THIS week the Office for National Statistics (ONS) reports that the rate of inflation measured by the consumer prices index rose by 10.1 per cent in the 12 months to July 2022, up from 9.4 per cent in June. 

The Bank of England expects inflation to rise to “just over 13 per cent” in the last quarter of 2022. 

The ONS confirms what we all know: the principal contribution to inflation in July came from the cost of electricity, gas and other fuels, and food prices.

The price of oil dramatically increased in early 2022. This was not because of war or increases in the cost of exploration, extraction, refining or transport: it was because the global cartel of energy producers calculated that consumers would pay. 

In consequence, the first six months of 2022 doubled the profits of Shell, BP, Chevron, and Exxon Mobil to $58.2 billion.

As for gas, in July, Centrica (which owns British Gas) declared profits for the year of £857m, six times as much as its previous year’s profit of £140m. 

This week, world gas prices surged to €251 a megawatt hour, equivalent to more than $400 a barrel of oil, 10 times the price a year ago. 

Gas producers could thank Russia’s war restriction of gas exports for this as traders outbid each other for the limited supply. 

But that too is capitalism: the price of these commodities does not reflect the actual cost of supply (which has not increased), it reflects that cost plus the maximum amount of profit which the producers can extract.

And the consumers must pay. This is a working-class catastrophe, considering that 10 per cent of UK employees earn less than £695 per month and 90 per cent earn less than £4,963 per month. Those on benefits and pensioners are even worse off.

Inflation means that those incomes are now worth less. This week the ONS reports that median wage increases are, on average, currently running at around 6.54 per cent a year. With inflation at 10.1 per cent that is a significant cut in purchasing power. 

Yet the “median wage increase” disguises the fact that for the lowest-earning tenth of the workforce (three million workers), wages are increasing at a mere 1.3 per cent a year. 

And the median varies by industry. It might be thought that sectors, like hospitality, with shortages of workers might pay higher increases. Not so. 

ONS reports that the median annual wage increase in accommodation and food services is only 2.46 per cent a year (just above arts, entertainment and recreation at 1.85 per cent and below education at 3.15 per cent). 

In contrast, finance and insurance achieved 8.32 per cent a year. These figures exclude bonuses — benefits largely enjoyed by those in the top earning group.

As the value of wages falls workers become cheaper to hire and employers’ profits rise. This sudden transfer of wealth from labour to capital is unparalleled since the 1930s. 

That’s why the current fight by railway workers, mail and call centre workers, dockworkers, nurses and junior doctors, bin workers, Co-op coffin-makers and the rest is so important. Their fight is a fight for the entire working class.

The upsurge in industrial action has been compared to the 1970s. But circumstances are very different.

The 1970s was the most equal decade in British history. Wages took a greater share of GDP than ever before or ever since. 

That achievement was because 85 per cent of workers had their terms and conditions set by collective bargaining between unions and employers. Successive governments have demolished collective bargaining in all but a few sectors. 

They did this by urging the end of sector-wide bargaining and fostering derecognition by  individual employers, abolishing the wages councils, repealing legislation extending collective bargaining, ending the requirement that public contractors abide by collective agreements, allowing corporations to move whole industries overseas, and by encouraging privatisations in the public sector and outsourcing in the private sector. 

Above all, the destruction of collective bargaining was achieved by legal restraints on industrial action, most particularly the outlawing of sympathetic industrial action.

The result is that less than 25 per cent of workers have the benefit of collective bargaining today. In fact, bargaining over wages is much less than that because so many workers in the public sector have their wages set either by a pay review body or by governmental wage freeze.

The fact is that the vast majority of British workers are not in a position to negotiate better wages; for them it’s “take or it leave it.” 

And for most, they can’t afford to leave it. They don’t need the governor of the Bank of England to tell them to exercise wage restraint — they have no option.

Lord John Hendy QC is chair of the Institute of Employment Rights (www.ier.org.uk). Read part 2 of this series in tomorrow’s Morning Star.