I posted this thread on Twitter this morning:
I am so bored of hearing politicians saying that the country is being held to ransom by trade unions whose pay demands cannot be afforded when that is not true. A thread…..
I accept that many unions are at present making pay demands that exceed the rate of inflation. Given the state of our public services there are good reasons for them to do so. But those same unions are also settling for inflation-matching pay rises, so let's consider them here.
What we have had in the UK are two overlapping inflationary shocks. One resulted from the reopening from Covid. The other was caused by the war in Ukraine. The Bank of England agree that these were the causes of inflation. Let's not look further then when we don't need to do so.
Let's also remember that inflation is simply a measure of price changes from one year to the next. It's no more sophisticated than that. This means that once the impact of these shocks is more than 12 months in the past their impact falls out of the inflation calculation.
Looking at this month's small inflation fall, from 11.1% to 10.7%, we can begin to see this happening. Some of the effects of the post-Covid price increases are beginning to fall out of the inflation calculation. As a result the rate fell.
As we get past the anniversary of the war in Ukraine this will become much more marked. Inflation will tumble in 2023 unless there is another, as yet unknown, inflationary shock about to beset us. I think that unlikely.
So too do the Office for Budget Responsibility. They think inflation will have disappeared, and even turn negative, in 2024 and 2025 as oil and gas prices fall, as they already are. There is in that case nothing contentious about what I am suggesting here.
Instead what is so utterly bizarre are three things. The first is that the Bank of England thinks it must still raise interest rates. It never needed to raise these rates at all to beat the externally created inflation we have suffered. It certainly need not raise them any more.
Despite this the Bank of England will raise rates today. They are fighting a war on inflation which need not happen as it will go away anyway. They are, in the process, making matters massively worse for us all by increasing the price of money.
Second, the current pay disputes that the government is pursuing with such vigour make no sense at all. Not only is it totally normal for pay to catch up with inflation in situations like the one we are in, as the IMF has shown in recent research, but the quicker it does so the better.
That's partly because the catching-up process almost never seems to be inflationary in itself, as the IMF has shown, and it's also because unless pay does catch up inflation of the type we are now suffering can cause a recession because people can't afford new, higher, prices.
Refusing to give inflation-matching pay rises does in that case mean that we go into recession. Giving inflation-matching pay rises prevents that, and does not create inflation. That's a pretty big thing to achieve.
Third, this is completely affordable. The reason is staring us in the face. Inflation does, by itself, pay for these pay rises. The simple fact is that if there is 10% price inflation and 10% wage inflation then the revenues from the three big taxes go up by at least 10% as well.
In fact, the increase can be by more than that if tax allowances are fixed, as they have been right now. That provides maybe £55 billion of extra tax revenue to the government. The total cost of additional pay is said, at most, to be £28 billion. Clearly the increases can be afforded.
Now of course I know there are other cost increases to consider as well. But the big one is interest - and cutting interest rates, which the government could do, could solve that and save more than £30 billion a year at the same time.
In other words, inflation-matching pay rises in the public sector are totally affordable unless the government has some other goals in mind. What might they be?
Well, they could be trying to crush public services as a matter of policy. After a decade or more of austerity that is hard to rule out.
They could also want a recession to provide cover for increasing returns to capital by trying to create a long-term fall in real wages. Again, that can't ruled out.
And they could also just be utterly incompetent. The possibility has to be taken seriously.
What is impossible is that they can claim what they are doing is credible economic policy when it is not. Refusing to pay affordable inflation-matching pay rises when doing so would prevent recession makes no sense at all. So the other options have to be taken seriously.
Whichever of those other options motivates this government it is clear that what is going on in these disputes is ideological. But it is not the unions that are being ideological. They're simply pressing a fair claim. It is the government that's doing class warfare here.
If we had an honest, fair, open and competent government in this country they would be offering inflation-matching pay rises to their staff now. Instead we have a government intent on crushing the public services and the people who work for them.
Today nurses are striking for the first time, ever. They have to. They have been given no choice. The government has declared war on them, and us all. That's why nurses deserve our support.
Their battle is ours too if we want to live in a decent, prosperous society where all have a chance. The government does not want that. But we can and should have it. That's enough to require support for the nurses and others pursuing their claims. Right is on their side.
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“It is the government that’s doing class warfare here.”
If I may, two quotes from the same man: Stanley Baldwin
“The Conservatives can’t talk of class war. They started it.” (post 1926 general strike).
& with respect to the Uk meeja which aims to inflame rather than inform:
Newspaper proprietors have power without responsibility, the “prerogative of the harlot throughout the ages”.
So in nearly 100 years, nothing, absolutely nothing has changed. The tories are only ever interested in class war and the UK meeja is only interested in throwing petrol on the flames. It is time for a change, time to eliminate the ownership of the UK press by oligarchs and to move to PR to reduce the tories to a rump of noisy and stupid lunatics.
I do wish people would realise that what we are seeing are the effects of austerity.
The public sector or anything that was a public service has been hollowed out to such an extent that it cannot ride out external shocks – Covid, BREXIT and the CoLC.
The foundations for today’s problems were all laid down in 2010. Now society is trying to play catch up but the dogmatic Tories refuse to see the error of their ways.
Proper reasonable cost of living investment budgets and pay rises since 2010 would have stopped all of this from happening.
Trying to explain this to these Tory fanatics and their fan base is like pouring water into sand.
You know what?
I think that the Tories have been so bad that one day when their reign ends, this country will need a period of truth and reconciliation to get over the trauma they have inflicted upon is.
I think that would be a good idea
PSL – your take on the world so succinctly captures my own that it helps me feel less isolated if not less frustrated! Thank you so much for your regular, articulate, heartfelt contributions.
On the decimation of our “public” service, speaking to posties on the picket line about agency workers I was shocked to be told that Angard agency delivery service have been owned by Royal Mail for years. Their “reforms” against the postal service were to be implemented just as COVID hit. It was the unions who dissuaded them from that action in order to serve the public during the (recognised) pandemic. Public Relations may have been more persuasive.
Has anyone else seen media coverage of this obvious conflict of interest?
You are welcome hyperNorm but our host deserves much more credit, believe you me.
You sub blog here very effectively
You are BOTH wonderful!! And modest.
Now I feel the need to mention all the other people whose posts are knowledgeable, caring and really appreciated but I know I’ll miss someone out that also deserves acknowledgment.
How about “this blog informs, comforts and infuriates me and I’m grateful to everyone here”?
That will do
Thank you
Now quoted on Twitter
What has happened to NHS pay since 2010?
The page linked below has a diagram showing the real-terms impact of (i) first limiting pay increases to £250 for those earning under £21,000 for two years (with pay freezes for everyone else), (ii) then seven years of 1% increases, and (iii) a slightly better three year deal in 2018, albeit still less than inflation (that deal expired last year, hence the present dispute).
https://www.nuffieldtrust.org.uk/resource/chart-of-the-week-what-has-happened-to-nhs-staff-pay-since-2010
(About half of staff achieve a slightly better result, as they incrementally progress towards the top of their pay band, but the other half at the top of their pay band already don’t.)
This is about 1,2 million people, paid about £56 billion in total. But the starting salary for a nurse on qualification is about £27,000 (usually these days after a nursing degree) and the average is around £35,000. For doctors (after five or six years of study, and then two years of foundation on £30k and £35k) it will be around £40,00 to £50,000. Some doctors and managers will be earning much more. I wonder how many MPs (salary £84k) have tried to live for any length of time on this sort of money.
Looking at the NHS Pay Review Body’s reports for the period from 2010 to 2018 is eye opening. Much wringing of hands about the potential impact of pay restraint on recruitment and retention, amid concern about increasing vacancies and the amount spent on agency staff, and then the body concludes that it must recommend the amount the government said was available. It looks like a sham, with nothing independent about it at all.
Is the Country being held to ransom by the Unions, or is it being held to ransom by The Government who are refusing to allow workers to maintain their standards of living and working conditions?
Why, the latter of course.
A low wage economy is a high profit economy for investors – that’s how Cameron wanted us to compete on the world stage and also attract ‘inward investment’ and encourage privatisation etc.
The Tories are ‘market making’ for rentiers. Low wages will help business to go to the banks and reassure them that they are able to pay back their exorbitant loans.
‘Sub-blogging’
I have to say that I’ve thought about this a lot over the years. All I can say is that before finding this blog, I’d become increasingly convinced that we were being led astray – something was not quite right in the way we were being managed.
I’d always been sceptical about Thatcherism since I was a teenager and already had been made redundant twice before I was 30 despite working all hours Godsend. I’d worked in the catering and retailing sectors and seen the indicators of failure there – what I had to do and have been trying to do ever since is find the language that explained adequately and objectively (non-politically) what was going on. I went through a period of severe self-doubt and blamed myself for losing my job and my prospects initially. But I’d also started to read and this made me realise it was not just down to me and not just me.
Most people I spoke to about this had nothing to say about it.
How we were failing and why was what I was after?
I am also from a purely working class background and had first hand experience of the impact on skilled labour of globalised finance on my family which was quite devastating to be honest and still affects my brothers who are both skilled labourers (I’m a desk jockey now – very white collar but I stick out like a sore thumb). I was in the grammar stream at school but I remember class mates being able to go off on school trips abroad and I never could – I was always there to wave them off. I just became interested in why I couldn’t do those things. Not out of resentment – believe it or not – just curiosity.
Anyhow, I’m not particularly good at self-realisation either which could be used to explain why I come here too (I am the type of person who will always be employed by another). All I can say is that the topics you choose just happen to chime with mine as do many of the attitudes. The questions you pose always promote from me a response. Because everyone should be asking them.
As you say it’s your full-time job and you enjoy it. I have a full-time job too but not this. I’m grateful you tolerate my presence. It’s always very interesting being here. That’s it.
Thanks PSR
But this is nit my full time job
Part, at best
But worth doing
Richard
I meant the areas you specialise in really – tax, political economy/economics, accounting, finance which you have various roles in – academic, blogging, writing research, campaigning etc. You send more time on these and go into greater depth that I can. Thank goodness.
By trade I’m a development officer at the moment – that’s my area of expertise – the areas above I’m interested in but have never worked in to any extent or studied in dept academically. I do try to go beyond being a dilettante especially since I can relate to how these issues effect me and others.
Best wishes,
PSR
Understood
I also know how lucky I am
And the risks I took
No one should quit a safe job with a six month old to move into campaigning / research on tax when no one did it
It came off
I am sure the policies are to shrink the state and make as many as possible of what used to be public services into for-profit private enterprises. I hope they are incompetent in doing this but they sure have made the country a mess. Sadly, Labour is not calling out the truth of this but pandering to the same – we don’t have enough money. My own reply to that is – then take it back from those who have taken too much.