Commons Sense

House of Commons · Westminster Hall

Corporate Profit and Inflation

16 May 2023 · 12 other contributors · 8,101 words

Opened by Richard Burgon Lab Leeds East

Responding minister: Andrew Griffith

EconomyTaxation

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Richard Burgon raised concerns about corporate profit and inflation in Westminster Hall. A government minister responded.

Key points

  • Corporate profits increased by 34% at the end of 2021 compared to pre-pandemic levels.
  • Nearly all of the profit increase was due to just 25 companies.
  • Profit margins for the largest companies in London nearly doubled since 2019.

Key requests to Government

The Government should introduce an excess profits tax on all sectors benefiting from record-high profit margins during the crisis. They should also consider extending price caps beyond energy to other essential goods like food, housing, and utilities. Finally, public ownership of key utilities could prevent profiteering by privatised companies.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

Richard Burgon Lab Leeds East

The discourse on inflation has largely ignored the role of corporations in driving up prices for profit, a phenomenon referred to as 'greedflation'. Studies show that corporate profits increased by 34% at the end of 2021 compared with pre-pandemic levels. Nearly all of this increase was due to just 25 companies. Profit margins for the largest companies in London have nearly doubled since 2019, contributing almost 60% to inflation. The financial press and central banks are raising concerns about corporate profits driving inflation.

Other contributors (12)
  • Claudia Webbe

    The UK economy is facing high inflation driven by corporate greed, squeezing living standards. Leicester East has a high child poverty rate despite the large number of food and garment factories in the area. The Bank of England's interest rate hikes punish ordinary people rather than addressing corporate profiteering.

  • Ian Byrne Lab Liverpool West Derby

    Two thirds of constituents in Liverpool West Derby are cutting back on essential utilities, and one in three are experiencing food poverty. Industry profit increases have been excessive for shipping firms, oil refineries, agribusinesses, and energy companies while many face fuel poverty.

  • Ian Lavery Lab Blyth and Ashington

    It is perverse that in a rich economy, supermarkets are making billions of pounds while parents steal baby formula due to inability to afford it. This highlights a significant systemic issue.

  • John Martin McDonnell Lab Hayes and Harlington

    Mr McDonnell discussed the impact of climate change on food supply and highlighted profiteering as a significant issue. He cited a 97% increase in supermarket profits and a 255% rise for agribusinesses. He called for price controls, an excess profit tax modelled after Rab Butler's 1950s initiative, and regulations against financial speculation in food markets to prevent further exploitation of the current economic situation. Will the Minister explain the role that Putin played in ensuring that Tesco, Sainsbury's and Asda increased their prices to such an extent that they have increased their profits by 97%? Let me explain this to the Minister. There is such a thing as the Co-op party, of which some people on this side of the House will be members, and there is such a thing as the Co-op store. The Co-op store is not related to the Labour party; it is a completely separate commercial entity. The Co-op party is separate completely, so there is no relationship between the Members here and the Co-op store, although some of them might shop at it.

  • Kate Hollern Lab Blackburn

    Ms Hollern echoed concerns about the government's narrative that wages are driving up inflation, highlighting corporate profiteering as a major factor. She cited statistics from Unite the union showing FTSE 350 profit margins increasing by 73% between 2019 and 2021, and by 89% in the first half of 2022 compared to the same period in 2019. She noted that shareholders of TransPennine Express received a £15 million bonus last year while residents faced travel issues. In Blackburn, 16.6% of households live in fuel poverty, higher than the national and regional averages.

  • Kim Johnson Lab Liverpool Riverside

    I am concerned about the rising prices of baby formula, which has led to desperate parents resorting to stealing or purchasing black market alternatives. The revenue in the UK food market's baby segment is set to increase by £265 million over four years.

  • Margaret Greenwood

    I agree with my hon. Friend that the debate needs reframing, especially as prices for food and non-alcoholic drinks are rising at their fastest rate in 45 years, with cheese up 44% and bread and cereals increasing by 19.4%. This is indicative of 'greedonomics'. I agree with my hon. Friend that it is unjust for companies to make massive profits while failing to pay decent wages to their staff, thereby exacerbating the economic disparity. Will the Minister come back to the question from my right hon. Friend for Hayes and Harlington? Why have profits increased so much?

  • Nadia Whittome Lab Nottingham East

    I am aware that the IMF's chief economist has stated that profit margins have surged, while wage inflation lags behind. I suggest exploring avenues to boost wages, including a £15 minimum hourly wage and above-inflation public sector pay rises.

  • Natascha Engel Lab North East Derbyshire

    Emphasised that corporations are hiking prices to increase profits, which is a significant cause of inflation. She supported the call for an excess profits tax and price caps on essential goods.

  • Ronnie Cowan SNP East Ayrshire North

    Profits can be good if they are used wisely, but the question is how big do profits have to be and how were they created. He criticised the idea that greed drives people to generate bigger profits and emphasised the need for prioritising wellbeing over profit, advocating for a four-day working week and universal basic income.

  • Tulip Siddiq Lab Hampstead and Highgate

    She highlighted that real wages are lower than they were 15 years ago and called for policies to support people during the cost of living crisis. She also mentioned Labour's call for a windfall tax on energy giants to support working people with their bills and energy prices, suggesting it could raise an additional £10.4 billion.

  • Zarah Sultana Your Party Coventry South

    Ms Sultana addressed the disparity between soaring profits for big businesses and rising costs for constituents. She mentioned that FTSE 350 profit margins increased by 73% from 2019 to 2021, and were up 89% in the first half of 2022 compared with the same period in 2019. She also referenced investigations showing supermarkets like Tesco, Sainsbury's, and Asda experiencing a 97% profit increase between 2019 and 2021. I mentioned that.

Government Response

Andrew Griffith

It is a pleasure to respond, acknowledging the debate on high prices and inflation affecting constituents across the country. The minister attributes cost increases primarily to Putin's illegal invasion of Ukraine and global supply pressures post-covid. He highlights that domestic inflation pressures have risen due to tight labour markets pushing up costs for firms. Noting the impact in Germany with food inflation above 20%, he addresses concerns about profiteering by comparing prices at Co-op, a mutual organisation, against major supermarkets like Tesco. The minister presents data showing higher prices at Co-op for milk (20p more per pint), eggs (35p more per six-pack), bread (56p more), chicken breasts (£1.70 more), and baby milk (£1 more) compared to Tesco, suggesting either a competitive market or anti-competitive practices across the sector. He cautions against assuming price increases automatically indicate profiteering without considering broader economic factors.

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