Dig out your flares and Chopper bikes – the 1970s are back in fashion. You may not be mad, in a coma, or back in time, a la John Simm, but one cannot escape the obvious parallels between our current political climate and the decade that style forgot. Our headlines are filled with inflation, energy crises, and the long-heralded returns of ABBA to Wembley and Nottingham Forest to the top flight. Even the Sex Pistols are back – and just in time for a jubilee. It really does feel like we are all doing the time warp again.
And now we can add another throwback to that list: strikes. The National Union of Rail, Maritime and Transport Workers (RMT) has long been quietly preparing for what is being described as the ‘biggest industrial battle in a generation’. With a national ballot poised, the railway union is threatening a ‘summer of discontent’ to protect jobs and win a bigger pay rise. For the Government, the revival of industrial militancy is almost as unappetising a prospect as a return of cheese hedgehogs.
That is especially as, with inflation at a 40-year high, it is not only the RMT that are considering action. The teachers’ National Education Union and the postal workers’ Communication Workers Union are also balloting members. Jacob Rees-Mogg’s push to remove 91,000 civil service jobs has caused the civil servants’ Public and Commercial Services Union to contemplate striking, and the Trades’ Union Congress is asking for a national demonstration next month over living standards.
One can understand their reasoning. In the year to March, nominal total pay rose 10.7 in the finance and business sectors, helped by some healthy bonuses. But in the public sector, the rise was only 1.4 percent – and with inflation galloping past 10 percent, that means large real terms cuts for many on low and middle incomes. The largest union is Unison, representing the NHS. With workers there facing only a 3 percent pay rise, how long can it be until we see nurses on picket lines again?
As unfortunate as inflation may be for many workers, the threat their strike action poses to the country goes far beyond a few cancelled trains or pupils getting the a couple of days off school. The real damage that trade unionists did to Britain in the 1970s – asides from undermining democracy and letting the dead go unburied – was to unleash an inflationary wage-price spiral. Galloping inflation meant galloping wages demands, in a vicious circle of rises that required punishing interest rates and biting tax rises to finally be tamed.
Of course, there are some crucial differences between now and the 1970s. Doctor Who and popular music are much worse, for one thing. But thanks to Mrs Thatcher and Gordon Brown, the structure of our economy is also very different. As Karen Ward of J.P. Morgan has pointed out for the FT, the share of the workforce that is unionised has fallen from over half in 1979 to only 24 percent today. Moreover, the Bank of England is now independent, with a clear duty to keep inflation in check.
Yet there is still cause to be seriously concerned. Threadneedle Street has hardly covered itself in glory when it comes to keeping the inflationary genie in the bottle. Andrew Bailey is playing catch up on interest rates whilst price rises surge towards double the Bank’s estimates of only six months ago. And even if the days of 25 percent inflation may be long gone, pay settlements anywhere near the current rate of inflation would ensure that a phenomenon ministers hope will be transient will soon become bedded in. The 40-year period of low inflation would be well and truly over.
What is the Government planning to do? Grant Shapps, as is his wont, has talked a good game. Ministers are looking at legislating to make industrial action illegal unless a certain number of staff are working, a proposal mentioned in the 2019 manifesto. But hoping the unions “will wake up and smell the coffee” suggests the Government’s broader strategy largely involves keeping its fingers crossed. An administration focused on living by the next day’s headlines is not ready to fight a prolonged battle against militant workers.
To do so would require a level of foresight and nerve often lacking from the current administration. It is all very well for ministers to complain about tax rises, high spending, or a lack of a plan for growth. But they were elected on a platform of reversing austerity, were complicit in the scrapping of the Government’s only major supply-side reform, and now balance calls for tax cuts with fantasies of raising defence spending to 3 percent in the near future. It is not only the trade unions who should be smelling that coffee.
So the Government finds itself racing towards a fundamental challenge to both its authority and its efforts to get inflation down. Boris Johnson is buffeted by inflation, union militancy, and energy crisis. He hops from u-turn to u-turn, in a government whose only major achievement relates to our membership of a European community. The Prime Minister has long sought to play up the parallels between himself and Winston Churchill. Now his situation much more closely resembles that of Edward Heath, whose premiership was scuppered by economic crisis, trade union strength, and his own hubris.
Of course, it is an open question whether it is Tory MPs or the country who will answer “who governs Britain” first. But a Heathite economic record will bring a Heathite drubbing at the ballot box. If the Government cannot stand firm and get a handle on this inflation, then the most likely outcome at the next election is a Labour government by default, cobbling a majority together with the Liberals and the SNP like Wilson and Callaghan. The only consolation of such a defeat would be that it might produce the same sustained reassessment of Conservative economic thinking that Heath’s defenestration did 50-odd years ago.