A Spring Statement to give Britain a Pay Rise? Think Again.

“Workers are enduring the longest squeeze on pay in 200 years. Against almost any metric of inflation real earnings are falling.”

By Adrian Weir

Activists and supporters involved with labour rights campaigns and think tanks have long pointed out that the precipitous collapse in the coverage of union negotiated collective agreements has been accompanied by a long term collapse in working class livings standards.

Collective bargaining – at its highpoint in 1980 meant that 86% of UK workers went to work on union negotiated terms and conditions, that figure has fallen to 20% today.

The impact of the collapse of the coverage of collective bargaining is that the share of GDP going to salaries and wages has fallen from a high point of 64.8% in 1975 to 59.9% in 2021.

As Prof Richard Wilkinson has noted the simultaneous collapse of collective bargaining and working class living standards are not merely correlated but the latter is causally related to the former.

Never let anyone say that there should be no return to the 1970s – the centrist and right wing political forces strongly make that argument because in the 1970s a much greater share of the national cake was going to working people and their families.  In terms of share of national income it was a much more equal decade, never to be repeated during the neo-liberal era from 1980 onwards.

Of course, the whole point of the neo-liberal project was and is to restore to the 1% that which had been taken from them during the years of social democratic advance after the Second World War.

Fast forward to 2022 this chronic problem for workers’ incomes is now compounded by an acute crisis brought about from multi-sources – the fallout from the 2008 financial crash, the Covid pandemic and for the past few weeks, Russia’s invasion of Ukraine.

Workers are enduring the longest squeeze on pay in 200 years. Against almost any metric of inflation real earnings are falling. Measured against RPI real earning have fallen by 3.8%, the biggest drop in eleven years; against CPI they have fallen by 1.8%, the biggest drop for eight years.

Up to the end of last year pay grew by just 3.6% which compares with pre crisis average per annum wage growth of 4.25% in the decade up to 2008.

Rishi Sunak, the Chancellor will make his Spring Statement on March 23rd against a backdrop of inflation at 5.5% – a 30 year high which even the Bank of England predicts will hit 7% by April, National Insurance increases from April and rocketing energy bills.

Although the war in Ukraine is worsening the economic crisis, television’s financial pundit Martin Lewis is correct to remind us that many of today’s economic ills predate the war. The war will inevitably be used as cover for further attacks on working class living standards.

The obvious example is the energy price hike. Before the war we learnt that fuel bills were to massively increase because the Government via Ofgem has raised the energy price cap by 54%, that’s an average increase of around £600 for every household in Britain but it’s speculated that the energy price cap could be raised again in October by possibly 20%.

There are options open to the Chancellor that he could take next week short of renationalising the gas and electricity companies. In France, government intervention has limited price rises to just 4% which will mean, for example, that energy giant EDF will take a €8.5 billion hit as a consequence of that measure.

Will Sunak use the Spring Statement to take on the private UK energy companies? I think we all know the answer to that question.

From April this year National Insurance contributions are due to rise by 1.25% allegedly to fund the Health and Social Care levy. However, because recent public sector borrowing has been less than was forecast, it could be argued that the Chancellor has a £13 billion ‘windfall.’ He could use his Statement to announce the £13 billion will be used to fund the levy which co-incidentally needs that amount in its first year and thus he could cancel or at least defer the increase in National Insurance contributions.

The venal and self-publicist Prime Minister and the Chancellor who is drawn from the ranks of the masters of the universe, aka merchant bankers, are reported to have set their faces against any delay in increases to National Insurance Contributions (NICs) , hardly surprising because, as Richard Murphy points out, National Insurance is a regressive tax so would impact on working people the hardest, or put another way, the wealthiest the least.

What will the £13 billion be used for? There is apparently no submission from the Ministry of Defence for increased spending but those in the ‘war party’ will use the conflict in Ukraine to push for more money for the military with little in the way of a contrary position from the Labour Front Bench.

Labour’s defence lead John Healy MP is on the record as saying that he anticipates there will be a “big boost to defence” in the Spring Statement and “the Government must respond to increased threats to our security in Europe.”

So will the Spring Statement be used to give Britain a pay rise?

Clearly not; just looking at two issues where there are options available to the Chancellor – energy prices and NICs – the Tory solution will compound the long term decline in working class incomes and will drive many who are already struggling into severe poverty.

To give Britain a pay rise Labour should campaign for:

  • National Minimum Wage to be increased to £15/hour
  • Increased Statutory Sick Pay – up to £320/week
  • Reversal the Universal Credit cuts and ‘auto-enrol’ everyone into the Universal Credit scheme so that the 1.3 million people missing out on payments worth an average of £7,300 pa receive what they’re entitled to
  • Public ownership of energy, water, transport and posts – stop the corporate sector siphoning off public money
  • Decent jobs for all – no more precarious working, all people at work to be designated as workers
  • Crucially and most importantly, statutory support for sectoral collective bargaining so that union negotiated collective agreements can lead the way in taking a justified bigger share of national income for those who by their labour created it.

  • Adrian Weir is standing for re-election as a London Representative on Labour’s National Policy Forum (NPF).
  • CLPs have until 17th June to nominate NPF candidates – to do this you will need their membership number. Adrian Weir’s membership number is A175718.
  • Please show your support for Adrian’s campaign by following his twitter @AMJWeir.
Chancellor of the Exchequer Rishi Sunak holds up the red box outside Number 11 on his first Budget. Picture by Harriet Pavey/ No 10 Downing Street. Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

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