For millions of workers, there are bitter memories of the depths of the cost-of-living crisis. For many, it never ended. And so projections for a new round of inflation coming down the track will be met with dread, and justifiable anger. Trump’s bombardment of Iran, together with Israeli forces, and with UK prime minister Starmer providing British military assistance, has ignited a deathly spiral of violence and instability in the Middle East. It is also a recipe for a new deep phase of capitalist economic crisis, an active ingredient being rising energy prices.
For most workers in Britain, this is first felt acutely at the fuel pumps. Diesel prices are up 30% since the start of the war, petrol 16%. Many drivers will have already visited forecourts to find pumps temporarily empty. But higher energy prices inflate the price of everything. Food inflation, for example, is projected to reach 9% by the end of the year. For lower earners who typically spend a higher proportion of their income on essentials, this is more keenly felt.
The energy price cap mechanism applied by government energy regulator Ofgem means that heating and gas bills won’t dramatically rise in the first instance. However, rises beyond the end of the current three-month period are all but inevitable. So much for Labour’s promise to lower energy bills by £300 by 2030.
By pitching his party’s local elections stand as bigging up what the government is doing to address the cost of living, Starmer will only provoke more justifiable anger. Especially when the propaganda comes from the mouths of Labour councillors who, like those of all establishment parties, have just voted through yet more council tax, rent and charges rises.
Monster energy profits
During the most recent energy shock in the aftermath of Russia’s 2022 full-scale invasion of Ukraine, governments internationally intervened to limit the extent to which bills rocketed. In Britain, the government’s Energy Price Guarantee capped bills, although at a still unaffordable level, and essentially subsidising monster profits for energy producers.
The aim was to ameliorate the immediate worse effects of the cost-of-living crisis and prevent working class anger boiling over, with the intention of making us pay for it through further austerity measures in the future. Of course, it didn’t save the Tories from being smashed in the 2024 general election, or the biggest wave of strikes in a generation. And it is now a Labour government charged with making us pay with its mantra of ‘fiscal responsibility’.
Since 2020, energy company profits in the UK have topped £125 billion, according to the End Fuel Poverty Coalition – around double the entire annual government spending on schools. The feeble windfall tax on so-called ‘excess profits’ has raised just £12 billion since its introduction in 2022.
Two mouthpieces of the capitalist establishment, the Financial Times and the Economist, have stated their opposition to a repeat of elements of price controls which they judge too expensive. Instead, the FT argues for “targeted cash support to the most vulnerable in society while leaving valuable price signals intact”. A significant hurdle facing any government attempting that would be the capacity of civil services and local authorities gutted by austerity measures to be able to administer means testing.
So far, the government has limited its measures to direct support for the small minority whose homes use oil heating. That has been administered through local authorities. A Crisis and Resilience Fund already exists to offer support to those in most acute need. It is currently inadequately funded from central government, but a willing council could expand the fund’s remit to cover direct support for rising household costs, and mobilise a campaign to demand the government coughs up funding. An approach that Socialist Party members standing in the May elections as part of the Trade Unionist and Socialist Coalition are calling for.
The Economist says that, “in 2022 Europe’s interventions felt cheap because interest rates and bond yields started the year near zero. Today the cost of debt is much higher.” It now costs the UK government 5% to borrow for ten years – the most expensive for any government in Europe.
In fact it was Liz Truss’s government which introduced the 2022 Energy Price Guarantee – her ‘mini-budget’ laid bare Britain’s vulnerability to the bond markets, which still remains.
However, it’s not simple arithmetic that determines what is deemed affordable and what is not. It cannot be ruled out, faced with the prospect of deep crisis and a threat to their system – particularly a rising tide of workers’ struggle, that this government could be forced to make temporary concessions to the working class and can be afforded more wriggle room to do so by ‘the markets’ and world financial institutions.
After all, government spending during the Covid pandemic showed how what was once deemed impossibly expensive becomes temporarily possible, although the capitalist class will always try and claw back what is given later. Today, desperate to recoup what was given during the pandemic, the Financial Times warns that “the expectation that the state will step in with a bailout each time a price shock arises needs to be curbed”.
What both the Covid pandemic and the 2022 energy price shock showed is the complete and utter failure of the profit-driven, competition-fuelled capitalist market to deal with crisis. In both, capitalist states intervened to defend their system, and did so by fuelling huge profits for big business.
Planning
Planning is both absolutely essential and impossible on the scale needed while the major energy companies, big industry, big business and the banks remain in the hands of competing private owners. Why should price controls be prohibitively expensive if the government isn’t coughing up the asking price from big energy profiteers?
In public ownership, and under the democratic control and management of the working class, the main levers of the economy could be directed to best deal with crisis, and also to plan investment to meet the needs of the environment while defending jobs. To those who falsely claim such measures would be too expensive – who are they possibly going to convince that compensation is needed for those at the top who have profiteered to the tune of billions for so long? Compensation should only be paid on the basis of proven need, for example to secure the value of workers’ pensions investments.
Recent reports have suggested the Labour government is considering nationalising the British Steel plant in Scunthorpe. Between April 2025 and the end of January, £377 million has been spent to keep the plant open, while it remains in the hands of Chinese owners Jingye. The government took operational control (stopping short of nationalisation) of the plant in April last year, with a bill passed through parliament within hours, on a Saturday. It was proof that government can use emergency legislation to nationalise British Steel, and other parts of industry, now.
Despite energy nationalisation being universally popular however, none of the big five parties support such measures. That includes the Green Party, which at its most recent online conference voted to only call for nationalisation of parts of the energy industry that constitute a ‘natural monopoly’ – the national grid, for example – but not energy producers or retailers. Undoubtedly, huge numbers of those who have joined the Greens in support of Zack Polanski’s rhetoric against inequality and the rigged system would disagree.
To deal with the rigged system, including the predatory way in which super-rich speculators profit from wars and economic volatility, and to achieve the necessary planning and coordination to stop climate change needs socialist planning and nationalisation.
Trump’s war has set the course for further and deeper economic crisis and pain for the working class. In which the failures of the capitalist system will again be laid bare. Join the Socialist Party to fight for socialist change in Britain and worldwide, as the only way to bring an end to economic hardship and climate catastrophe.