We Tories can be reflexively anti-trade union. Staring down grim-faced men in high-vis pleases our Thatcherite consciences. Yet there is an argument, aired by a few, that the Government has it wrong in wanting to take on the Lynch who stole Christmas, and other striking unions. This narrative goes that public sector workers are paid less than their private counterparts, that the Government has more room for manoeuvre in spending than it makes out, and that a threatened wage-price spiral is a chimera.
I do not agree. As Talleyrand supposedly said of the Bourbons, those advocating giving way to the unions seem to have learned nothing, and forgotten nothing. Those lessons don’t (only) stretch back to the 1970s and 1980s – as with Mrs Thatcher carefully aiming not to repeat Heath’s mistakes – but to only the last year.
The first question is that of the relationship of public to private sector pay. The headline figures bring sympathy to the brazier enthusiasts. The latest data shows private sector pay growth at 6.9 per cent, well ahead of the 2.7 per cent for those working for the state. That is the largest difference since records began. In the case of nurses, in August last year, they were paid on average 7.1 per cent less in real terms than a decade earlier. With inflation at 10.7 per cent, their demand of 19 per cent almost seems reasonable.
Almost. The headline figures are misleading. Nurses are set for a 9.3 per cent rise now, compared to 4.5 per cent for doctors, and between 5 per cent and 8.9 per cent for teachers. Below inflation, but not awful – and especially as private sector increases (excluding bonuses) are running at 4.3 per cent.
Moreover, we must remember that the faster increase in private sector pay is driven by temporary factors, such as labour shortages. Before the pandemic plunged the economy into mayhem, public sector workers were better paid than by quite a margin.
A 2019 ONS report on earnings shows that the “premium” for working in the public sector was 7 per cent when various entitlements were included. 82 per cent of public sector workers have a defined-benefit pension, compared to only 39 per cent in the private sector. Hourly pay among those employed by the state in 2021/22 was 7 per cent higher.
Next, there is the idea that the Government has more room to increase spending than Sunak and Hunt are suggesting. Anoosh Chakelian, for The New Statesman, argues that it is an ideological fixation with “balancing the books” that stops the Tories finding the 18 billion required to give an inflation-linked pay rise to all public sector staff. After all, we do have the second-lowest debt-to-GDP ratio of any G7 country.
But to suggest we can put a permanent increase in spending on the national credit card without the markets kicking up a fuss is to forget about the whole Trussonomics experiment. As Robert Colville has highlighted, it has been a great triumph of our new Prime Minister and Chancellor for the markets to treat us as a normal economy again. The pound is up; gilt yields are down. With energy prices falling, inflation might be tamed – although we should not under-estimate Andrew Bailey’s ability to release the pressure at exactly the wrong moment.
Yet that is a product of the very clear message Sunak and Hunt have been putting out: fiscal responsibility is in. Caving it to a big spending increase at the first sign of trouble would tell the markets that this Government is weak. Fears about a wage-price spiral can be overblown, since this inflation is largely the consequence of monetary incontinence and lockdown-related disruption. But locking in more public spending could encourage a culture of militancy. If you have paid him the Dane-geld, you never get rid of the Dane.
Furthermore, increasing spending on wages would come at the expense of other departmental spending, if the Government wishes to avoid more borrowing or tax rises. Leaving asides the efficiencies departments are already being asked to make for shrinking real-term budgets, that will mean more spending on the same – or a smaller – number of staff. The NHS has 10.7 per cent more nurses, yet does 10 per cent less work than it was in 2019. Cuts to that figure are politically impossible.
Of course, we could pay strikers more if our public services were more efficient and our economy more productive. But caving into the unions on pay will only make that more difficult. Strikers defend an unreformed NHS that absorbs an ever-larger slice of public spending; they oppose, in the name of jobs for the boys, the Driver Only Operated trains that have been in use in this country for 40 years. If we give in, we will have surrendered to the anti-growth coalition, meaning we will have even less freedom for pay increases in the future.