Editorial: Whoever wins the next election will have to spend money to repair the damage done after 13 years of Conservative party rule
Graham Watson's insight:
Today's Guardian editorial looks at the public sector pay deal and worries that it's only a short-term solution, and that longer term there's going to be a need to increase taxation to pay for properly funded public services.
And this, politically, is a significant dividing line: we've already got taxes at a historically high level as a proportion of GDP, and many people think that any further increase will be unpalatable.
PM Rishi Sunak said the offer to workers was final and there would be "no more talks on pay".
Graham Watson's insight:
Yesterday saw the announcement of the public sector pay deals and, too many people's surprise, the government fully accepted the recommendations of the independent pay review bodies, meaning that a range of workers are going to get pay rises around 6% per annum.
Now, here's the kicker - there's no extra money - so the pay deal needs to be financed out of existing budgets. Even then, the real pay of these workers is shrinking given the current rate of inflation.
Tax and spending watchdog says pay rises would not cause inflation
Graham Watson's insight:
The latest IFS research reveals, once again, the trade-offs that exist in policymaking.
In this case, they argue that the proposed fuel duty freeze due to be part of the Budget could be cancelled and the revenue used to fund more generous public sector pay rises. However, noble and eye-catching though this might be, there are more car drivers than there are public sector workers.
The UK's two biggest steelmakers are expected to get support to move away from old-fashioned coal.
Graham Watson's insight:
Well, well. What a dilemma: it seems as though the government's intervention in the steel market might be contingent on a transition to 'green steel' and environmentally-friendly methods of production. Equally, the cost of such help is likely to be above the £300 million already offered. That's quite an opportunity cost.
Try selling that to striking public sector workers who've been told that there's no money to fund public sector pay increases.
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Wages rose at their fastest growth since 2001 excluding the pandemic, but still lag behind rising prices.
Graham Watson's insight:
A nice indicator of the difference between nominal and real values with macroeconomic implications. Yes, nominal pay is rising at its fastest level for 20 years but real pay is falling.
Further, drill down and there are significant discrepancies between public and private sector pay, and hence obvious reasons for the current level of strike action, although remarkably unemployment remains largely unchanged.
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The Tories have even lost the support of their cheerleaders in the rightwing press, says Guardian columnist Polly Toynbee
Graham Watson's insight:
How Polly Toynbee sees the current state of play surrounding public sector strikes, with public support for many of the strikers, not least nurses, and many of the government's claims about the cost of granting public sector workers larger pay rises having been debunked.
You don't have to agree with all of it but it seems to be a politically tone deaf hill to want to die on, although the current Prime Minister might like to point out that most of these difficulties reflect mismanagement of the economy over an extended time period.
David Cameron first took aim at public sector workers in 2010. Continued Conservative policies have brought them to their knees
Graham Watson's insight:
Interesting, and entirely accurate assessment of the state of public sector pay, which highlights the fact that even if nurses got a inflation increase plus 5%, it would still mean that their real pay has fallen relative to 2010.
And let me run that by you again, a sector which is struggling to recruit has less lower real pay than in 2010. And think about that in terms of what that might mean for other areas of the public sector - why would talented people opt for a career in the public sector, in areas such as education and so on, if they're going to be faced, over time, with real pay cuts. It really is cakeism of the very worst sort.
I don't deny that there are aspects of the public sector that are inefficient, but to seem to hold them responsible for all of the nation's economic woes is remarkably short-sighted.
Rail disruption and another Royal Mail walkout - what you need to know by the BBC’s Zoe Conway.
Graham Watson's insight:
A fascinating article - if only because the choice of image isn't accidental, and I think unfair on striking workers. Why not show what's happened to the real pay of nurses, relative to private sector pay? However, this is a classic example of shaping the narrative - and I don't like it.
However, this Zoe Conway article details exactly what strikes are taking place this week, but it doesn't show what's happened to real pay for public sector workers, both in general terms and relative to the private sector.
The government says it wants to tame public sector pay to fend off a highly unlikely wage-price spiral
Graham Watson's insight:
Richard Partington states it in no uncertain terms: UK inflation is a function of higher energy prices, and the impact of rising wages on inflation has been minimal.
As a result, he condemns the attempts of the government to create a narrative about the possibility of a wage-price spiral driven by higher wages, not least in the public sector.
For me, the most interesting data relates to the number of days lost to industrial action - look closely. The government are going to claim that the country is being held to ransom by striking railway workers and postal workers, and announce new legislation to curtail their right to strike. But the evidence - and objective evidence - suggests that, overall, there's little in the way of need for this.
Wages rise at their fastest rate in more than 20 years, but still lag behind the soaring cost of living.
Graham Watson's insight:
The cost of living crisis has seen a significant fall in real wages for many, and some interesting sectoral shifts, with care sector workers leaving the profession for more lucrative positions with online retailers, in supermarkets and hospitality.
Factor in other complications - the disparity between public sector and private sector pay, and the shrinking of the UK labour force and it is clear that there is considerable disruption still to come.
Basic pay falls at fastest rate since records began in 2001 when rising prices are taken into account.
Graham Watson's insight:
And in an entirely unrelated story - the rate at which real pay is falling is the fastest on record - and records began in 2001, which seems historic given some of the "since records began stories" this week.
The net result is that basic pay is 2.8% lower than a year ago, although, surprise, surprise, private sector pay growth is 7.2% from March to May.
The real worry is that we're entering a two-speed economy - and that number experiencing in-work poverty are going to rise significantly.
The government will deliver "sound public finances", the new chancellor will say in a speech.
Graham Watson's insight:
The Chancellor has pledged to tackle rising prices - by delivering "sound public finances". I'm not entirely certain I follow his chains of reasoning?
Is he suggesting that the current inflation is caused by demand-pull factors, and how does this square with his previous pledges as Education Secretary to significantly increase teachers' pay?
And doesn't sound public finances smack of austerity? And what does it mean for the much vaunted "levelling up"? Lots of unknowns, or, dare I say it, incoherence here...
The result of the Pay review Body could become economic dynamite.
Graham Watson's insight:
Just for you to be aware of: public sector pay is going to be front and centre of the economic agenda in the months ahead given the cost of living crisis.
It seems as though the government are on a sticky wicket here.
An agreement over public sector pay doesn't mean the pressure is off altogether.
Graham Watson's insight:
Faisal Islam's take on yesterday's pay deals - he, rightly in my view, notes that whilst it might be a sticking plaster for now, it hasn't resolved many issues for public sector workers - not least in relation to working conditions, recruitment and retention.
The prime minister says he would make the "responsible" decision to keep inflation under control.
Graham Watson's insight:
The next source of political conflict in the UK is going to be whether or not the government accepts the decision of independent pay review bodies or not. Apparently, the figures cited suggest that many public sector workers have had a 6% pay deal recommended but the Prime Minister has indicated that they might not get this, largely on the grounds of its inflationary effect.
Unfortunately, yesterday's news that pay has risen by 7.3% in annual terms means that, should the government ignore this independent decision, further strikes are likely. But then again, from a political perspective, I think the government wants this to raise the spectre of the union bogeyman prior to the 2024 General Election.
Survey figure is highest in at least a decade as businesses face pressure to help staff in cost of living crisis
Graham Watson's insight:
It seems as though UK workers are going to be getting another year of relatively high pay rises, around 5%, as a result of labour shortages. according to the Chartered Institute of Personnel and Development (CIPD). However, expectations for public sector pay rises are lower.
In normal circumstances, pay rises above 4% are seen been many as being inflationary, but these aren't really normal circumstances.
Exclusive: Treasury sources say chancellor is resisting pressure from MPs who want taxes to start falling well before next election
Graham Watson's insight:
It seems that the Budget might be bloody - it's almost as if the Treasury are already starting to 'spin' a low tax version, presumably on the basis that if they can't afford to increase public sector pay, then they can't lower taxes either.
Of course, free marketeers would say that public sector workers don't deserve higher pay because in the public sector there are fewer incentives for them to be efficient, not least when their jobs and pensions seem so secure as to encourage 'laziness' (note: you'll not catch them saying it, but it's what a number of them think!).
And from a political point of view it's interesting, because I suspect the same group see lowering taxes as their only chance of winning the next election.
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CEOs pass milestone nine hours earlier than last year, with pay up 39% on January 2022
Graham Watson's insight:
Your annual reminder that there's still remarkable income inequality in the UK, with FTSE bosses having, on average, been paid more in three days than the average worker. And CEOs have reached that figure nine hours earlier than in 2022.
So, what should we make of this? But gut instinct is 'not much' - it's a nice headline - but beyond this, it's an interesting topic in the light of the ongoing pay disputes, and the division between public and private sector pay.
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Ted Heath and Jim Callaghan paid a big price for taking on the trade unions, and once again voters are blaming the politicians
Graham Watson's insight:
Larry Elliott's take on the ongoing strike action - he suggests that we're on the brink of another 'Winter of Discontent' but that circumstances have changed, so that the unions have a stronger hand than they've had for a while, and that, at the moment, public opinion is with them.
He also bursts the current government narrative that the the 'independent' pay review bodies can't be overruled, although it seems that his Chancellor, and former Health Secretary, Jeremy Hunt, has done exactly that in the past.
Thus, it would seem that the government is in a bind. In effectively trying to impose an incomes policy at a time when we've got the richest Prime Minister ever, and when people are well aware of how public sector pay has been squeezed over time, the government isn't courting favour. And when we last had a Winter of Discontent, it didn't end well for the party in government.
Workers are battling for higher wages, while the government and employers want to temper increases.
Graham Watson's insight:
Simple answer to a simple question: no. And why should they?
If I were a public sector worker, I would be on strike, pointing out the number of pay freezes that I've endured in the past decade, and trying to ask people to look beyond the government's "independent pay review" body defence, by suggesting that circumstances have changed dramatically since they reached their judgment and thus that the proposed pay increases are unfair. I'd also be looking at comparing what has happened to MPs and ministers salaries over the past decade, and private sector pay, with public sector pay.
Objectively, looking at all of these factors helps explain why so many workers are on strike and presents a compelling case. The narrative that public sector pay increases will drive inflation is, for the most part, utter tosh.
This is an extract from our First Edition newsletter
Graham Watson's insight:
As a counterpoint to lots of coverage of the current wave of strikes, it's worth reading the following analysis from yesterday's Guardian. Did you know for example that real private sector pay is 4.3% higher than it was in 2010, whereas real public sector pay has fallen by the same amount.
Factor in the overblown claims about how increasing public sector pay would be inflationary, which it isn't relative to the current effect of energy prices and you might have a different view of industrial action.
Wage growth continues to lag behind rising inflation as unemployment rate rises slightly
Graham Watson's insight:
The Guardian's take on the latest labour market data and the news that real pay is falling. Given the discreprancy between public sector pay and private sector pay, it's unsurprising that there's so much strike action at the moment.
Analysis: Rising inflation likely to lead to more strikes and falling spending unless government acts
Graham Watson's insight:
Larry Elliott's take on falling real pay - he's stating the obvious here. Are labour markets in desperate need of a reset? If public sector pay lags behind private sector pay, where are future generations of doctors, nurses and train drivers going to come from?
NHS staff, teachers, police and the armed forces are to find out details of this year's wage rise.
Graham Watson's insight:
And then to segue into two more stories - it seems as though the efforts of key sector workers in the pandemic are going to go largely unrewarded. Again. The public sector pay offer is announced today and will, once again, show the unwillingness of the government to pay them appropriately.
More short-termism - imagine promising to increase the numbers of policemen, doctors, nurses and so on, and then offering them ever lower real pay. You'd have thought the Conservative Party had at least some semblance of economic understanding - although increasingly I fear not...
There's criticism of the move as ministers warn workers not to expect pay rises to match increasing costs.
Graham Watson's insight:
And here's this week's smoking gun: the government are prepared to restore the triple lock on pensions and see them rise by 10%, rather than offer public sector workers anything approaching a pay award in line with inflation.
Of course, the cynic would suggest that one of these groups votes a particular way, and the other votes another.
I would simply say it's scandalous short-termism, designed to avoid dealing with the underlying problems of the pension system, and the fundamental distributional unfairness of the last 40 years.
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Today's Guardian editorial looks at the public sector pay deal and worries that it's only a short-term solution, and that longer term there's going to be a need to increase taxation to pay for properly funded public services.
And this, politically, is a significant dividing line: we've already got taxes at a historically high level as a proportion of GDP, and many people think that any further increase will be unpalatable.