The pay policy pressure cooker

As Fair Pay Fortnight begins, the unrelenting ferocity of this government’s assault on the pay of working people is plain to see.

Using public sector pay as a battering ram for driving down the wages of all workers, it set course immediately in 2010 with a two-year pay freeze that delivered massive blows to the living standards of public sector staff between 2011 and 2013. A year later, it bolted on a pay cap of 1% to run from 2013 to 2015, but not content with that the government also put forward proposals to break up UK wide pay scales to drive down pay in the UK’s poorest regions.

UNISON was at the forefront of opposing those proposals and in 2012 they were largely rejected by the pay review bodies responsible for assessing salaries across large sections of the public sector. But the government returned in 2013 with an extension of the pay cap to 2015-16 and an announcement that it intended to phase out all public sector pay progression based on length of service.

Last week’s Budget did nothing to lift the cap and in recent days we have seen the callous decision by Jeremy Hunt to deny even this 1% to huge swathes of health staff, along with the vast majority of local government workers receiving yet another below inflation offer.

The effect of these policies is that the average worker is estimated to have lost around £4,000 in the value of their pay packet over the last four years. For some public service workers, the effect has been even sharper, with inflation draining 16% out of the value of their salaries since 2010.

The consequences can be seen in communities across the length and breadth of the UK, in the form of increasing personal and family debt affecting workers’ daily lives with weekly battles to meet the rent, the mortgage, the food bill and the energy bill. Between 2009 and 2012, a further 1.4 million workers fell below the living wage threshold and by 2014 a total of 8.8 million people (that’s 18% of the total UK adult population) were in serious debt.

When this all began we were told that “pay restraint” was a necessity to return the economy to growth and tackle government debt. So how’s the government been doing on those fronts? Well, the economy is actually still worth less than it was six years ago and the government’s programme of cuts has locked us into a downturn that has lasted almost twice the length of any downturn since the Second World War. Meanwhile, government debt has increased by £370bn since the Tories arrived at No 10 and has now hit over £1.2 trillion.

To justify the specific attack on public sector pay, the Tories and their attack dogs in the media and right-wing “think tanks” drip fed us a constant diet of stories claiming to show that public sector workers were paid more than private sector workers and try to turn worker against worker.

UNISON consistently rejected these claims as they were based on false comparisons between different types of jobs in different types of organisation and now the truth has finally come out. The Office for National Statistics has taken on board criticisms, changed the way it compares public and private pay rates and the mythical “public sector pay premium” has evaporated..

Of course, Tory “restraint” was never meant to apply to the rich, so the directors of the biggest private companies in the UK enjoyed an average pay increase of 27% over 2012, right in the middle of the pay freeze policy, and shareholders are looking forward to a 27% rise in dividends in 2014.

Two news stories over the last month really summed up the poverty of this government’s vision.

In February, Barclays Bank shamelessly announced that it was cutting 12,000 jobs at exactly the same time as it increased its bonus pool for top executives by 10% to £2.4bn.

A few weeks later, an Age UK study  revealed that 168,000 older people have stopped receiving help with essential tasks such as eating, washing and getting dressed as a result of cuts to social care.

The problem for the government is that the great majority of people in Britain recognise this picture  of declining living standards for the majority and both UNISON’s Worth It Campaign   and the TUC’s Fair Pay Fortnight are set to raise awareness of the impact of government pay policy on this decline.

The pressures on household budgets are certainly not going to go away, with inflation predicted to rise by around 3% a year over the next four years, which means that the cost of living will be around 16% higher in 2018 than it is today.

But the pressures on the government’s pay policies are also set to rise. No economy remains in a downturn forever and with the value of the economy predicted to grow by around 2.5% this year (or 2.7% if you believe the Office for Budget Responsibility), the government’s determination to stop working people sharing in the wealth generated becomes ever more untenable.

Delivering fairer pay is not only a matter of justice for workers who have endured years of declining living standards, it is a necessity for the health of the British economy – bigger pay packets mean greater demand in the economy, more investment and growth.

Dave Prentis is General Secretary of UNISON