Inflation should not be an excuse for the return of rip-off Britain
Some businesses are taking advantage of rising prices by charging more while costs stay the same
‘Measured by minute, it now costs more to pull up outside the airport than it does to fly to Paris or Madrid’
Airport “kiss and fly” charges are going up by an eye watering 30pc or more. Very soon it will cost 20pc more to park at the station. An Amazon Prime subscription has already gone up in price, and it probably won’t be long before speeding fines, bank charges and mobile and broadband connections cost more as well. With inflation already running at 10pc, and still heading higher, we are all becoming used to punishing rises in the cost of living.
Sure, we can all understand that our local restaurant has to pay a lot more for its energy and staff, and has to put up prices on the menu simply to stay in business. But a slab of tarmac outside Gatwick? Or a streaming subscription? It doesn’t cost any more to run today than it did a year ago, or indeed five years ago. In reality, some companies, typically operating in virtual monopolies, are using inflation as a cover for the return of rip-off Britain, pushing up their profit margins while their costs are virtually unchanged. And yet, with free market capitalism facing a perilous few months, that is a very dangerous game – and if the businesses guilty of it are not careful they will face a terrifying backlash.
With the cost of filling up the car above £100, groceries up 20pc or 30pc, and electricity bills likely to provoke a heart attack, most of us have become hardened to the prices of everything soaring. In most cases, we simply have to pay up, and if we can’t afford it then we have to cut back. Often the rises are regrettable, but easy enough to understand.
It costs more to run a coffee shop than last year (dry weather in Brazil means the beans have doubled in price, and that’s before you get into the cost of power). A hair salon is a lot more expensive to keep open, and a taxi costs more to run. We understand that prices have to go up if companies are to stay afloat, and many small entrepreneurs in particular are taking a hit to their own profits to try to moderate that as much as possible.
The trouble is, not everyone is doing so. The charge for pulling up at the airport to drop someone off – “kiss and fly” in the jargon of the trade – were already the most annoying in the world. But according to the RAC, 16 airports have either introduced or increased the charge since the pandemic began. Measured by minute, it now costs more to pull up outside than it does to fly to Paris or Madrid.
Leaving your car at the station won’t be any cheaper. Station charges are rising faster than even the train fares. At Plymouth station the daily charge is up by 36pc since 2019, and in Brighton by 15pc. An Amazon Prime annual subscription has gone up from £79 to £95, while a family Spotify subscription is up by a couple of pounds, and the law firm that I deal with occasionally has been in touch to say that – due to unavoidable cost pressures obviously – the price of a partner hour is going up steeply. The list goes on and on.
It is simply impossible to justify much of that. The strip of road outside the airport doesn’t consume any electricity, nor does it have any staff to pay. The station car park is just a big empty space, and given that so many of us now work from home, it typically isn’t even very full any more. There is no reason why it should charge more. Amazon may have to pay more for fuel for deliveries, but its TV service doesn’t cost more to run, neither does Spotify, and lawyers don’t necessarily have to increase their hourly rates when they could just economise a little like the rest of us. In truth, there is a real problem here. Inflation is going to be used by some companies as an excuse for the return of rip-off Britain. They will see it as a chance to push up prices while costs stay roughly the same.
Sure, they will increase their profit margins. A station car park is going to be even more lucrative than it was before. So will a law firm, or a bank or investment company, while the local council will be raking in millions from increasing levies on everything, and no doubt the Treasury will soon be getting in on the act by increasing fines for speeding or missing a tax deadline. And yet, it is a very high risk strategy. Free market capitalism is going to be under ferocious attack over the next few months. With living standards falling at the fastest rate in a generation, and with many families struggling to make ends meet, or even to keep the heating switched on, there will be calls for price controls, windfall taxes and even for outright nationalisation.
Of course, none of that will actually help. It doesn’t cost any less to run a business just because it is owned by the state (in fact, usually more because it will be so inefficient). But that doesn’t mean it won’t be popular. In reality, companies need to steer a careful path through the next few months. They should keep prices low where they can, and not simply assume they can increase all charges in line with the retail prices index. And they shouldn’t use inflation as cover for blatantly rip-off charges. If they do, they will pay a high price – and possibly even higher than dropping someone off at the curb next to “departures”.