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.