Autumn Statement Resolutions

Rosie Winterton Excerpts

Monday 21st November 2022 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

I would like to start on a note of agreement—because I probably will not end up on one. The supply shocks after the covid pandemic, followed by the war in Ukraine and Putin’s weaponising of the gas supply to Europe, are the primary reasons for inflation and the cost of living crisis. But they are not the whole story. Analysis of data from company accounts and the Office for National Statistics suggests that there is an additional level of profiteering that the Government have failed to address.

Let me substantiate that claim. If companies were simply passing on increased supply chain costs, we would expect company profits to be broadly static, or even slightly reduced, given that low wages have been unable to keep pace and therefore would have reduced demand. In fact, profit margins for the UK’s biggest listed companies on the FTSE 350 were 73% higher than pre-pandemic levels.

When companies raise their prices to cover their increased costs, that is justifiable; when they increase their prices by more than their increased costs, that is gouging and it gives them a boost in profit. The trouble is that this can then create a second, third and fourth wave of inflation as companies along the supply chain all follow suit. This is the real inflationary spiral. Workers’ wage demands are not driving it; they are following it and responding to it in desperation, as workers see their living standards eroded first by genuine inflationary pressures and then by profiteering.

Many companies respond badly to the accusation that they are price gouging. In April, Sainsbury’s reported a record profit of £730 million. The supermarket insisted that it was not price gouging, but it was not above accusing its competitors, which were making even higher profits, of doing precisely that. Sainsbury’s chief executive Simon Roberts said:

“We are inflating behind the market, our direct competitors are inflating ahead of the market.”

I take that to mean: “We are only profiteering because we don’t want our share price to decline against our competitors who started profiteering first.” As protestations of innocence go, that one does not really go far.

When so many companies are making record profits at a time of soaring inflation, the logical expectation is that they should be able to pay their workers at least enough to maintain their standard of living, yet employers and the Government insist on wage restraint, by which they mean workers accepting wage settlements that are a cut in real terms. They think that is the key to managing inflation. I say again that wage demands have not and are not driving inflation.

Food prices are causing real misery in the UK. Food price inflation is running at over 16%, yet Tesco, Sainsbury’s and Asda increased their combined profits, compared with pre-covid levels, by a staggering 97%. Many of their customers—even their own workers—earn so little that they are on universal credit. This Government are presiding over a system that is happy to see companies grind down workers’ wages to funnel more and more public money through universal credit into shareholders’ dividends. It is obscene.

What about the food manufacturers? They made a profit of £22.9 billion after the pandemic. Nestlé alone showed a profit of £13.7 billion, more than £4 billion more than its pre-pandemic level. Yet in July, after a two-month strike at its east London factory, Nestlé agreed to settle with its workers for a miserly 4%. The workers had asked for 7.5%, which, as we now see, would still have meant a real-terms cut in their living standards. It is not workers who are being unreasonable.

Remember that in the UK we have approximately 2.5 million children who have been using food banks, and then ask why the four giant agribusinesses managed to increase their profits by 255% compared with pre-covid levels. Probably the most blatant example of profiteering and gouging, though, comes from the container shipping industry. The sector is dominated by three alliances of major multinational giants and, together, they control 85% of the world’s container trade. Some might call that a cartel. Only eight of the top 10 container companies have yet reported their latest profits. They are not up by 200%. They are not up by 2,000%. Their combined profits are up by 20,650%, compared with pre-pandemic levels. No wonder they managed to pay out £4.7 billion to their shareholders last year. No wonder P&O, under DP World, is now back in the container business. That brand is so well-known in Parliament for the disgusting treatment of its own workers, and its directors’ total disregard for the law.

When Members speak of the cost of living crisis, attribute it all to Putin and covid, and attempt to blame ordinary working people for fuelling inflation, they should understand that it is a perfectly reasonable request for ordinary people to say that after 12 years of declining real wages, they should not lose out yet again when inflation is at a 40-year high.

Our Government, and more especially those on my party’s own Front Bench, need to be making the case that workers are not causing this inflation spiral. They need to listen to what some of the companies themselves are saying. In a survey of retailers earlier this year, 56% of companies said that inflation had allowed them to raise prices beyond what was required to offset increased costs. Some 63% of larger companies reported that they were using inflation to “boost profits”. BP’s chief executive has referred to his business as a “cash machine”, and BMW’s chief financial officer has said that the company has

“a significant improvement in pricing power”.

When companies themselves tell us that they are ripping us off, it is time for politicians to listen and to act. Ordinary families should not have to pay the price.

[Madam Deputy Speaker (Dame Rosie Winterton)]

A perfect eight minutes.

--- Later in debate ---

[Anthony Browne]

I agree with the point made. As I said, there was a temporary period of a few weeks when there was a rise in interest rates. Some people renewed mortgages in that time and some people lost mortgages. That is terrible for those people, but there are no ongoing, long-term consequences because virtually none of the mini-Budget was implemented.

Many Opposition Members have referred to the Tories’ economic record since 2010. The fact is, we have had a series of extraordinary economic hurricanes. In 2010, we inherited an economy in recession—by Labour’s own admission, we had run out of money—and the 2008 economic crisis was so profound and deep that it led to the longest, deepest recession since the second world war. It took about a decade for the structural changes to the economy to play through, and gradually we returned to growth. Since then, as many have mentioned, we have had the once-in-100-years pandemic followed back to back by the once-in-50-years energy price shock.

During the pandemic, we spent £400 billion supporting households and businesses. I do not think Labour has complained about that too much, but that has led to higher national debt. The pandemic also led to problems with global supply chains that hit countries across the world. On the energy price shock, we are an energy importer, so inevitably we are poorer as a country and inflation has shot up. The question is this: if you are in a plane in a hurricane, or repeated hurricanes, and the plane gets struck by lightning and the engine catches fire and explodes, do you attack the pilot and ditch them because they happened to be in the pilot’s seat when all that happened or do you judge them on their performance and how they managed to get through those crises?

There are two things. First, this is not a UK crisis at the moment. Inflation has shot up around the world and is at roughly the same level in America and Germany as it is here. The IMF has said that one third of the global economy is going into recession this year. The downturn in Germany is faster than it is here. In America, they are putting up taxes by $800 billion to pay for it all. This is a worldwide phenomenon.

Secondly, as many Opposition Members keep going back to 2010, I have been checking my data—I like data. Between 2010 and 2019—the latest international figures I could find while sitting in the Chamber—the UK’s GDP growth per capita was lower than that of the US and Germany, but higher than that of every other G7 country. It was higher than that of Japan, Canada, France, Italy, and every other major European economy, including Spain. Our economic track record between 2010 and 2019 was better than all those countries, so the Conservative Government have a lot of which to be proud.

I want to make a couple—I see you waving your hand at me, Madam Deputy Speaker—of substantive points. The autumn statement does increase taxes; no Conservative Government like increasing taxes, but it is far better to iron out tax distortions before, or indeed while, raising them. The capital gains tax system, for example, has many distortions and is not indexed with inflation, which it should be. It works in a very perverse way. Inheritance tax, which has effectively been increased because the threshold has been frozen, is riddled with issues. There is a potentially exempt transfer scheme where many people do not pay any inheritance tax at all. We need to get rid of all these exemptions, smooth things out and fix inheritance tax before raising it. I also urge the Government to look at marginal rates of taxation that are more than 50%. Increasing numbers of people are falling into that bracket because of the freezing of the thresholds.

Finally—thank you for your patience, Madam Deputy Speaker—I welcome the protection of capital budgets. In particular, I urge the Government to protect the funding for Cambridge Children’s Hospital.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I was not so much waving my hands at the hon. Gentleman, as indicating that he might remember that we had talked about an eight-minute speaking limit. That was simply my intention, and I realised that he immediately remembered that stricture.