL6Dj
— Saul Staniforth (@SaulStaniforth) July 12, 2023
It’s true: driving down wages will do nothing to halt inflation because the only reason people want wage increases is so they can afford to pay prices that have already risen.
Wage rises don’t cause inflation – they are demanded because of inflation.
So what’s the real answer to the crisis – the one these rich Tories and super-rich bankers don’t want you to know?
Here’s Richard Murphy:
As I have said time and again, wage rises cannot be causing our inflation. Wage rises have been persistently lower than the rate of inflation throughout the period since Covid and so there is no basis whatsoever for saying wage rises are causing inflation.
— Richard Murphy (@RichardJMurphy) July 12, 2023
There’s your argument to put against twits like Victoria Atkins (above): for wages to be fuelling inflation, wage rises would have to have been above the rate of inflation – and they haven’t been.
In fact, wages have fallen so badly in real terms that teachers are said to have lost more than £65,000 in total since the Tories started cutting their pay.
If the Governor of the Bank of England and the government want to crack down on inflation they need to cut interest rates as they are pushing up prices. They also need to end profiteering. And they need to tax those who have gained – the wealthy and the banks – more.
— Richard Murphy (@RichardJMurphy) July 12, 2023
That’s your answer in a nutshell.
But why aren’t the Tories and the bankers saying – and doing – this? Easy: they hate you.
How do I know that? Because the Governor has let his senior staff say that people must get used to this inflation cutting their real incomes and the government is trying to force perpetual pay cuts on public sector workers. That's what anti-working people policy looks like.
— Richard Murphy (@RichardJMurphy) July 12, 2023
The inflation arrived after the Covid reopening. It peaked a few months ago. It is now falling. It will – because throughout history it always has – go back to around one to two per cent a year. No action is needed for that to happen. Inflation just always does go back to normal.
— Richard Murphy (@RichardJMurphy) July 12, 2023
So it’s perfectly fine for working people to have the pay rises they need, in order to make ends meet. Inflation will return to the normal level without any downward pressure on your pay.
Wage rises will always follow inflation and continue after that inflation has gone back to normal because that is necessary to make sure that working people do not suffer as a result of that inflation.
— Richard Murphy (@RichardJMurphy) July 12, 2023
There is an issue if some companies can increase prices excessively and others cannot. Banks, fuel companies, some supermarkets and mobile phone suppliers look like they are profiteering – i.e. increasing prices excessively – right now.
— Richard Murphy (@RichardJMurphy) July 12, 2023
So: greedy corporate bosses who are taking advantage of current circumstances to increase their prices beyond what is necessary are responsible for inflation.
The only question then is by how much the wage rate will rise, and what period of time is required for it to do so. The first chart with wages rates on it (above) assumed wages would follow the same pattern as inflation, with a bit of a lag.
— Richard Murphy (@RichardJMurphy) July 12, 2023
Wages have fallen compared to inflation to date. This is apparent in this chart: real wages are falling as inflation peaks in this chart. However, there is then a lengthy catch-up period. Long after inflation has fallen away wages keep rising at rates that exceed inflation.
— Richard Murphy (@RichardJMurphy) July 12, 2023
That is why everyone, employers included, always want wages to catch up with inflation in the end. The pretence that this is not the case from both the government and the Bank of England is particularly worrying: it is as if they want to crash the economy.
— Richard Murphy (@RichardJMurphy) July 12, 2023
They probably do; an election is approaching that the Tories do not expect to win. If they crash they economy and a Labour government has to deal with it, they’ll be able to criticise from the sidelines (especially if Labour honours its pledge to continue Tory economic policies until such time as the economy improves) and use Labour’s subsequent failure to sort out the mess to persuade voters to bring in another Tory government at the following general election.
So why will they give up those excess profits? First, because they will not get staff unless they do. Second, because they can afford to pay, and third, they will know that unless they do people will not have the means to buy what they have for sale.
— Richard Murphy (@RichardJMurphy) July 12, 2023
This is what economic reality looks like. It is enforced by the fact that people are free to change employer and they will if they cannot get the pay rises they need to pay inflated prices and (quite critically) inflated costs of borrowing.
— Richard Murphy (@RichardJMurphy) July 12, 2023
So corporations are pushing up inflation so they can make a fat profit; they’ll still have that fat profit in the future when they use continuing higher revenues to pay higher wages, so their employees can still afford to buy the goods and services they need. The current inflationary cycle is a means for the already-rich to become even richer.
And whatever any politician says, people will demand these rises because they will have to do so in order to stay in their homes, feed their families and meet their essential costs of living, all of which will have risen in price. They're not being greedy. They want to survive.
— Richard Murphy (@RichardJMurphy) July 12, 2023
The claim that much of the pressure for wage rises is created by the Bank of England is supported by the fact that businesses will incorporate interest rate rises into their prices. Most, if not all of them, will have debts. Look at the privatised water firms: they have debts because they borrow to cover the costs of equipment and so on. This allows them to pay around 35 per cent of their turnover to shareholders – an enormous amount of profit.
But they must pay interest on the money they borrow and they add that amount into their prices so the customer pays more, not the shareholders.
The knock-on effect is to give us all another reason to demand pay rises.
Second, because very soon we will be hearing politicians saying they cannot meet the pay demands of people that will be for above-inflation pay rises – but they will have to pay them unless public sector workers are going to be made perpetually worse off.
— Richard Murphy (@RichardJMurphy) July 12, 2023
The result is that unless we get some change of heart in the government – and in Labour, who appears to have no greater understanding of this issue – then we are heading for more, and very prolonged industrial strife, major private financial stress, and recession.
— Richard Murphy (@RichardJMurphy) July 12, 2023
So the Tory government and the Bank of England are deliberately engineering a recession that will probably harm the credibility of Labour, if Labour wins the next election.
And if the country is to be worse off – as the Bank of England says it will be because the cost of imports has risen – that does not change any of my argument. Everyone should share that loss – and not just working people. So wages should still increase.
— Richard Murphy (@RichardJMurphy) July 12, 2023
Not understanding anything of this is simply a recipe for economic stress, economic disruption and destruction of our public services. Since understanding it is really not hard, I am staggered by the intransigence of the government and the Bank of England.
— Richard Murphy (@RichardJMurphy) July 12, 2023
There is no justification for that class war. I am baffled as to why Labour appears to be signed up for it. But I will keep talking about it until common sense – and economic peace – breaks out. I am just hoping that might be soon.
ENDS
— Richard Murphy (@RichardJMurphy) July 12, 2023
To me, that seems a forlorn hope.
Mr Murphy has described a political struggle in which the Tories are using inflation now to attack a possible Labour government in the future.
The livelihoods of working people are merely collateral damage in that war. Nobody who can make a difference thinks you matter at all.
The wealthy, the corrupt, the liars and thieves in Parliament and their tax evading cronies will always sh*t on us it is as simple as that. They will rob us of our last penny, and see us dying on the street…They won’t care until we can no longer pay, or afford to keep them, then they will make us suffer more, see us die through lack of food, homelessness, and lack of medical care….We are almost at that point now. We can no longer afford these parasites!
I’ve always said inflation percentages they give out are false as prices go up more than the rate of inflation and the government always edits the shopping basket to make the inflation rate lower. It’s like swapping a tin of Heinz for the savers range just so they can lower the rate of inflation. People will always buy what they prefer rather than the budget brands in many cases just as they will replace their white goods with the more expensive model similar too the previous product and even pay in instalments for items knowing that they’re charges 20% plus in interest on the items they buy.