A COMBINATION of rising inflation and the first glimmerings of worker resistance are bringing some old elite fears back to the surface.

Ben Broadbent, of the Bank of England’s monetary policy committee, responsible for setting interest rates, told the Financial Times this week that he was concerned there was an “upside risk” that workers will demand higher pay increases.

Elsewhere, the Treasury has warned that higher public-sector pay “could lead to permanently higher prices.” 

Its official submission to the government’s pay review bodies for the public sector argues that pay awards in the public sector that match inflation will, in the BBC’s summary, “encourage higher wage demands” by other workers.

This is a classic divide-and-rule tactic that the Tories have applied in government since 2010.

By undermining public-sector pay, they have also undermined pay in the private sector — all the while trying to play off workers in the public sector against those in the private.

In the 2010s, the argument against decent public-sector pay was the need for spending cuts. Today, the argument against public sector pay increases is “inflation.”

This is different from the other common claim about inflation, which says that rising prices are the result of excessive amounts of money being created.

But since 2009, over £895 billion of new quantitative easing money has been pumped into the system by the Bank of England.

Yet inflation has stayed at historic lows until this year. There is no direct relationship between the amount of money in the system and the rate of inflation.

Instead, the right-wing argument now being pushed is that improving workers’ pay will push up inflation.

No-one should give an inch to this. Fundamentally, inflation is caused by the decisions of company managers to raise prices.

If a price goes up, it is because someone has chosen to put the price up. So it is decisions by companies, not the pay of workers, that ultimately determines inflation. 

And with profits hitting record highs in the last year — even as coronavirus struck — owners of businesses have plenty of spare cash at hand to pay their workers properly without raising prices.

British companies are sitting on over £800bn in company bank accounts — money that is neither being spent by nor invested, but hoarded by business owners. There are enough resources in the system to meet workers’ demands for fair pay.

Inflation is when many prices rise at once, and it happens when a large number of suppliers choose to raise prices to maintain their profits.

In theory, this could happen when workers have strong trade unions, and are able to exert pressure on their employers for more pay.

But after a decade of flat or falling real wages, and with many workers now worse off than they were in 2010, it is obviously nonsensical to pretend that this is the case in Britain.

NHS staff are among those who are now paid far less, after adjusting for inflation, than a decade ago.

The Health Foundation think tank estimates that nurses are paid £1,583 less than in 2011, for example, while younger workers in the private sector have borne the brunt of zero-hours contracts and low pay.

The real sources of inflation today are from the huge disruptions caused by Covid-19, and the growing costs of an unstable environment.

Covid-19 has provoked lockdowns and disrupted production and trade right across the world, causing shortages.

With supplies restricted, but demand rising, many suppliers have pushed up their prices in response.

More broadly, extreme weather events like droughts and floods have hurt crop production.

Coffee harvests have been damaged in Brazil from drought, helping push the world price of coffee up 40 per cent in the last year.

Covid-19 is going to be with us for a long time, and environmental instability is going to get worse thanks to climate change. So inflation is likely to remain high for a long time.

It is absolutely right and correct, therefore, that workers should be compensated for higher prices with high, inflation-busting pay rises.

Strikes remain close to their all-time lows. Unions are obviously far weaker than they were in previous decades. Yet the argument to hold back wages is getting noisier.

It is coming because there are the first signs that workers are starting to sense their own power.

In the last few weeks, unions at Clarks successfully fought off fire-and-rehire with strikes, lorry drivers in Merseyside have won a 17.5 per cent pay rise, and Tesco workers are planning to strike before Christmas.

The so-called “Great Resignation” has seen a record 970,000 people change their jobs over the summer, driven by voluntary resignations.

This isn’t people taking collective action through a union, but individual choices to look for better work.

Nonetheless, it shows how the pandemic has shaken up labour markets and, for the first time in decades, shifted the balance of power a little towards those who work.

This alarms those who prioritise profits over workers’ pay, and so the arguments for pay restraint grow louder.

But every socialist should be absolutely clear: the best solution to rising prices is higher pay, and the best way to win higher pay is to join a union and fight for it.