Oral Answers to Questions
Richard Burgon Excerpts(7 months, 2 weeks ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Bim Afolami)
My right hon. Friend is right that this issue is critical. I am pleased that the ISSB recently announced its intention to commence a research project on a nature thematic standard, carefully considering the TNFD’s recommendations. His Majesty’s Government have established a formal mechanism to assess the ISSB standards for suitability for the UK to ensure that with a general sustainability standard, and more specifically with a climate sustainability standard, we are doing the right thing for the UK. The Government will publish an implementation update on sustainability disclosure requirements shortly to provide further information for industry—watch this space.
Richard Burgon (Leeds East) (Lab)
The Financial Secretary to the Treasury (Nigel Huddleston)
I have to say that I find this hypocrisy astounding. First, if the Opposition objected to the national insurance cuts, why did the Leader of the Opposition say that he supported them? If the Opposition are so keen on abolishing tax dodging, why did they not support our Finance Bill, which had measures in place to do just that? They did not support it; they abstained on it.
Public Sector Pay 2024-25
Richard Burgon Excerpts(11 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Beth Winter
I fully agree. I will conclude because I am conscious that lots of people want to speak today.
My final point regards pay restoration. The TUC’s position is clear. As agreed by its affiliated unions, it wishes to see a commitment to funding pay increases for public sector workers that at least match inflation. More than that, it wishes to see above inflation pay rises that provide for pay restoration, and the Welsh Government have committed to that if they have the funds to do so.
Richard Burgon (Leeds East) (Lab)
My hon. Friend is making an incredibly important speech on the need to pay our public sector workers properly. Does she agree that the crisis in our public services will not and cannot be solved unless the people who work in our public services are paid properly? For example, band 2 NHS staff—including nurses—outside London are paid less than the real living wage. While that continues, how can our public services deliver the kind of service that people across this country need and deserve?
Beth Winter
My hon. Friend makes a very strong point. I wholeheartedly agree. Pay restoration is the right thing to do. Last year’s IPPR report argued that restoring pay to 2010 levels would cost an additional £22 billion per year. How would we pay that? By increasing taxes. There was a debate earlier this afternoon on wealth tax. We have the funds to provide pay restoration and above-inflation pay awards if we choose to.
Before I wrap up, I have a few questions. Will the Government please commit to above-inflation pay rises for public sector workers? Will they commit to providing pay restoration over the long term? If not, how can they justify the permanent devaluation of the work carried out by public servants? Thank you very much—diolch yn fawr.
Richard Burgon
I am listening very carefully to what the Minister is saying. Why does he think that nursing staff are leaving the profession in droves? Does he agree that it is because they are underpaid and overworked, or does he think there is some other reason? If he thinks there is some other reason, could he enlighten the House on that now?
Bim Afolami
Although this a debate about public sector pay, I will say this in relation to nurses: we have more nurses now than we had at the beginning of the Parliament. There are problems with the retention and recruitment of nurses, which we are addressing, but those problems are receding and those who leave do so for a range of reasons. We are working with the Health Secretary and across Government to ensure that we retain high-quality staff across our public services. Pay is of course part of that consideration, as it is for us all.
The Government strongly believe that dedication to public service should be appropriately rewarded, which is why for the 2023-24 pay round we accepted the headline pay recommendations of the public sector review bodies in full—for the armed forces, teachers, prison officers, the police, the judiciary, medical workforces and senior civil servants. What precisely does that mean for those professions? To answer, I will give three clear examples.
First, it means that policemen and policewomen received a 7% uplift that rightly recognises the risk that those brave men and women take at work. Secondly, teachers, who have been mentioned today, have received a 6.5% uplift and an increase in starting salary for newly qualified teachers to £30,000—significantly above the median wage in this country—which helps to ensure that we can continue to attract the brightest and best to safeguard our children’s education. Thirdly, NHS consultants, doctors, dentists and GPs have received uplifts of 6%, with junior doctors receiving an enhanced pay increase that averaged 8.8%.
Alongside those headline pay awards, we have since agreed offers with the unions representing senior medical workforces, including consultants, which covered reforms to their pay structures. The junior doctors strike has come up in this debate, as one would expect. We were in talks with the British Medical Association’s junior doctors committee, but they unfortunately chose to walk away. I am saddened by the strike because, frankly, it is having an impact on all our constituents. Nobody in this House should want the strike to continue. We urge the junior doctors committee to reconsider its decision, call off the strikes and come back to the table so that we can make further progress. Its demand of a 35% salary increase is unreasonable, and I hope the committee is reflecting on that and will come back to the table as soon as possible.
The pay settlements I mentioned appropriately reward the key role that staff play in safeguarding public health and the health of our NHS.
Bank Profits: Windfall Tax
Richard Burgon Excerpts(1 year ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Richard Burgon (Leeds East) (Lab)
Today I am calling on the Government to introduce a windfall tax on the banks, which have exploited the cost of living crisis to make super-profits, just as the energy companies did before them. Such a tax could create much-needed funds to invest in our public services and to help bail out those hit hard by the ongoing economic crisis. Before I make the case for that, however, I want to look at where we are after 13 years of Tory misrule.
British economic growth was recently downgraded again. Britain has now seen well over a decade of economic stagnation. We are living through the largest fall in living standards since records began 75 years ago. This will be the first Parliament in history in which people are poorer at the end of it than at the beginning. What a record! Wages are set to be no higher in 2028 than they were 20 years before. That is the slowest wage growth in 200 years, and it has cost the average worker £10,700 a year in lost pay growth. Shockingly, 9 million younger workers have never worked in an economy where they have seen sustained average wage rises.
Income inequality in the UK is higher than in any other large European country. We have a much weaker economy and much lower living standards. That is the record of the Government’s agenda of austerity, deep public service cuts and trickle-down economics. They have created a social nightmare, too. Fourteen million people live in poverty, including over 4 million children. One in seven people is facing hunger, and 6 million households are in fuel poverty. As the cost of living crisis continues to hit families across the UK, this should be a time to bail them out. It should be a time of public investment to boost economic growth and living standards, and to rescue our public services. Instead, the Government are plotting another £20 billion-worth of cuts to public spending. I cannot think of a single policy that would cause more economic and social harm.
When we talk of a worsening economic and social crisis, we cannot forget the class politics of it all: how it affects the 99% and how it affects the 1%. We hear a lot about the cost of living crisis, but it is not a crisis for the elites. For them, it has been boom time. There have never been so many UK billionaires, and British billionaires have increased their wealth by £120 million every single day over the past decade. The profits of the UK’s largest companies are now 89% higher than before the pandemic. Bankers’ bonuses have hit record highs. Bosses’ pay at the largest 100 companies has been going up and up, and has increased by 16% in the past year.
One sector that has been doing very well out of the crisis is banking. Just like the oil and gas companies, the banks have used the crisis to line their pockets. While millions of people struggle to pay their mortgages and rents, the banks have been cashing in. Higher interest rates have enabled them to charge households more for mortgages and firms more for loans, but those higher interest rates have not been passed on to savers.
Jim Shannon (Strangford) (DUP)
I commend the hon. Gentleman for bringing forward the debate; I spoke to him beforehand. Does he not agree that the closure of high-street banks—there have been some 11 in my constituency of Strangford— especially in rural communities, has left a massive problem of rural isolation and that there should be a windfall tax on the banks making profits, with that money routed to the rural communities who have felt the brunt of the banks’ thirst for enhanced profits over service, which seems to be their calling card?
Richard Burgon
The hon. Member makes an important point. The example he gives of the closure of so many high-street banks, which disadvantages people in my community as well as in rural communities, just goes to show that the banks’ huge increase in profits has not been achieved through delivering a better service to consumers at all. Higher interest rates have not been passed on to savers; they have been hoarded by the banks, creating a windfall for them of many billions for doing nothing productive.
Such a transfer from the public to banks would be unjustifiable at any time, but it is especially so when so many people are struggling to cover the essentials and our public services are on their knees due to Tory cuts. The banks should face the same type of tax on their unearned and underserved windfalls as the energy companies.
The pre-tax profits of the big four banks—Lloyds, Barclays, HSBC and NatWest—show why that would be a just tax. In the first nine months of 2023, they made a staggering £41 billion in pre-tax profits, which is almost double the £23 billion they made in the same period last year, according to research by Unite the union. The question we must answer is this: will we allow the Government to claim that more austerity and cuts are inevitable and that public investment is unaffordable, or are we to build a better tax system that focuses on making the wealthiest pay their fair share?
Richard Foord (Tiverton and Honiton) (LD)
On that point about a better tax system, my understanding is that business likes certainty and that banks, like businesses, need to be able to predict the future fiscal regime, but earlier this year this Conservative Government cut the bank surcharge from 8% to 3%. So rather than a one-off windfall tax, would it not be better to reinstate the bank surcharge at 2016 levels, reinstate the bank levy at its previous rate from earlier this year and so have an additional £18 billion for His Majesty’s Revenue and Customs between now and 2027?
Richard Burgon
The hon. Member makes a valuable intervention. I will come to how it was unjustifiable for the Government to reduce the surcharge in that way. Both approaches are possible and desirable, with yes, a windfall tax, but also reversing that cut.
If we build a fairer, better tax system that focuses on making the wealthiest pay their fair share, we can invest in rebuilding the economy so that it serves the majority of people, we can invest in renewing our public services, and we can give people back some hope. A windfall tax on unexpected and undeserved bank profits can play an important role in creating that fairer tax system. Banks are not reinvesting their profits in the economy; they are handing out huge pay and bonuses, which could go even higher, aided and abetted by the Government’s decision to scrap the bonus cap.
That all comes at a time when the banks are turning their backs on local communities. As the hon. Member for Strangford (Jim Shannon) mentioned, bank branches have been disappearing from our high streets at an alarming rate. Since 2015, almost 6,000 branches have permanently closed their doors. At a time of deepening social crisis, while banks collect record profits, they have made it even more difficult for working people to access their finances and get financial advice.
Jim Shannon
Does the hon. Member not feel that there is something immoral about banks making high profits, closing branches and seeing their profit margins actually grow, while people are being left disadvantaged? There is something immoral about that. People are being disadvantaged, while others are making more.
Richard Burgon
The hon. Gentleman is completely correct: there is something immoral about the way that banks’ profits are soaring while they are not delivering a better service for their customers, particularly vulnerable customers—the less affluent, the disabled and the elderly. That is not how we should be going about things, and he makes an important moral case.
Based on the latest quarterly results, a windfall tax in the UK could raise between £4 billion and £16 billion this year from the profits of the big four banks alone, depending on the form that that windfall tax takes. That is billions of pounds that could be used to boost public investment and to tackle the soaring inequality that we are facing. Spain’s progressive Government offer us an example. They introduced a 4.8% windfall levy on certain bank incomes and commissions above a threshold of €800 million. Replicating that here could raise almost £4 billion this year. Even Margaret Thatcher introduced a form of windfall tax, with a 2.5% tax on banks’ non-interest-bearing deposits. In words that sound all too familiar today, Thatcher said that the banks had
“made their large profits as a result of our policy of high interest rates rather than because of increased efficiency or better service to the customer.”
Such a tax in the UK, according to Positive Money calculations, could raise up to £11 billion today, and a windfall tax, in whatever from, would be popular. According to a poll commissioned for the TUC, three quarters of the public support a windfall tax on banks’ excess profits, including 76% of people who voted Conservative in 2019.
Perhaps the simplest move—we heard this in an earlier intervention—would be to reverse the tax break for banks that the Government introduced in last year’s autumn statement. They slashed the bank profits surcharge from 8% to 3%, saying that this was to cushion them against the impact of higher corporation tax rates. But this surcharge, along with the banking levy, was one of the special taxes raised on banks after the financial crash due to the greater risks that banks posed to our wider economic stability. The risk they pose clearly still remains and so too should the surcharge.
The TUC general secretary, Paul Nowak, rightly described the slashing of the surcharge as starving our public services of much-needed funds at the worst possible time. Reversing it could provide key funds to, for example, introduce universal free school meals, scrap the two-child cap or fund a proper pay raise for junior doctors. The TUC estimates that the Treasury will lose at least £1.5 billion a year over the next four years, although it believes that it is likely to be more given the recent boost to bank profits.
Positive Money estimates that reversing cuts to both the bank surcharge and the levy could raise more than £4 billion this year. We need to be clear about this: it was a political choice for the Prime Minister to slash the surcharge on the banks just as it was a political choice to scrap the cap on bankers’ bonuses. Doing so is a sign of what is so wrong in our current taxation system.
It is clear that more of the same Tory dogma of the past 13 years of cuts and trickle-down economics is not the answer. All that that would succeed in doing is deepen the social crisis that is harming so many families in Britain. It is time that we put a stop to that. It is time to tackle the tax perks handed to the wealthy. The banks were bailed out when they were in trouble during the 2007 global financial crisis. It is now time for them to be taxed fairly to help bail out communities that are suffering because of the Tory party’s focus on building an economy that serves the wealthy few while the vast majority fall ever further behind. A windfall tax on bank profits is a just policy, it is economically sound and it would be welcomed by people across this country. I look forward to the Minister’s response.
Economic Growth
Richard Burgon Excerpts(1 year, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Richard Burgon (Leeds East) (Lab)
I will address the crisis in the middle east and the Government’s failure to back the growing calls for a ceasefire from the UN Secretary-General and beyond, and I will speak to amendment (b), tabled by my hon. Friend the Member for Coventry South (Zarah Sultana), of which I am a sponsor.
Already, after just five weeks, more than 11,000 people in Gaza and more than 1,200 Israelis have been killed. It is the duty of everyone in this House to help save life—both Palestinian and Israeli—to help stop the bombing, to help end the suffering, to help free the hostages, to stop the war crimes, and to get the aid that is so desperately needed into Gaza. That means that we have to work for a ceasefire, and that work needs to happen now—there is not a second to waste.
The UN Secretary-General says that the way forward is a ceasefire, and so does the UN High Commissioner for Human Rights. In fact, the heads of all major UN agencies are calling for a humanitarian ceasefire, so why do our Government think that they know better than the world’s leading humanitarian agencies? President Macron has now called for a ceasefire, so France joins other European nations such as Spain, Norway, Portugal, Switzerland and Ireland, as well as the UN Secretary-General, in that call. Other major nations, such as Brazil, and middle eastern nations including Qatar, Saudi Arabia, the United Arab Emirates and Egypt, are all calling for a ceasefire.
Securing a negotiated ceasefire—one binding on all sides—is achievable but it requires a huge diplomatic effort. It is time for our Government to add their weight to the push for a ceasefire rather than dismissing out of hand a proposal that has growing international support—especially when polls show that two thirds of the British public want a ceasefire. I am afraid that the Government have instead sought to distort what is being demanded, so let us be totally clear: a ceasefire means that all sides stop firing. That requires negotiation, so our Government should be straining every sinew, using every possible diplomatic avenue, and talking to Governments of all persuasions—those with sway in Israel, and those with channels to Hamas, such as Qatar—to secure a negotiated ceasefire that is binding on all parties, and bring an end to this crisis.
Of course, securing a ceasefire will not be easy, but it will not happen if Governments do not even bother to try. Once we secure that ceasefire, instead of more bloodshed, more suffering and occupation, let us turn this moment—as difficult as it now seems—into the moment when we secure, alongside Israel, the viable Palestinian state that is so needed for the cause of justice.
Oral Answers to Questions
Richard Burgon Excerpts(1 year, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Gareth Davies)
We are incredibly supportive of the Scotch whisky industry. In fact, the Scotch Whisky Association was my first meeting in post. In nine out of 10 previous fiscal events we either cut or froze duty on whisky, and we have acted to remove punitive tariffs on Scotch whisky in the US market. It will not be a surprise to my right hon. Friend that all taxes remain under review and he will not have long to wait until the next fiscal event.
Richard Burgon (Leeds East) (Lab)
The Economic Secretary to the Treasury (Bim Afolami)
There are two things I would say in response to that. First, it is important, when we talk about banks, that we have a globally broadly competitive tax regime, and we do not apologise for that in the Treasury. Secondly, the hon. Gentleman should bear in mind that the reduction he talks about in terms of the levy on banks was offset by rising corporation tax.
Mortgage Charter
Richard Burgon Excerpts(1 year, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Jeremy Hunt
My hon. Friend is absolutely right. Notwithstanding the fact that 85% of mortgages are now fixed to some degree, an extra 1.2 million families will feel the increase in interest rates over the months between now and the end of the year. That will be felt by many families, but we should do everything in our power to tackle inflation, because in the end that is the only way to end the misery for so many people.
Richard Burgon (Leeds East) (Lab)
Many of the banks that the Chancellor has been talking about are raking in bumper profits by refusing to pass on higher interest rates to their savers. Surely, a windfall tax on those additional profits would allow the Government to provide mortgage holders with the kind of support they really need at this time. Before the Chancellor dismisses that idea, may I gently remind him that even Margaret Thatcher imposed such a windfall tax on banks’ excess profits?
Jeremy Hunt
I hear what the hon. Gentleman says, but he will be pleased to know that banks already pay a 3% surcharge on their corporation tax—they pay 3% more than everyone else—as well as a levy on their balance sheets.
Oral Answers to Questions
Richard Burgon Excerpts(1 year, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Richard Burgon (Leeds East) (Lab)
The Chief Secretary to the Treasury (John Glen)
The Government are doing three things to reduce inflation. First, we remain steadfast in our support for the independent Monetary Policy Committee of the Bank of England as it takes action to return inflation to its 2% target. Secondly, we are making difficult but responsible decisions on tax and spending so that we do not add fuel to the fire. Thirdly, we are tackling high energy prices by holding down energy bills for households and businesses, alongside investing in long-term energy security.
Richard Burgon
The rich and powerful have repeatedly sought to blame workers for high inflation, even though workers’ real wages have been falling as inflation soars. Many leading economists now say that profiteering by certain corporations, not wages, is driving price rises. The French Government have taken action to limit food prices, and Spain has introduced rent controls. When will this Government start targeting the profiteering that is helping to drive inflation?
John Glen
We continue to have constructive dialogue with industry and different sectors. I met supermarket representatives a few weeks ago, and the Chancellor and others in the Treasury will continue to have these conversations. I think most people recognise that we face common global challenges and that different economies will respond in different ways.
Council Tax and Stamp Duty Alternatives
Richard Burgon Excerpts(1 year, 7 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Richard Burgon (Leeds East) (Lab)
I congratulate the hon. Member for Barrow and Furness (Simon Fell) on securing this important debate on alternatives to council tax and stamp duty.
The Government need to look at more progressive alternatives to council tax, which is very regressive, as has been said. I draw hon. Members’ attention to the work of the Fairness Foundation. Its important research on this very issue, which is out later this week, makes the point that low-income households spent two to four times more on council tax, as a percentage of their income, than richer households. The research also makes it clear that people want the Government to do more to tax the richest in society. Council tax is deeply regressive, so the Government must lay out alternatives. Some 68% of people think that the Government should be doing more to tax high net worth individuals—those with £10 million or more—and 79% of people worry that the wealthy do not contribute their fair share. It will be no surprise to hon. Members that I encourage the Government and the Minister to consider real wealth taxes on the very richest.
I also draw hon. Members’ attention to a campaign that is being run by the community union ACORN, which argues that when the Levelling-up and Regeneration Bill becomes law, councils should implement a 100% council tax premium on second homes and empty homes to help to fund important expenditure on council housing. I have lent my support to the campaign, and I will support that proposal if and when the Bill becomes law. We have heard about the issue of second homes and holiday homes, which could be looked at. I encourage the Minister to look at the Fairness Foundation’s research when it comes out later this week; it is about what can be done to move to a more progressive taxation system in which the super-wealthy pay their fair share.
Corporate Profit and Inflation
Richard Burgon Excerpts(1 year, 7 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Richard Burgon (Leeds East) (Lab)
I beg to move,
That this House has considered levels of corporate profit and inflation.
It is a pleasure to serve under your chairship, Sir Mark. I secured this debate because the discourse on inflation in Parliament, in Government and in the Bank of England has been dominated by the need to curb workers’ wages. Government policy has focused on driving down workers’ real wages. In the words of the Bank of England’s chief economist, people should just
“accept that they’re worse off”.
That approach has ignored the elephant in the room—the role that corporations are now playing in driving up inflation through price hikes designed to boost their profits. There is mounting evidence that such corporate profiteering is playing a very significant role in the latest wave of inflation. It has been called many things: price gouging, profiteering and, most commonly, greedflation. The US Senate Committee on the Budget has held a special hearing on this subject, but there has been very little focus on it in Parliament so far. Today, that situation changes. I believe that this is the first specific debate on greedflation in this House. It should not be the last one. Indeed, I hope that this debate kicks off a serious discussion in this House about how we tackle greedflation.
Of course, higher inflation since late 2021 has been affected by big problems in supply chains, as a result of post-covid trade disruption and the war in Ukraine. However, two excellent studies have highlighted how soaring profits are now having a big impact. The Institute for Public Policy Research and Common Wealth think-tanks have shown that profits were up 34% at the end of 2021 compared with pre-pandemic levels and that nearly all of that increase in profits was due to just 25 companies. As the IPPR has recently said:
“It’s time for policymakers to look at ‘greedflation’ and prioritise reining in corporate profits, instead of blaming workers’ wages for driving up inflation.”
Using the latest available figures for the largest 350 companies on the London stock exchange, Unite the union has shown how profit margins for the first half of 2022 were nearly double—89% higher—than for the same period in 2019, before the pandemic. Unite’s report finds that in the last six months company profits are responsible for almost 60% of inflation. As its general secretary, Sharon Graham, correctly states:
“Make no mistake, profiteering has resulted in the high prices we’ve all had to pay”.
I pay tribute to those organisations for bringing attention to this issue. For example, Unite the union has secured press coverage for its recent study. However, I fear that the Government, in their reply, will simply dismiss these studies as coming from left-of-centre organisations and will plough on regardless. Therefore, I want to use the next part of my speech to focus on how this issue goes well beyond the centre-left and is now a mainstream debate. The financial press, investor bodies and central bank officials are openly discussing how corporate profits are, in fact, driving inflation. It seems that it is just the Government who are ignoring this issue.
Let us look at some of the recent headlines in the financial press. One Financial Times headline said:
“‘Greedflation’: profit-boosting mark-ups attract an inevitable backlash.”
A Wall Street Journal headline said:
“Why Is Inflation So Sticky? It Could Be Corporate Profits.”
That article went on to explain:
“Businesses are using a rare opportunity to boost their profit margins.”
MoneyWeek, the UK’s best-selling financial magazine, had a piece entitled:
“What should we do about greedflation?”,
which noted:
“Companies’ price hikes have been driving inflation.”
Fortune said:
“‘Greedflation’ is the European Central Bank’s latest headache amid fears it’s the key culprit for price hikes”.
Meanwhile, an Investors Chronicle headline said:
“‘Greedflation’ is only making things worse”,
adding:
“Business using inflation as cover for unjustifiable price hikes are on borrowed time”.
Likewise, economists and investment strategists are openly saying that corporate profits are driving price hikes.
Kim Johnson (Liverpool, Riverside) (Lab)
I thank my hon. Friend for raising the issue of corporate greed. The spotlight has been shone today on the crisis of unaffordable baby formula, with parents forced to steal or settle for black market alternatives, putting the health of their babies at risk. Given that the revenue in the baby food segment of the UK food market is set to increase by £265 million, or nearly 15%, over the next four years, will my hon. Friend join me in calling on the Minister to put an end to the scandalous profiteering that takes money directly out of desperate parents’ pockets and into shareholder profits, fostering a public health crisis whose repercussions we will suffer for decades to come?
Richard Burgon
As ever, my hon. Friend makes the point about what is really happening out there. She gives a powerful example about baby food. I will come on to food and a policy suggestion for price caps later.
The chief economist of UBS global wealth management, Paul Donovan, has stated that
“much of the current inflation is driven by profit expansion. Typically one would expect about 15% of inflation to come from margin expansion, but the number today is probably around 50%.”
Albert Edwards, the global strategist at Société Générale, one of the largest financial services groups in Europe, tweeted:
“More Greedflation? When are government going to force a halt to this price gouging?”
Elsewhere, he explained how companies have
“under the cover of recent crises, pushed margins higher”.
In more technical language, but saying the same thing, Goldman Sachs economists said of the eurozone:
“Unit profit growth now accounts for more than half of GDP deflator growth, with compensation per employee growth explaining a little over a third.”
Central bankers are also raising concerns. In fact, the European Central Bank’s Fabio Panetta said that
“there could be an increase in inflation due to increasing profits.”
He has also said that
“unit profits contributed to more than half of domestic price pressures in the last quarter of 2022”.
Meanwhile, Lael Brainard, formerly of the Federal Reserve and now a White House official, said:
“Reductions in markups could also make an important contribution to reduced pricing pressures.”
Margaret Greenwood (Wirral West) (Lab)
I congratulate my hon. Friend on securing this debate and his excellent speech. He is reframing the whole debate, which is incredibly important.
According to the Office for National Statistics, during the 12 months to March the price of food and non-alcoholic drinks rose at its fastest rate in more than 45 years. Cheese was up 44% and the average price of bread and cereals increased by 19.4%. My hon. Friend is discussing what the economists are talking about now: greedonomics. Does he agree that that will chime with people out there in the shops, trying to feed their families? We all have casework involving people who simply cannot afford to put the food that their children need on the table.
Richard Burgon
As always, my hon. Friend makes an important point. I will come on to that in the remaining passages of my speech, because people out there are really feeling in their day-to-day lives the consequences of this greedflation and the opportunistic pushing up of prices by so many companies.
In the United States, an Economic Policy Institute study found:
“Corporate profits have contributed disproportionately to inflation”,
and that
“over half of this increase…can be attributed to fatter profit margins, with labor costs contributing less than 8% of this increase. This is not normal.”
Let us take a moment to note that a broad range of officials at UBS, Unite the union, Goldman Sachs, the ECB and the US Economic Policy Institute are all suggesting that over half of the current price mark-up is to do with profiteering.
Nadia Whittome (Nottingham East) (Lab)
My hon. Friend is making some excellent points. Is he aware of comments made last month by the International Monetary Fund’s chief economist, Pierre-Olivier Gourinchas? He said that he remains “unconvinced” that we should be worried about the risk of a wage-price spiral, highlighting that wage inflation continues to lag far behind price inflation, while profit margins have “surged”. Does my hon. Friend agree that the Government should be exploring all avenues to boost wages, including a £15 an hour minimum wage, above inflation public sector pay rises and, of course, scrapping anti-union laws?
Richard Burgon
I have to say—and this will come as no surprise—that I agree with my hon. Friend’s three policy demands. A £15 an hour minimum wage is more necessary now than ever before. When people first started talking about it, we of course supported it then. Fewer and fewer people can argue against that policy now. Of course, the anti-trade union laws need scrapping. It is wrong to suggest that it is workers’ wages that have been driving inflation. I hope this debate gets people in this place talking about what a lot of economists, who are certainly not on the left, have been talking about—namely, greedflation.
I will move on to some solutions. While workers’ real wages continue to fall, the Financial Times recently noted that across western economies, profit margins reached record highs during 2022 and remain historically high. It is increasingly clear that some corporations are hiking prices to gain those profits, and it is that, not wages, that is a major cause of the inflation crisis. What should be done about that? In the words of Robert Reich, the prominent economist and former US Secretary of Labor under Bill Clinton:
“To control inflation, we must take aim at corporate profits, not working people.”
I have three proposals. First, there should be an excess profits tax. The kind of tax we have seen on the super-profits of oil and gas firms should now be extended to all the other sectors of the economy making excess profits from this crisis at the expense of ordinary people. That would send a clear message to those companies that their profiteering must stop. There has rightly been a huge focus on the eye-watering profits of energy firms, though the Government’s windfall tax has failed to deal with that properly and should be amended to close all the loopholes.
Excess profits are in evidence in other sectors, too. The five big banks have reported soaring profits, as they take advantage of high interest rates. Supermarkets, food manufacturers and agribusinesses have benefited from profit spikes recently. The Treasury should set up a special unit for this excess profits tax that could go after all those companies that are blatantly profiteering, ripping off customers, fuelling inflation and deepening the cost of living crisis.
Margaret Greenwood
My hon. Friend is being very generous in giving way. Does he agree that it adds insult to injury that so many of these companies are not paying decent wages to their staff? On the one hand, they are making massive profits, essentially ripping off consumers, and on the other they are not paying the rates they should to the people who actually do the work.
Richard Burgon
That is absolutely right. It is scandalous when workers are not fairly paid, the public are being ripped off, and all this profiteering is causing the price crisis that we see. It is not for nothing that people call it greedflation.
On price caps, for all its obvious flaws in not being set low enough, the Government’s energy price guarantee, which was introduced last year, was an important break with the idea that the Government cannot interfere in market pricing to protect people. Surely such price caps should be extended to other sectors. It is very welcome that London Mayor Sadiq Khan has called for powers to allow him to impose private rent controls in London. Other countries do this, so why can we not do so here? On soaring food prices, the French Government have secured a deal with some of the country’s major retailers to place a price cap on staple foods to ease the pressure of inflation on consumers. Why not here?
Ian Lavery (Wansbeck) (Lab)
Is it not absolutely perverse that in the fifth richest economy in the world we are seeing, on the one hand, supermarkets and retailers making billions and billions of pounds and, on the other, parents criminalising themselves by stealing baby formula because they cannot afford to feed their newborns? What on earth has gone wrong in this country?
Richard Burgon
That is exactly right. That state of affairs is completely perverse in one of the richest countries on earth.
I mentioned that the French Government have secured a deal to place a price cap on staple foods to ease the pressure of inflation on consumers. Why can we not do that here? The public backs it. A poll last year showed that 71% of voters support price caps that place limits on what companies can charge for certain goods and services such as energy, housing and other essentials, including food. That 71% even included the overwhelming majority of Conservative party voters.
My final point is about the need for public ownership. Returning energy, rail, water and other key utilities to public ownership, to be run for people and not profit, is the best way of ensuring a permanent end to the profiteering that so many of these privatised companies are gratuitously engaged in. I hope the Minister will respond by admitting what all the leading economists and financial institutions say about greedflation, and I hope that today’s debate is the start of the Government listening and Parliament talking more about the fact it is greedflation, not workers’ wages, that drives inflation. Corporate giants are taking advantage in the most heartless way, using this crisis as an excuse to hike up the prices of essentials. As ever, it is ordinary people who pay the price.
Several hon. Members rose—
The Economic Secretary to the Treasury (Andrew Griffith)
It is a great pleasure to see you again in the Chair, Sir Mark. I congratulate the hon. Member for Leeds East (Richard Burgon) on securing this well-attended debate, and for his valiant attempt to leave his mark on the lexicon on this topic. I thank all Members for their contributions. Clearly, the issue of high prices and inflation is affecting everybody across the country—all our constituents, who send us here—and I welcome the opportunity to respond on the Government’s behalf.
The reality is that costs in the UK have primarily risen because of Putin’s illegal invasion of Ukraine and global supply pressures post covid. The right hon. Member for Hayes and Harlington (John McDonnell) was the only one of the eight contributors we heard from, including both Front-Bench spokesmen, to even go so far as to mention those two unprecedented facts.
Andrew Griffith
With respect, I have not heard an awful lot of analysis in the debate. I have heard many mentions of Unite the union, and I am familiar with its work, but I did not hear any analysis from Members. Let us talk about food prices for just a moment.
Andrew Griffith
I will give way because it is the hon. Member’s debate, but I will talk about food prices, if that is what I am being asked to do.
Richard Burgon
The Minister said he heard very little analysis from Opposition Members other than reference to research by Unite the union. Does he accept, however, that as well as Unite the union, officials at UBS, Goldman Sachs, the European Central Bank and the US Economic Policy Institute all suggest that more than half of the current price mark-up is to do with profiteering? If so, what are his Government going to do about it?
Andrew Griffith
I listened to the citations and I will go away and inform myself about them, but one can find a million citations in support of any argument, however spurious.
Let us get to the heart of food inflation. After reading the report from Unite the union earlier today, I went and did some research. I am keen to understand the level of alleged profiteering that we see, so I looked into costs at the Co-op, a mutual organisation that I believe supports many Opposition Members. I compared the alleged profiteering by our major supermarkets with what is happening in an organisation that I hope we can all agree—and join hands across the House—is not indulging in profiteering. The cost of four pints of milk at the Co-op is 20p more expensive than at Tesco. I have a wonderful chain of Co-operatives in my constituency and it serves our rural community magnificently, so I pay great tribute to the Co-op, but six eggs in the Co-op cost 35p more than at Tesco. The Co-op was retailing the same loaf of white bread for 56p more, and chicken breasts for £1.70 more, than Tesco. The Co-op is retailing butter, tea and Heinz baked beans for 40p more than Tesco—I would be very happy to give Hansard the details of this. I will stop at the emotive category of baby milk: an 800g pack of Cow & Gate baby powder retails for £10.50 at Tesco, but the same product retails for £11.50 at the Co-op.
I put it to you, Sir Mark, that we are seeing either a vibrant and competitive market in food retail—which includes the Co-operative mutual organisation, although its prices seem a little higher—or a level of anti-competitive practices. But if it is the latter—right hon. and hon. Members should be enormously careful about this—those anti-competitive practices and that profiteering extend to no less an organisation than the Co-operative mutual society, which supports Opposition Members. If any of them want to intervene on me, I would be very interested to hear their view of the Co-operative’s business practices.
Oral Answers to Questions
Richard Burgon Excerpts(1 year, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Daniel Zeichner (Cambridge) (Lab)
Richard Burgon (Leeds East) (Lab)
The Financial Secretary to the Treasury (Victoria Atkins)
It is right that everyone contributes to sustainable public finances, and the Government are ensuring that those with the broadest shoulders pay their fair share. The spring Budget took steps to tackle avoidance and to improve the ability of His Majesty’s Revenue and Customs to collect tax debts. That is alongside taking millions out of tax altogether by consistently raising personal tax allowances. An average of more than £3,300 of assistance per household in the UK has been provided for help with the cost of living over this year and last.
Victoria Atkins
I do not think that the hon. Gentleman is being quite fair, as he neglects to tell the House the rate of levy for those companies. He will understand why we have said to businesses that want to invest to improve energy security in the United Kingdom that we will support such investment. That is in our interests, as we have heard today concerns raised by Members of Parliament on behalf of their constituents about the cost of living and the impact particularly of energy prices.
Richard Burgon
The Government recently announced a huge tax giveaway to the very wealthiest, allowing them to stash vast sums in their pensions tax-free. The £1 billion annual cost of that handout would cover the cost of free school meals. Food banks gave out a million food parcels for children last year, so why do the Government think that this tax cut for the super-rich is a priority?
Victoria Atkins
I gently remind the hon. Gentleman of the conversation that happened at the Budget—I hope he recalls it—about the need to get doctors, consultants and those in the public sector back into the NHS. We heard from doctors themselves—the British Medical Association and others—that there were barriers in the pension tax rules which stopped them continuing to serve. I am delighted if those rules help more doctors to serve our NHS and help our constituents who are patients—helping doctors to continue to serve in that vital public service. The difference between Conservatives in government and Opposition Members is that we listen to people, and we deliver what we need to keep the economy going and help our NHS.