By Jeremy Dewar
TORY CHANCELLOR Philip Hammond is a modern man. He believes that driving a train is so easy that “even a woman could do it”. He also believes that 5 million public sector workers are “overpaid”. And he certainly believes that the 1 per cent public sector pay cap should be retained.
He’s not the only one. MPs voted 323 to 309 against a Labour amendment to abolish the cap. This was just after Hammond and Theresa May found £1 billion to buy the support of the Democratic Unionist Party.
This “cap” is a classic example of the Tories using state intervention to “correct” the market. While remaining steadfast against anything so rash as nationalising steel or the railways, the nasty party are quite willing to freeze real public sector wages for the seventh year running.
By pinning pay rises below the rate of inflation, millions have seen their living standards squeezed. As Labour leader Jeremy Corbyn has pointed out, the repeated 1 per cent limit has created real shortages in nursing and teaching, with hard-working nurses having to access food banks to survive.
Public sector pay rates as a whole have lost 10 per cent of their value since 2010. Nurses’ pay has fallen by 14 per cent in real terms (i.e., after inflation) over the same period. Between 2005 and 2015, doctors’ median real earnings fell from £38 an hour to £30, and school teachers’ real pay dropped from £25 an hour to £22.
But are they overpaid? Not according to an Institute of Fiscal Studies (ifs) report. Although public sector pay held up far better than in the private sector immediately after the 2008 crash, the pay cap has since restored this differential to pre-crash levels.
Average weekly public sector earnings are £506, compared with £464 in the private sector. But the public sector has a higher percentage of qualified staff; the like-for-like gap is just 3 per cent. Also the shape of the workforces differs; more low-paid jobs in the public sector, like cleaners and caterers, are outsourced and so not included in the figures. On the other hand, a layer of high-earning executives, consultants and specialists in the public sector earn more than £150,000, pushing the average up.
What is incontestable is that a victory for well-unionised public service workers would be a boost for those in private sector pushing for a rise. Indeed this is the real reason Hammond is so hostile to lifting the cap.
The truth is, we all need a pay rise. The Office of National Statistics says that real household disposable income fell by 1.4 per cent in the first three months of 2017 compared with the previous quarter. Wages have not kept up with inflation for the third quarter in a row, something not seen for over 40 years.
Working household savings have fallen to 1.7 per cent of income, the lowest on record, as the struggle to make ends meet takes priority. The Bank of England reckons that household debt has climbed 10 per cent in the past year. Collectively we owe £58 billion on cars, £67 billion on credit cards and £72 billion in loans and overdrafts. We are running on thin air.
Looking into the future, the IFS predicts that, while the richest 1 per cent have recovered completely from the 2008 crash, our wages on average will not before 2021, because of increased inflation, low investment and the likely effects of Brexit.
Ballot for action
Now is the time for unions to turn to their members and campaign for strikes.
The Universities and Colleges Union is to ballot members for action to win a 3 per cent rise in the autumn, while the PCS union is balloting civil servants to strike for a 5 per cent increase.
The Royal College of Nursing has just finished a “summer of protest” under the slogan #ScraptheCap, after 74 per cent of its members said they are willing to strike over pay, which would be a first for this union.
Unison, the gmb and Unite have launched a campaign for a 5 per cent hike for local government workers, and the tuc is holding a Rally for Fair Pay in Parliament Square on 17 October.
Already there have been positive results. The Scottish Parliament is likely to scrap the cap north of the border. And the Fire Brigades Union (fbu) has been offered 2 per cent this year and 3 per cent in 2018, although fbu leader Matt Wrack has rightly said that after seven years of pay restraint this simply is not enough.