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‘From BP to Banks: There’s Lots of Money Around – It’s Just Not In Workers’ Pockets’

Despite Government calls for pay restraint, new figures show some people are doing very well out of the cost of living crisis, writes Josiah Mortimer

Revellers at Royal Ascot. Photo: Cavan Images / Alamy Stock Photo

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Workers’ living standards are being squeezed by higher borrowing costs caused by interest rate rises – while corporate giants are laughing all the way to the bank. 

Higher interest rates mean that the Bank of England is expected to pay an estimated £75bn of interest on banks’ reserves over 2023 and 2024, with a total of around £150bn due to be paid out between 2022 and 2028, according to Positive Money

Calls for a windfall tax on banks have been echoed by Labour MPs including Angela Eagle, John McDonnell and Clive Lewis. It’s popular too – polling commissioned by the group found the majority of the public supports a windfall tax on banks. 

HSBC alone announced this week that its pre-tax profits for the third quarter of 2023 were £6.37 billion, a 138% increase on the same period last year. This takes its profits for 2023 so far to £24.3 billion, up from £9.9 billion last year (a 145% increase).  NatWest’s pre-tax profits for the third quarter of 2023 were £1.3 billion, taking its profits for 2023 so far to £4.9 billion. I could go on, but you’d get bored of the word ‘billion’.

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Unions have called on the Bank of England to cut interest rates and put squeezed workers ahead of “profiteering” by the big four banks. The Bank’s Monetary Policy Committee, responsible for setting interest rates, makes its decision this Thursday (2 November).

Meanwhile, a year since Sunak became Prime Minister, 55% of voters believe that life has got worse for them during his tenure, WeThink polling for Byline Times suggested this week.

One in eight (12%) say it has got better, and a third (33%) say it has stayed the same. Even among Conservative voters, just 29% say that life has got better for them, while 24% say it has got worse. It is not hard to say why. Interest rates have hardly budged and pay continues to stagnate.

Energy giants are seeing similar returns to Britain’s financial behemoths. Analysis by the progressive IPPR think tank found that energy giant BP made profits of £2.7bn in the last quarter – while investing £2bn in fossil fuels. 

In fact, for every £1 BP spent on low carbon investments last quarter, they invested £11 in fossil fuels and gave shareholders £9. BP has also announced a new round of share buybacks, transferring £1.2 billion to shareholders.


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Wicked Windfalls

It means that during a period of surging energy bills over the last two years, BP has invested nine times more into fossil fuels as renewables and completed more than £14.8 billion of buybacks from surplus cash flow.

Emi Murphy, warm homes campaigner at Friends of the Earth, notes that the firm recently rowed back on its climate pledges – in the same year we’ve seen record-breaking temperatures, devastating floods and unprecedented ocean warming. 

“The Government has had countless opportunities to bring down our bills and emissions through a nationwide programme of insulation funded by a proper windfall tax on the excess profits of fossil fuel companies and cheap, clean renewables. Instead, all we’ve had are weakened green policies and massive tax breaks for oil and gas giants”, Murphy said. 

Meanwhile, Over half of people from vulnerable households (56%) are worried about being cold this winter (54% of all UK adults), according to new data from Opinium, commissioned by the Warm This Winter campaign. The figure rises to 63% among people living in a household where someone is suffering from a pre-existing health condition or is disabled.

Commenting on BP’s mega profits this week, Warm This Winter campaign spokesperson Fiona Waters said the energy system is “broken”.

“Oil and gas companies continue to post obscene profits at the expense of the British public. Households are struggling under astronomical energy debts totalling £2.6 billion, pensioners are too afraid to put on their heating despite the cold, and businesses up and down the country are struggling to survive.”

But instead of taxing these windfalls properly, ministers are handing these profiteering firms billions in tax breaks to develop 100 new oil and gas fields – a policy we know will do nothing to lower our energy bills or boost UK energy security.


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Cruel Trick

The share of GDP that goes to workers over the past few decades has fallen off a cliff, at the same time as the power of employees to collectively bargain has collapsed. The two are highly related. 

We are seeing the cruel trick of so-called trickle down economics in action: far from Brits reaping the rewards of big firms’ earnings bonanzas, the cash stream is flowing very strongly upwards. 

New figures from the Office for National Statistics released today show a huge earnings slump (for most) since the financial crash – with most working people’s pay packets still worth less than 2008. 

Average workers would be £125 a week better off had pay increased at the same pace since 2010 as between 1997 and 2010, according to TUC analysis. Instead, the Conservatives have overseen a fall in real weekly pay of £4.50 from 2010 to 2023. In the 13 years before the Conservatives took power, real weekly pay grew by £99. 

Yet there is plenty of money sloshing around Britain’s economy. When it doesn’t go to workers or pension funds though, many of the profits are sent offshore – into the accounts of shareholders from Belize to Bermuda. As Private Eye might put it, trebles for some – and doubled mortgage and energy bills for the rest of us. 

1,189 adults in Britain were polled online on 27 October 2023 by WeThink, commissioned by Byline Times. Results were weighted to be representative of the wider population

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