Disputes over pay are plaguing Britain’s public sector

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“WHAT WE ARE want? Fair pay! When do we want it? Now”. On January 18th thousands of strike nurses sang this stop on picket lines across England. Their walkout is expected to last two days and another is planned for February if the government does not meet their demands. The 465,000 members of the Royal College of Nursing, a trade union, are demanding a pay rise of 5% above the rate of inflation for nurses working in the National Health Service (SNS). This is the first industrial action by nurses since 1988 – when they won a 15% pay rise.

Nurses are not the only ones looking for more money from the government. Between August and November 2022 a total of 1.5m working days were lost to strikes in Britain, the highest total for any comparable period since 1988. Ambulance workers went on strike for a day in December and will do so again on January 23. Teachers will go on strike on February 1 and up to 46,000 SNS junior doctors are expected to walk out of work for three days in March. This is the worst period of business activity in a generation.

The problem is the same as in the late 1980s: rising prices have eroded the real value of wages. Inflation peaked at an eye-watering 11.1% in October, the highest rate for 40 years. Prices are now starting to moderate thanks, in part, to cheaper energy. Data published by the Office for National Statistics on 18 January showed that consumer prices rose by 10.5% year-on-year in December. The government says there is a risk that pay increases at or above inflation will follow a wage-price spiral and therefore could be self-defeating.

Nurses, doctors and teachers beg to differ. Adjusted for inflation, average public sector pay was 4% lower in the year to November than 12 months earlier, but has been stable for the average private sector worker. Public sector pay has lagged behind inflation for years. The average nurse is currently paid 14% less in real terms than 12 years ago and the average teacher earns around 15% less (see chart). After considering the evidence published by independent pay review bodies in July – based on an inflation forecast of just 4% – the government agreed to give nurses a £1,400 pay rise (a 3.9% increase for an average nurse), a 4.5% increase for doctors. and a 5% increase for teachers.

The government also insists that it cannot pay workers more. The Institute for Fiscal Studies, a think tank, estimates that it would cost the government an extra £12bn-15bn (about 0.5% of GDP) to give each of Britain’s 6m public sector workers an inflation-matched pay rise above what they are already offered. But the government may have some extra money. A fall in wholesale energy prices is likely to save around £10bn ($12.3bn) over the next two years – the government has set unit prices for UK homes until April 2024 and paying the difference to energy suppliers. They recently pledged £6bn to curb energy prices for businesses too.

A long battle with the unions lies ahead. The government is proposing new legislation to guarantee “minimum service standards” for public services, effectively limiting the bargaining power of unions. Unions are therefore planning a co-ordinated day of industrial action on 1 February to “defend the right to strike”. With little sign that either side is willing to compromise, who or what could break the deadlock? Lower inflation could help. Consumer price inflation is expected to fall to around 7% by summer. That might allow both sides to lower their demands. After a winter of discontent, summer can’t come soon enough.

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