Callum Joyce, Socialist Party National Committee
Following war in the Middle East and the continued blockage of the Strait of Hormuz, there have been numerous headlines asking: Are we facing another surge in inflation? Many of us have already felt the effects of the sharp rise in prices at the petrol pump. The government’s energy price cap has risen 13% and there is fear for what that means for bills this autumn and winter.
While the official rate of inflation according to the Bank of England (BoE) is now around 3% – actually its lowest rate since June last year – it has still stayed persistently above the official Bank of England target of 2%. A small degree of inflation is seen as ‘good’ from the capitalists’ point of view as it can help reduce the real cost of historic debts and encourage consumer spending. But even at its relatively low current figure it has still contributed to the systematic chipping away of wages, benefits, and pensions, which are now effectively worth 3% less than they were a year ago, in real terms.
The concern from central bankers and economists is not so much about the current rate of inflation – although it’s already bad enough for those of us that haven’t had a significant pay rise in years! – but that it could rise further as events in the Middle East unfold.
Worst still to come
The eventual restoration of regular shipping from the Middle East may relieve some of the economic pressure. But, in reality, some of the worst economic effects of this horrific war may be still to come.
Apart from the impact on oil and gas supplies, around one third of the world’s fertiliser supplies which normally travel through the Strait of Hormuz have been heavily affected as well. Even if shipping through the Strait returned to normal levels in the next few months (big if!) then the lingering effects of the disruption mean shortages are virtually inevitable for at least a large remainder of the year (see ‘Food price crisis looms: Build workers’ fightback, fight for socialist planning’ at socialistparty.org.uk). For the majority in Britain who had to endure the shock of food inflation reaching over 19% in 2023, the prospect of a return to those days will feel unbearable.
So what can we do to stop it? Most people will remember very keenly the negative consequences of the last surge in inflation. But we didn’t just see an historic rise in prices – we saw an historic rise in the class struggle as well. 2022-23 witnessed the biggest sustained strike action in 30 years, with hundreds of thousands of workers taking action, many for the first time. This was not only among groups like rail and postal workers with a long history of fighting to defend their pay and conditions, but new traditions of struggle being formed by those including doctors, nurses, and even barristers!
Not every victory that those struggles won was perfect – more could have been gained, including through a strategy of coordinating strike action across different sectors. Nevertheless, strikes forced the Tory government and a number of employers to cough up for better pay rises, despite their insistence that there was ‘no more money’.
The experience of those strikes and the conclusions to be drawn about future tactics and organisational measures must be discussed and absorbed at every layer of the trade union movement. But the main lesson from the strike wave is that if you fight, you can win! We need a mass trade union campaign to demand fully funded, above-inflation pay rises for all, with members properly prepared for taking strike action if necessary.
Pay offers that do not cover inflation should be exposed and rejected for what they really are – pay cuts! This should include opposing offers that do not take into account the possibility of inflation rising even further. National Education Union (NEU) members’ determination to reject below inflation unfunded pay offers from the government, pressuring the NEU leadership to prepare a strike ballot for the autumn, has forced the government to improve its initial pay offer. 6.5% will be offered over two years rather than three. However, not being fully funded, the NEU points out: “Schools are being asked to find £460 million from budgets already at breaking point. This is the equivalent of 8,300 school staff: 3,900 teachers and 4,400 support staff.” This emphasises the need for unions in the public sector to fight for fully funded pay deals.
Of course not every worker is currently organised at their workplace, so a mass drive to unionise those layers who are also suffering the impact of the cost-of-living crisis is needed as well. The best way to do this is to give a clear fighting lead – during the last strike wave the Trades Union Congress (TUC) reported an 800% increase in visits to its ‘Join a union’ webpage.
The trade unions must take up demands not just for those workers that they directly represent, but for the working class as a whole. That should include demanding at least a £15-an-hour minimum wage with no age exemptions, real living benefits and pensions for those out of work, mass building of affordable council housing, and a guarantee that pay automatically rises at least in line with inflation each year.
Trade union campaign
A serious campaign on these issues would draw the majority of workers behind it and prepare the forces needed to take on and defeat the offensive against our living standards planned by the capitalist bosses aided by the Labour government. The TUC organised a mass demonstration in 2022 against the cost-of-living crisis, which gave a huge confidence boost to workers across the country and played a role in encouraging others to follow the example of the rail workers who were taking strike action at that time. If fighting back worked then, why couldn’t it work now? A good start would be implementing the policy passed unanimously at last year’s TUC congress and organising a mass weekend demonstration against Labour’s austerity with concrete fighting demands. That could be the springboard to then launch a sustained campaign of coordinated industrial action over the autumn and winter.
‘But wait, not so fast!’ the bosses will cry. ‘If wages go up too much, we’ll have to raise prices again to compensate and inflation will just get worse’. This will be a familiar argument to anyone who has argued for an above-inflation pay rise in recent years. Already Huw Pill, chief economist at the Bank of England, has warned against rising wages making inflation harder to tackle. That’s OK for Huw while he makes over £190,000 a year!
We would agree that prices have risen as a result of some people increasing their income too much – but it’s been the bosses not the workers! BP reports having made a profit of over £2.3 billion in just the first three months of this year – more than double what they’d made by this point in 2025. Meanwhile real wages for the rest of us have stagnated and actually declined. Research by the TUC suggests that if wages had kept growing at the same rate from before the 2008 financial crisis, the average worker would be over £10,000 a year better off. But that holding down of wages still hasn’t stopped average prices rising by 67% over the same period. The ‘wise sages’ of the capitalist economy can keep their advice about pay restraint to themselves!
The reality is that workers demanding better wages are in no way responsible for the rise in inflation. The same companies arguing against it are continuing to make record profits that could easily absorb the costs of increasing pay. The Socialist Party says that the finances of these companies should be opened to full inspection by democratically elected committees of workers and trade unionists to see where the money really is. Companies which can clearly afford it should be compelled to pay up.
If there are large companies that genuinely cannot afford to pay a decent wage, or where bosses are refusing to give up their profits, then they should be nationalised with no automatic compensation for the private owners who have already enriched themselves at our expense, only paid on the basis of proven need. Democratic public ownership of these companies as part of an integrated economic plan that uses the huge wealth across all of society could invest to save the jobs of those workers while ensuring they are paid properly.
In the case of small businesses – many of which will be suffering from the pressures of inflation themselves – they should be subsidised if they are socially useful, on the condition that they too are willing to open their books to inspection. This approach would mean that even small business owners could be split away from the pro-capitalist parties and won to supporting the workers’ struggle against the capitalist system which is more than willing to see their businesses go to the wall.
But these ‘inconvenient’ truths about the wealth in society are often dismissed and all the blame for rising prices is put solely on the war in the Middle East instead. Certainly the war has had an impact on immediately raising energy prices, but more than anything it has exposed and accelerated the already rotten nature of global capitalism, particularly in Britain.
Decades of underinvestment in manufacturing and infrastructure, the use of fragile supply chains that cannot be relied upon in a world of increasingly divided and hostile capitalist states, and the huge quantities of money that were pumped into the economy after 2008 and during the Covid pandemic, have all contributed to an increasingly anaemic economy. It may still be able to massively enrich a few people at the top of society, but it is incredibly vulnerable to new economic shocks and crises, something that there’s no shortage of today! This was revealed just as clearly during the last major rise in energy bills after the war in Ukraine. Politicians were quick to heap blame on that conflict, but neglected to mention that inflation had already reached a 30-year high of around 5% before the war even started.
‘Happier times’
Inflation today cannot be explained just by ‘exceptional’ wars and catastrophes around the world. It is instead a symptom of a terminally-ill capitalist system. This is shown by the inability of the capitalists’ own ‘experts’ to resolve the crisis – in four years they have still not been able to reduce inflation to their desired level despite raising interest rates and using other measures that economists claimed were reliable methods of combating price rises. Even Jerome Powell, then-chair of the US Federal Reserve, said in 2022, “We understand better now how little we understand about inflation.” Not exactly reassuring from the head of the biggest central bank in the world!
Workers cannot wait for ‘happier times’ to fight for decent wages when it’s more convenient for the bosses. There are no happier times coming on the basis of this system! That is why as well as a strategy to fight for pay rises in the here and now, the workers’ movement also needs to be armed with a socialist programme that can end the chaos of the capitalist economy and provide a decent standard of living for all.
In this era of economic crisis, any pay rises or other concessions that are won from the bosses can only be temporary. Inflation will not disappear as a feature of this system, and neither will rising housing costs, crumbling services, and poor working conditions. Probably much of what was won in the last strike wave has already been clawed back through price rises. Even when official inflation figures drop, it doesn’t mean prices go back to their previous levels!
Socialist plan for the economy
This system doesn’t work for us – it needs to be replaced with a rational plan for the economy run in the interests of the majority of the population. That would mean nationalising the top 150 monopolies and banks to take the major levers of the economy out of the hands of the 1%. Workers’ control and management at every level of the economy would be able to quickly and effectively judge the needs of the population and make changes in supply chains and production patterns efficiently, without relying on the unstable capitalist markets.
Collaboration between socialist states, based on the interests of the working class rather than the bosses, would be an alternative to the destruction and waste of capitalist competition and war. Only this socialist alternative would be able to access the tremendous resources and technology that exist today to carry through the mass programme of investment that would be needed to grow the economy. On that basis, of socialist democratically planned production, new wealth can be created and decent jobs and living standards for all guaranteed, while safeguarding the environment.
