All to pay for, by Tony Travers

20 Sep 07
The grumblings from public sector trade unions are growing louder as Gordon Brown prepares for his first Labour Party conference as prime minister next week. But the strike threats over the pay rise cap are symptoms of a much deeper malaise, says Tony Travers

21 September 2007

The grumblings from public sector trade unions are growing louder as Gordon Brown prepares for his first Labour Party conference as prime minister next week. But the strike threats over the pay rise cap are symptoms of a much deeper malaise, says Tony Travers

The Labour Party assembles in Bournemouth next week with public sector pay clouds gathering on the horizon. Although the years of growth in government spending are coming to an end, many public sector unions still seem to think Gordon Brown will be kinder to them than Tony Blair was. On the evidence available so far, they are likely to be disappointed.

Official figures published recently show public sector pay increases running at 2.7% in the three months to July – well below those in the private sector. Indeed, there is growing divergence between the two. Public sector unions are threatening concerted action in an attempt to improve their bargaining position. Yet the 'new' Gordon Brown appears as resolute as the Iron Chancellor who originally imposed the 2% limit on public servants. And, despite some successful behind-the-scenes manoeuvres with Labour's National Executive Committee to head off union confrontations next week, it looks like a rocky road ahead.

Two events have provided a drum roll to announce the political parties' annual seaside visits. Last week, the Trades Union Congress put on its own conference to allow journalists to limber up for the arduous work that lies ahead. The week before, with equal predictability, the National Union of Rail, Maritime and Transport Workers, led by Bob Crow, fouled up most of London's transport system.

Even Left-leaning commentators found themselves spluttering about 'dinosaurs' and a 'return to the 1980s' in relation to the RMT. London Mayor Ken Livingstone described the strike as 'one of the most purposeless ever called'. Political commentator and Work Foundation chief executive Will Hutton argued for a new kind of trade unionism.

Yet the RMT has produced remarkable terms and conditions for Tube workers. A driver, for example, now earns more than £35,000 a year for a 35-hour week with almost nine weeks' annual leave. Pensions are generous, with free travel thrown in. The union has pitilessly targeted the capital's dependence on the Underground. This approach has, unhelpfully for the rest of the population, been successful.

TUC general secretary Brendan Barber conspicuously failed to criticise the RMT's militancy during a Radio 4 interview last week. Other union bosses probably envy the ruthless willingness of the rail unions to exploit their position to the point where politicians bend the knee. Having said that, Crow has been dumped from the TUC general council, so he does not appear to be particularly popular with comrades in other unions. The police, armed forces, nurses and even firefighters have never been willing to press their case in the full-frontal way the rail unions do.

Differences in the results of the negotiating styles of workers in the various parts of the public sector are stark. With their pay and generous conditions, London Underground drivers are paid about the same – on average – as the police, but more than teachers, nurses, prison officers, firefighters, Post Office workers and ambulance staff. By comparison, bus drivers – in the private sector – are abysmally rewarded.

Some commentators have argued that Brown might face a winter of public sector industrial strife. His visit last week to the TUC conference provoked a response only fractionally less chilly than those previously reserved for Blair. The prime minister reiterated his commitment to tight public sector pay limits. With the Comprehensive Spending Review promising spending constraints until at least 2010/11, there is a significant possibility of public sector strikes this winter – and beyond.

Despite seven years of growth in overall public expenditure under Labour, there is little evidence that public sector unions feel their members are now in a particularly good position. Indeed, in recent years the bulk of days lost to strikes in Britain have been in the public sector. A splurge of additional spending in health, education, transport and elsewhere has not stopped a sustained problem of labour relations squabbles. Moreover, the numbers working in the public services are now beginning to fall.

Office for National Statistics figures show that of 754,500 days lost to labour disputes in the UK in 2006, just 98,300 (13%) were in the private sector. The public sector, which accounts for only about a fifth of all employment, was responsible for 87% of strike days last year. As the concentration of public sector jobs varies across the UK, days lost to strikes in 2006 ranged from 53 per 1,000 employees in the Northwest, 51 in both Wales and the Northeast, down to as few as five in the Southeast.

Much the same was true in 2005. This is an abysmal record and surely needs some explanation. There is no evidence that, over time, average pay in the public sector changes at a radically different rate to that in the private sector. If private earnings rise significantly ahead of those in the public sector for a prolonged period, teacher and nurse shortages will appear. In recent years, there have been periods when public pay has increased faster than private earnings and other times when the reverse has been true.

Public sector union leaders understandably point to huge rises in boardroom earnings. The staggering bonuses paid in the City of London in recent years have also been a provocation to many on lower incomes, although the current turbulence in the financial markets will certainly cut back on payouts in financial and business services in the next couple of years.

However, whatever the position at the top of the private sector, it seems inevitable that public sector unions are going to keep up the pressure on the prime minister and his colleagues. Just before the RMT Tube maintenance workers staged their recent strike, prison officers had done the same. The latter's pay has in recent years fallen well behind that of most other public servants. But, lacking either the clout or militancy of the RMT, they were back to work in double-quick time.

There are potential flash points in other sectors. Post Office workers have already held strikes. NHS staff in England were considering action over the staging of their 2.5% 2007 pay award until they received an improved offer (in Scotland, Wales and Northern Ireland, it has been paid in one go). Civil servants at the Department for Work and Pensions are to hold a ballot on industrial action. Ominously, the announcement of the vote was made immediately after Brown's speech to the TUC. Unison is balloting its members over the local government employers' revised pay offer, and the GMB and Unite have suspended a threatened strike and will put a revised offer to their members.

Whitehall's strategy to avoid strikes has been to offer the lowest-paid workers rises slightly above the Treasury's 2% cap. This approach appears to have placated the GMB and Unite and seems to have worked in the NHS. But the underlying problem of simmering discontent remains in many parts of the public sector.

The prime minister also used his TUC appearance to promise a 'British job on offer for every worker' – new employment aimed at people who have failed to take advantage of the 30 million jobs now available in the UK. There are to be tougher language tests for overseas workers who come to Britain from outside the European Union. But these, and other promises concerning employment rights, evidently fell a long way short of the demands – mostly for cash – made by the leading public sector unions.

It is fascinating to note how Brown's approach to the unions differs from that of his predecessor. Blair used to visit the TUC for a bout of mild self-deprecation and to deliver a tour d'horizon of his government's achievements. Brown went to Brighton to argue, as if he were still chancellor, the case for his government's economic policy (Alistair Darling's most visible activity until the Northern Rock bank dragged him into the limelight was moving his cat, Sybil, into Downing Street).

There is no evidence whatsoever that Brown is going to abandon his tough public expenditure stance. Indeed, the mid-summer turbulence in the global financial markets will reinforce the iron rectitude of his government's approach. Inflation almost got out of control earlier this year, although it now seems set to fall back to its target level.

Public sector pay hikes were the death of earlier Labour governments. Of all people at the top of contemporary politics, the prime minister understands this. The government and the public sector unions are thus set for a trial of strength. Who will blink first? In reality, this question is a no-brainer. Apart from the rail workers, the trades unions remain in broadly the enfeebled state Mrs Thatcher left them in. Labour, with Brown leading the way, has evolved a series of tactics for keeping state employees on their toes.

The Thatcher labour laws remain firmly in place. Using private companies to deliver public services is the most obvious way the present government has found to dampen militancy. The Private Finance Initiative means fewer public sector school-keepers and hospital cleaning staff. Privatised bus drivers rarely take industrial action, while the near-public railway is a hotbed of militancy. Facilities management services purr quietly in the background while town hall staff are standing on picket lines. Ministers can now point to a raft of specialised private companies that can take over public service management.

The government can also set public sector employees against those who receive services. Much is said about the trade-off between public sector pay and 'frontline services'. This is code for a conflict of interest between, say, elderly patients and those who nurse them: if one group gets more, the other gets less.

Finally, Brown and his ministers are all too happy to invoke the chaos of past governments – Conservative and Labour – that got into a mess over public sector pay. Sepia images of the Winter of Discontent are relentlessly invoked to contrast the sunlit uplands of Britain in 2007 with the declining misery of the late 1970s.

But behind the rumbling industrial discontent in the Post Office, prisons, civil service, local government, NHS and at London Underground, there is a wider problem. How is it that after a period of sustained expansion of public sector employment and increases in earnings that union leaders feel the need to gear up their members for a series of strikes? If the Brown government holds the unions in check for 2007/08, what will happen in 2008/09 and beyond? Things can only get worse, as New Labour didn't quite say.

Public spending totals are now set in stone for at least the next three years. In all probability, the 2007 CSR will set the tone for the one after. The three major political parties are agreed on the need to hold spending at about 42% or 43% of gross domestic product, which is where it has recently arrived. Public sector pay will have to be held down to rises averaging just 2% – or thereabouts – in every year from now till at least 2012/13.

Of course, if the private sector continues to expand cheerfully over the next five years, a gap would almost certainly open up between its pay levels and those of public servants. If this happens, the government will not be able to avoid raising public pay settlements above 2%. That, in turn, would lead to cuts in the volume of services provided – unless spending plans were increased. Of course, if there were to be a recession, private sector earnings would fall back and public sector pay pressures would moderate.

Squabbles over public sector pay are almost certainly a symptom of a deeper malaise. There are other signs – such as absenteeism rates and stress-related illness – that public service fails to deliver a good deal for many of those who work in it. As we enter a period of spending restraint, there is surely a convincing argument for an inquiry into the wider question of public service employment.

Many of the public sector unions are still affiliated to the Labour Party. It would be in the national interest to have a wider understanding of where public service does not deliver effectively – for employees, employers or those in receipt of services. If taxpayers are to continue to be convinced to pay for schools, hospitals and other provision, those gathering in Bournemouth must consider what needs to be done to make public service as rewarding – in every sense – as it should be. The current wave of industrial disputes suggests there is a serious problem.

Tony Travers is the director of the Greater London Group at the London School of Economicsc


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