For those of us who were there, the rows over pay, the strikes, the picket lines and an ineffectual government bring it all back. Britain is facing its 2022 equivalent of the late 1970s’ winter of discontent. It was bitterly cold back then, too.
Rishi Sunak’s approach to the widespread industrial action is clear. The government will warn that excessively high wage deals risk entrenching inflation. It will argue that the recommendations of the public sector pay review bodies (PRBs) are reasonable and must be adhered to. And it will wait for support for action to crumble as striking workers contemplate the harsh reality of lost pay at a time of a cost of living crisis, and gradually give up the fight.
Trade union membership has halved since its peak in 1979, but there are still circumstances in which workers acting collectively can exert some serious muscle, and this is one of them. It is not just that unemployment is at 3.7%, among the lowest levels in half a century, it is that the supply of workers has been affected by people leaving the labour market during the pandemic. Nor can employers simply fill vacancies by whistling up workers from the EU as they could pre-Brexit. Demand for workers in the past year has exceeded the available supply, and that has given unions clout they have not had in decades.
No question, Sunak’s attempt to hold the line on pay is being made more difficult by the fact that the labour market is tight. There are some signs – a fall in the number of vacancies – that demand for workers is easing but it is very early days. It will take more than the small drop in private sector employment detected by the latest purchasing managers’ index to tip the balance of power in wage negotiations back in favour of employers. What’s more, most of the industrial action is in the public sector, or what was the public sector before privatisation.
It is, therefore, no surprise to find groups of workers asking to be compensated for the sharp rise in the cost of living over the past year. The latest figures from the Office for National Statistics show annual earnings growth in the public sector of 2.7% while inflation is running at 10.7%. You don’t need to be a genius to work out why workers are unhappy.
The government continues to point to the recommendations of independent pay review review bodies as a reason for not negotiating with unions, but this is an unconvincing argument for three reasons. First, the eight separate pay review bodies are not really independent, in that the government sets a remit and a spending envelope that binds them. Second, the PRBs have limited union representation, which sets them apart from the Low Pay Commission, which is responsible for making recommendations about the minimum wage. Third, the government can bypass the PRBs and engage directly with the unions, and there are plenty of examples of this happening in recent years.
When he was health secretary in 2014, Jeremy Hunt rejected the NHS PRB recommendation of a 1% pay increase for NHS staff, insisting on a 0% freeze instead. This prompted industrial action by nine health unions, which resulted in the government finally accepting the PRB recommendation in full.
Lesley Mercer, a former trade union leader who was once a member of the armed forces PRB, says: “It is bizarre to suggest that pay review body recommendations are binding on government. The clue is in the name: recommendations. In practice, governments decide whether or not to accept a recommendation. It is a matter of record that the recommendations from the armed forces review body in 2018 were not accepted in full.”
Opinion polls suggest the public isn’t buying Sunak’s argument that the government is being reasonable and fair. Again, that’s hardly surprising.
For a start, many of the workers who are taking industrial action were on the frontline during the pandemic lockdowns. It is not so long ago that people stood outside their homes and clapped for the nurses – something that has not been forgotten.
But that’s not all. Median wages adjusted for inflation are barely any higher now than they were at the start of the global financial crisis 15 years ago. The real pay of nurses is lower than it was when the Conservatives came to power in 2010.
Over the same period, ultra-low interest rates and the money creation process known as quantitative easing have boosted asset prices, particularly for the already well-off. It doesn’t really help the government in its battle for hearts and minds that Sunak is the richest prime minister the UK has ever had.
Certainly, the UK’s experience of the 70s and 80s highlights the dangers of a wage-price spiral, because, once embedded, high inflation proved hard and painful to shift. But with earnings growth falling well short of price increases, and the Bank of England forecasting inflation will be well below its 2% target within two years, such fears seem overblown.
Ultimately all roads lead back to the Treasury. Hunt, with the support of Sunak, is in effect trying to impose an incomes policy on workers who are strongly unionised, have a genuine grievance and enjoy plenty of public support.
Some Conservatives see the need for a bit of flexibility because they don’t see this ending well for the government. They are right to be concerned.
Ted Heath carried the can when a miners’ overtime ban resulted in a three-day week in early 1974. Jim Callaghan was booted out of office in the aftermath of the winter of discontent. The evidence is that voters are again blaming the politicians for the disruption caused by the strikes.
• This article was amended on 19 December 2022. An overtime ban by miners, rather than a strike, led to the 1974 three-day week.
