“We need a programme for securing stable, long-term investment in our infrastructure, but also in our people, so we can mobilise our whole economy to tackle the challenges we face of poverty and inequality, and the rising challenge of climate change.”
By John McDonnell MP
It is important for parliamentary debates to reflect on what is actually happening outside the House of Commons. In the discussions so far around the Autumn Statement—in the statement, in the debate yesterday and in some of the debate today—there has been little mention of wages.
It is important that we understand why we are faced with the prospect of up to one million workers taking industrial action over the coming months.
After the chaos of the last two months, the obvious aim of the Chancellor was to reassure the markets that, as he described it, the grown-ups were back in charge and that he had a plan to rebalance the budget. He especially wanted the markets to know that the Bank of England and the Government were marching in lockstep, as he put it. It is true: they are marching in lockstep, but the problem is that they now have a common agenda that combines austerity and increases in interest rates. This is pushing us ineluctably into a deepening recession.
We all hope that this will be a shallow and short-lived recession, but there are nevertheless large numbers of people out there who after 12 years of austerity just do not have the financial resilience left to avoid the hardship that this will inflict upon them. Part of that is about wages. I have listened to the various debates and heard the statistics being bandied about, but just for the record—because sometimes statistics cannot lie—wages today are lower than they were in 2007, and what is worrying me is that they are not forecast to reach 2007 levels again until 2028. That is 21 years of pay cuts.
The number of workers earning below the real living wage is expected to rise to 5.1 million next year. With inflation at 11.1%—I hope it is declining but we cannot be sure—we are experiencing the largest drop in living wages on record. Average wage rises in the private sector are 6.6%, but just 2.2% in the public sector. When the Chancellor spoke about nurses, he urged them to avoid taking industrial action, but we need to understand why they are even thinking about it. According to the TUC, nurses’ pay in real terms is £2,500 lower today than it was in 2010, so the Royal College of Nursing has asked for RPI plus 5%, which would meet inflation this year and restore some of the drop in wages that they have experienced.
I have been looking at the stats again, and what is interesting is that we think we are one of the richest nations on earth—the fifth or sixth biggest economy on the planet—but that wealth is not shared. By GDP per capita, we barely make the top 20 and we are below the average of the 19 countries in the euro and below the OECD average. As a result of that, people are suffering out there.
I raised the issue of housing with the Chancellor last week. I always look at housing as the canary in the mine to judge how people are faring. When people budget, they usually prioritise keeping a roof over their head. The figures show that, last year, mortgage possession orders increased by just under 500% and landlord possession orders increased by more than 160%, which shows that people are on the edge. Unless wages increase, more will fall over that cliff edge.
The Chancellor made a great deal about increases to NHS and school budgets, but it must surely dawn on Members that, if the wage settlements for nurses and teachers go anywhere near what they need and what they are asking for, those showing increases will be completely wiped out. Other departmental budgets fare even worse: they are expected to swallow inflation and wage cost increases in total.
I want the House to understand the situation people face. The energy cap is being lifted to £3,000, tax thresholds are being frozen, which will draw more people into tax, and mortgages and rents are rocketing. Many more people are asking how they will get by in this coming period. There is a growing atmosphere of frustration and, for those in in-work poverty, a growing atmosphere of absolute desperation, which is why increasing numbers of people feel they have little option but to demand a pay increase that at least matches the rate of inflation. If that means a pay offer is rejected, many of them feel they have no other option but to support industrial action. As we know, people do not take industrial action lightly.
If NHS managers, headteachers and other public service leaders try to accommodate inflation-proofed wage settlements in their existing budgets, the inevitable result will be cuts in services. Any of us who visits an A&E department anywhere in the country will see how stretched the NHS is at the moment, and how dangerous any further cuts would be. Ask any headteacher about their school’s budget, and they will say that, after 12 years of austerity—no matter what has been said today about increases—job cuts are the only remaining method to balance their budget if they are to meet pay demands.
It has been calculated that £100 billion of central Government support has been taken away from local government over the last 12 years due to central Government decisions. We now have a situation where local authorities, Tory and Labour alike, are basically saying that they are on the edge of bankruptcy and that there is no way they can accommodate increased wages to match inflation.
My simple message is that what is missing from this Budget, and has almost not been debated, is the Government’s inability or lack of willingness to inflation-proof wages in this coming period. That will almost inevitably result in escalating industrial action, which I will support because I do not know what else people can do to try to secure a pay deal that lifts some out of poverty and protects others from dropping into poverty.
The Budget also demonstrates that there seems to be a deep failure in Government to comprehend the consequences of the last 12 years. As we have heard in today’s debate, one consequence is that more and more people are on the edge and, unless there is some support, particularly on wages and benefits, they will be pushed over that edge. For the first time since the 1930s, a UN rapporteur on the state of this country is talking about destitution.
So, we need an alternative programme for government, which is being developed by those on the Labour Benches at least. We need a longer-term plan, rather than short-term decision making, one based on redistributive taxation that will fund our public services and address the poverty and inequality that scar our society. We need a programme for securing stable, long-term investment in our infrastructure, but also in our people, so we can mobilise our whole economy to tackle the challenges we face of poverty and inequality, and the rising challenge of climate change. I was hoping to hear that from this Budget. That has not happened.
The only way that debate will seriously happen in the coming months is if we have a general election.
- The article was originally published by Labour Hub on November 25th, 2022 and is based on a speech John gave in the House of Commons on November 22nd. You can watch the video here.
- Over the next two weekends, John will be speaking at two important events in London:
- CONFERENCE: FROM PENTONVILLE TO P&O: union rights & tory wrongs – campaigning for free trade unions, Saturday 3rd December, 11.00, Hamilton House, Mabledon Place, London WC1H 9BD. Speakers include: Frances O’Grady, TUC; Dave Ward, CWU; Mick Lynch, RMT; Laura Pidcock, People’s Assembly and many more! Register here.
- Solidarity * Struggle * Socialism – the Arise Festival National Conference takes place on December 10th at Conway Hall 25 Red Lion Square, London, WC1R 4RL. Speakers include Sarah Woolley, BFAWU General Secretary; Richard Burgon MP; Mick Whelan, ASLEF General Secretary; Nadia Whittome MP; Zita Holbourne, Black Activists Rising Against Cuts (BARAC); Heidi Chow, Debt Justice; and many more! Register here.