The worst hit to living standards in 25 years: time for workers to hit back!

Autumn 2021

As this journal went to press, yet another supply shortage had started to bite. Army tanker drivers had been put on stand-by to deliver fuel to service stations which had run dry. Just the week before, the public had been told “there was a supply chain problem”: many items had gone missing from supermarket shelves. Then suddenly there was little or no petrol left in the pumps, while government ministers were assuring everyone that there was no shortage; refineries and storage tanks were at “full capacity”! No, they explained, the problem was due to the lack of qualified heavy duty truck drivers... There were not enough of them available to deliver fuel to the service station forecourts. And if the petrol or diesel had now run out, it was entirely the fault of motorists for “panic buying”!

    Despite the escalating situation - with key workers unable to get to work in vital services like the NHS, or care workers unable to do their home visits - ministers appeared on TV to tell the public to “calm down”! They repeated nauseam that there was no fuel shortage! But of course there was - at the point where it was needed. 

    The complacency of the government caused fury among exasperated workers who use their cars, vans, or trucks for their jobs. Clearly ministers were out of touch with reality. And contrary to what many news reporters were saying - this was not a situation just like the run on toilet paper during the first Covid lockdown. When fuel runs out at the pump, for whatever reason, immediate emergency measures are necessary. But no such measures were taken. 

    Transport Secretary, Grant Shapps was asked at the start of this crisis what was going on - and his answer was simply “it’s coronavirus”! In fact he and his fellow ministers turned themselves inside out to avoid admitting that Brexit has anything to do with it.

    A more frank explanation came from the German Social Democrat leader Olaf Scholz, who was interviewed by a Channel 4 TV journalist on the day after Germany’s general election. Matt Frei asked if Germany could help by sending drivers over to Britain. Scholz replied that since free movement of labour between countries was something Brexit now prevented, sorry, but no... 

    He also suggested that poor wages and working conditions could perhaps be addressed; it is also the case that roadside facilities and truck-stops are notoriously bad here in Britain, compared to those in the EU - which is another disincentive to take this job.

    Although the road haulage associations say that the overall shortage of lorry drivers was already 60,000 before the pandemic, and indeed has been a chronic problem for many years, Brexit immigration barriers initially resulted in 16,000 EU drivers going back home. And now, 20 months into the pandemic, the number of HGV drivers who have returned to the EU is estimated to be over 26,000 and the driver deficit overall to be approaching 100,000.

    The government’s response has been likened to “throwing a thimbleful of water on a bonfire”. Retailers and turkey farmers had already threatened that Christmas could be “cancelled”, due to lack of delivery drivers and food processing workers. Now the government has offered 5,000 “temporary” visas to lure EU drivers back and another 5,500 temporary visas for poultry workers. These visas would only last 90 days, however. And anyone who took this “offer” up, would be expected to leave the country by Christmas Eve! Understandably, there have not been any takers...

Exploiting the poorest

All of this would qualify as hilarious satire if it was not just one unpleasant aspect of a destructive triple whammy of chronic economic crisis, Brexit and the pandemic, which is collapsing social infrastructure (including the already half-broken NHS) and driving up the cost of living of the working class to levels even greater than in 2008. And of course, added to this, is the fact that all kinds of essential goods are going missing from shops and supermarkets.

    Bosses in almost every sector - agriculture, social care, the NHS, retail, hospitality, indeed, all kinds of services, are complaining of being unable to find enough workers. Fruit and vegetables have been rotting in fields and orchards because there are no overseas workers (usually recruited on temporary, slave-wage, gangmaster contracts anyway), to pick them, thanks again, to Brexit’s immigration rules.

    Surprisingly, it was the bosses’ City favourite, the Financial Times, which recently did an exposé on the conditions of these workers, revealing how, “unlike under the EU’s free movement of labour, they are usually tied to a specific employer or recruiter which makes it hard for them to leave if they are treated poorly”. It went on: ”the schemes can exacerbate poor pay and conditions... and calcify employers’ dependence on migrants”. And it quoted a US Economic Policy Institute study on migrant workers: ”We cannot point to one historical example in which a temporary labour shortage has been remedied with a temporary labour migration programme, and then employers returned to hiring local workers”. Adding that “A favourite aphorism of migration experts is that there is nothing so permanent as a temporary migration programme.”!

    To deal specifically with the fruit and vegetable picking scheme in the run-up to Xmas (so that Brussels sprouts can be on the menu!) a special visa pilot scheme has nevertheless been opened for EU and other migrant workers and this has just been expanded from 2,500 to 30,000 workers. 

    The author of the FT report (Sarah O’Connor) criticises the government for not having predicted the shortage of workers in all the multiple sectors where they are now absent. She quotes an agency boss who uses temp labour as having told her that “We wouldn’t eat without eastern Europeans”. And points out that it was obvious after the 2016 EU referendum that the loss of freely moving “low paid migration” would mean farmers and bosses in food processing, slaughterhouses and hospitality (mainly) - who relied on being able to super-exploit these workers - would risk big losses, if not the loss of their businesses. 

    For O’Connor the alternative would have been to improve pay and conditions in these sectors - and she writes regretfully that ”the government insisted we would ‘have our cake and eat it’ rather than acknowledge trade-offs and plan for them”. She is probably right to conclude, as she does, that it will mean finding migrant workers who are so desperate to find work that they accept the slave like conditions and temporary visas - i.e., who are even more vulnerable to exploitation. 

    Despite “official data” showing over 1m unfilled jobs across the economy, these are in a handful of low-paid occupations - transport and warehousing, waiters, bar staff cleaners and carers... indeed jobs which were covered by “temporary contracted”, “zero-houred” EU workers on the whole! So anxious bosses are apparently calling for even more temporary visas to hire overseas workers...

    The Confederation of British Industry (CBI) is also having a fit, but over the lack of skilled workers - saying this is “a threat to British competitiveness”. Well, they only have “get-Brexit-done-Johnson” to blame.

Suspended law of supply and demand?

Perversely, the shortage of workers has had little effect on wages - which one would have expected to rise, given the worker-shortage. Yet health staff are still fighting for a rise above inflation (the offer stands at 2%) and railway workers have seen their wages frozen as well. This, while inflation is 3% and growing. 

    Some reports have mentioned that the shortage of labour supply could push wages up by 8-10%. And apparently the Bank of England is worried about that old bugbear - that is, wage rises pushing up inflation... As if it were not the other way around - price rises forcing workers into fighting for wage rises to match!

    However there are some exceptions to the general stagnation (or even fall, relative to inflation) of wages at the moment. For instance some supermarkets - and now, fuel suppliers - are promising truck drivers £60,000 or more a year. Workers in social care are being offered signing on bonuses to lure them away from rivals. Higher wages are also being offered in construction, to brickies and fitters. 

    Although the Office for National Statistics estimated annual growth in average pay (without bonuses) to be 7.4% in the three months to June (5.2% if inflation was taken into account), the underlying wage growth was lower - 3.5-4.9%. The Bank of England found wages growing slower still: just above 3% in the same period. The Resolution Foundation (a so-called think-tank devoted to “improving the living standards of low-middle income households”) says this is ”stronger than the paltry pay growth seen for much of the period since the financial crisis, in which pay barely outstripped inflation”. Maybe so. But most workers, if they are lucky, have not had pay offers above 2% - take the NHS - where a 1% offer has been raised to 2%!

    Unite the union’s National Officer Adrian Jones, who is responsible for the haulage sector - i.e., HGV truck drivers - said that even in this sector the bosses are not offering permanent pay increases, just one-off bonuses. Many were buying more vans to get around the shortage of heavy duty drivers and long backlog of the HGV licencing. Paradoxically, in this situation of hire-incentives, new recruits could be on higher pay than senior, long-standing workers and this Jones said, has led to threats of strike action...

    But it doesn’t mean conditions are improving for HGV drivers - quite the contrary. Explained Jones: One of our members saw an ad for £62k as a driver. He applied - it turned out to get that, you had to work nights, weekends, overnight. Every possible minute you could work you’d have to work . . . To get that money you’d have to push very close to the edges of the law and max out everything.”

    For now, it is thus the case that nurses and railway workers have common cause with many other public and private sector workers - stuck in a pay freeze or having received a below inflation offer. However, there is no indication on the part of their union leaders - this is no surprise - of a plan for industrial action, let alone joint action. Which will be the only way forward, of course.

Energy market casino

According to the state energy regulator, Ofgem, and government ministers, it is the normal operation of the law of supply and demand that has caused the surge in energy prices. As the pandemic has eased and more energy is required, even if there is enough supply - and we’re told there is - prices have risen. The gas producers have seized the opportunity to make a packet. In fact, there’s been a 4-fold hike since August 2020!

    Of course, it would even be in energy capitalists’ interests to claim a shortage, in order to push the price up further. However, despite all the Cold War revivalist messaging, the supply problem is probably not being caused by Russia’s Gazprom! 

    Here in Britain the problem is magnified many times over by the overblown, chaotic and unregulated energy market created by privatisation 35 years ago. Ten years ago, electricity and gas supply was still dominated by a “big six” of British Gas, EDF Energy, Eon UK, Npower, ScottishPower and SSE, and they made huge profits, gave executives massive bonuses and household energy prices rose exponentially. There was much furore over this. So the government liberalised the regulatory framework (what little there was) and the number of household suppliers rose from just 12 in 2010 to 70 in 2018! This was meant, in true free market thinking, to result in a fall in prices... 

    Britain now boasted one of the most “liberalised markets in the world”! But prices still soared. Some firms collaborated to keep them high, although others did offer cut-price deals - until the former “big six” were no longer monopolising the field. But quite a few of the 70 newcomers went bust between 2018/9 so some rules were put in place to protect these cowboys against themselves - preventing deals being offered below the cost of supply... But price caps introduced in 2019 (to protect consumers from prices which continued to rocket) were regarded by the energy capitalists and some Tory MPs as ”a mistaken intervention into free markets” !

    By March this year there were still 49 suppliers - large, small, and very small. But only the largest had the wherewithal to hedge their bets adequately in the face of the price hikes which have just happened. That is, to retain enough capital to maintain supplies in a scenario where the gas price increased 250% since January 2021!

    By the way, “hedging bets” is exactly what this is. Energy is bought and sold by suppliers on a spot market where prices go up and down and companies have to bid for their gas or electricity - which further drives the prices in both directions... As the boss of “Green” (a new big kid on the block) commented, his fellows treat the energy market like a casino! Already 10 of the smaller punters have gone to the wall since mid-September. 

    But whether the government steps in to keep the crooked market going, whether Ofgem shifts customers to British Gas or other big companies, or takes over as supplier of last resort, the cap on energy prices is to be lifted and bills are rising - by £139 this month and 17% next year! 

    However, the shifting of customers from companies which have gone belly-up, to more solid ones, is not for free. Incredibly, there is an agreement with the gas companies that the whole population of energy customers will share the cost accrued by the bigger companies who take over the customers of the bankrupt firms! This could apparently add £90-100 or more to each household’s bill (depending on how many companies collapse!) In other words customers have been acting surety for their suppliers: cowboys who have been profiting out of their pockets! And not only that, but the big cowboys are looked after so they don’t bear any of the risk, nor lose a penny.

    The economist Robert Peston put it this way: ”under the ‘supplier of last resort’ scheme to protect customers of failed energy companies, every rescued customer of a failed energy company costs the rescuing company £600 to £700 to ‘on board’, which they have the right to reclaim over 15 to 24 months from every energy customer in the country. In other words the costs of customers’ mistakes in buying energy from fragile businesses are ‘socialised’” ! But he is wrong. It is not the customers’ mistakes which are the problem but the fact that dodgy companies came into being in the fi rst place with Ofgem’s blessing. Not to mention the constant advertising for customers to “U-Switch” via comparison sites - to the lowest tariffs!

    Given a minor outcry over this compensation arrangement, the Treasury is setting up a rescue scheme for these gamblers and crooks - but customers will still pay - all it will mean is that the levy is paid over several years.

    Former Ofgem chief, Dermot Nolan, who headed the regulator for six years until February 2020, has said that with the “benefit of hindsight”, he would have implemented “stronger licence conditions earlier” for both existing and new suppliers. This, from the guy who presided over the free-for-all! 

    One should also mention the CO2 shortage which struck at the same time. Who would have thought that 2 fertilizer factories supply 60% of the chicken stunning/food freshening CO2 requirement for the whole country? Suddenly they had no money to pay the increased gas price, so just shut down! And nobody in government realised it might be a problem until after it had happened - threatening the meat industry, the NHS, etc... 

    So how can the situation be sorted out? Of course, vital utilities like gas and electricity should certainly be in public ownership. But even if they were, there’d be no guarantee of improvement (think of the NHS!) - because it all depends on “who rules?”. Certainly with a government such as the current one in charge - or in fact not in charge of anything, really - the case for workers’ control would be an easy one to make!

What now?

It is clear that the rising cost of living is already hitting the working class hard. Inflation is 3% and growing. Food costs are (according to the boss of Tesco!) - going up further, by 5%. Petrol and diesel, which were becoming unaffordable even before the supply shortage, are going to go up even more.

    And just as the furlough scheme ends (30 September), a further attack begins: on 1 October, the energy price cap for gas and electricity is going up - from £1,150 to £1,277 - a rise of 11%. On the very same day, the £1,000 a year (£20/week) uplift to Universal Credit is removed. 

    Then, next April, National Insurance Contributions will increase by 1.25% - taken as a tax from every worker’s wage. At the same time gas and electricity prices are due to rise a further 17%! 

    Even before the latest crisis of supply chain and petrol/diesel shortages, business minister Paul were going to face a “really difficult winter”, with the rise in energy bills and a “real concern” about food shortages.

    When the BBC’s Laura Kuenssberg asked Johnson how working people were going to put food on their tables he answered that anyone “struggling” could get a better job and work longer hours! 

    Most workers who earn what this government has the cheek to call the national living wage - of £8.91/week (IF you are over 23) - are obliged to rely on Universal Credit to top up their measly incomes. And losing it is the difference between managing and not managing. 

    Of course, the “re-opened economy” and shortage of workers hasn’t resulted in better jobs and wages. Quite the opposite: for example, the railways are cutting jobs left, right and centre, in preparation for the “big launch” of their reinvented rail privatisation - so-called “Great British Railways” (see article in this journal). Railway workers are being asked to pay for it with their jobs and a pay freeze.

    But this is not being taken lying down: Abellio Scotrail engineers (among many other “essential” workers who worked through the pandemic), are demanding a pay rise. They have banned overtime and are taking industrial action - for now - short of strike...

    Stagecoach bus drivers and cleaners are currently voting to strike. This company made £58.4m profit this year, took the Emergency Measures “bonus” from the DfT and yet it hasn’t given workers a pay rise for 2 years! Wage freezes or below inflation pay offers are the order of the day - whether in the NHS, transport, distribution, manufacture, food processing or retail.

    So workers have common cause. The little strikes, demanding decent pay, which are popping up here and there, could become a great wave which the bosses wouldn’t be able to stop, if workers decided to turn this common cause into a common strike - all out, together, everywhere...

29 September 2021