The sheer stupidity of Labour ministers as they try to justify the massive pay awards they’re doling out to all and sundry in the public sector beggars belief.
One by one they step up to the microphone to claim it was cheaper to capitulate to union demands than to put up with the cost of continued disruption. Thus do they demonstrate a breathtaking naivety when it comes to industrial relations.
I said at the start of the election campaign that the inevitable Labour Government to follow would soon find itself out of its depth. My remarks so annoyed Labour bigwigs that the party boycotted the radio show I presented during the campaign. But my forecast has been proved right – much more quickly than even I envisaged.
The true cost of above-inflation pay rises is not the extra cash you have to hand over to meet union demands but the knock-on impact it has on pay talks to come. Be overly generous to one union and those unions next up in the pay round will form a queue with their hands outstretched expecting the same generosity, or more.
Before you know it, you run the risk of a wage spiral that pushes up prices and runs the risk of undermining your chances of keeping inflation down. Labour ministers are now finding this out the hard way, to the surprise of nobody who knows anything about industrial relations.
An incredible 22 per cent pay rise for junior doctors has been followed by pay awards twice the rate of inflation for teachers and NHS workers and a hefty 14 per cent for train drivers, backdated of course.
Now major legislation will be unveiled in the autumn to give unions even more power
An incredible 22 per cent pay rise for junior doctors has been followed by pay awards twice the rate of inflation for teachers and NHS workers and a hefty 14 per cent for train drivers
GPs and other rail workers now expect at least the same, if not better. Mick Lynch, the militant but savvy boss of the RMT union, has already demanded the same terms for his rail workers as Aslef, the drivers’ union.
And Aslef already has its hand out for more. Even though drivers will now earn north of £70,000 for a four-day, 35-hour week after Labour’s largesse – and easily over £80,000 with some modest overtime – it’s still calling its drivers out on strike on the state-owned East Coast Main Line from early next month over an unrelated dispute.
There could be no more telling evidence that ministers are out of their depth than this example of a union running rings round them. Expect a quick ministerial surrender on this front too. Very few of the Cabinet have the historic knowledge to learn from the past. So they should look up ‘Danegeld’, for that is what they are now paying the unions.
In Anglo-Saxon times, kings would levy taxes to raise funds to buy off the invading Danish Vikings. The Danes would pocket the dosh, take a short break, then threaten a return to murder, rape and pillage unless more cash was coughed up. Every time it was. Every time the Danes came back for more.
Chancellor Rachel Reeves is paying the modern equivalent of Danegeld. She will raise taxes by many billions in her Budget on October 30 to pay for the public-sector pay rises the Government is so blithely handing out like a drunken lottery winner. More tax rises will follow in subsequent budgets.
We already know that almost half of the £22 billion ‘black hole’ in the public finances she claims to have found at the Treasury was not the nasty Tory legacy she said it was but the huge cost of the first public-sector pay rises to which she had agreed. Since then, more inflation-busting pay awards have been sanctioned. There will doubtless be more before the end of October.
There is something a tad corrupt about all this. Yesterday, the Mail revealed that over 50 per cent of Labour MPs elected on July 4 had taken union donations totalling almost £2 million to help finance their campaigns.
Now it’s payback time for their paymasters, using taxpayers’ money to feed the insatiable union bear with the very tax rises they denied they’d ever make throughout the campaign. If not corrupt, certainly underhand.
It gets worse. Reeves will be increasing taxes massively not to invest in physical infrastructure or computing power to equip Britain to compete more effectively in the 21st century but simply to meet an exploding public-sector pay bill. Nor has the Government insisted on any productivity improvements in return for its generosity. No repeal of restrictive work practices or the right to introduce new technology without union resistance.
More investment and improved productivity were Labour’s mantras in opposition. Both were to be vital ingredients in the magic elixir that would kickstart British economic growth under it. Both have crashed and burned now it is in power.
Public-sector productivity is lamentable. These huge pay settlements will do nothing to improve it. Health Secretary Wes Streeting talked a good game about NHS reform in opposition. Now he’s just doling out more money without conditions, like the rest of his Cabinet colleagues.
Rather than pausing for breath to wonder if it’s taking a disastrous wrong turn that threatens its whole economic strategy, the Government is doubling down.
Major legislation will be unveiled in the autumn to give unions even more power, with the repeal of anti-strike laws, such as minimum turnout requirements in strike ballots, and the need to provide a semblance of basic public services even during a strike. Zero-hours contracts will be banned and a so-called ‘right to switch off’ (the boss can’t email you at the weekend) introduced.
Labour really does seem determined to learn nothing from history. In 1974 Harold Wilson returned as Labour prime minister after a four-year Tory interlude under Ted Heath. Wilson made the most prominent Left-winger in the party, Michael Foot, his employment secretary. He proceeded to give all manner of powers and privileges to union barons who were already too big for their boots.
His Employment Protection Act became better known as the Job Destruction Act as endless industrial disputes rocked the country. Unions used their new powers to coerce a soft-touch government into doing whatever they wanted, culminating in an historic national embarrassment in 1976 – the International Monetary Fund (IMF) had to be brought in to bail us out.
I don’t say Keir Starmer or his Chancellor are going to make as big a hash of things again. But they do seem strangely determined to miss a major economic opportunity.
Far from inheriting the worst economy since the Second World War, as Reeves has ludicrously claimed (and with which not one respectable economist agrees), a wise government would build on the encouraging signs of hope for our economic future.
We are the fastest-growing economy in the G7 group of advanced market economies so far this year. Inflation is only a little over its target 2 per cent. Unemployment is low, job vacancies are rising again. Living standards are improving again, at last.
A steady hand on the tiller, with more investment, a productivity drive and robust control of public-sector wages, unless paid for by more efficient working practices, could yet make this a brighter decade for the economy than it has hitherto looked.
Instead, through a mixture of ignorance and incompetence, Labour, even though it is not yet even two months in power, is dangerously close to throwing it all away and embarking on a path which will take us back to the future.
As a wise philosopher once said: ‘Those who cannot remember the past are condemned to repeat it.’ Starmer and Reeves need to brush up on their philosophy as well as their history.
