Senior lawmakers in the Boris Johnson administration say the imminent clash with public sector workers is one of the greatest risks to Britain’s economic and political stability, and a wave of industrial activity is brewing alongside anger over wage increases.
A nationwide strike for rail service disruptions next week was billed as the start of a “summer of complaints.” Trade unions representing teachers, junior doctors, civil servants and local authorities in the public sector are moving towards strike action. Beenman and the bus drivers have already gone on strike, and criminal lawyers and postal workers are expected to vote.
Ministers are concerned that wage wars with public and quasi-public sector workers who are experiencing much larger real wage cuts than the private sector could plunge a sluggish economy into recession or puncture government spending plans.
A cabinet minister said the government is walking a “delicate tightrope” to cut wages and avoid the vicious cycle of inflation without forcing a multi-sector strike. It is a chaos that risks shutting down the entire economy,” he said.
Another high-ranking minister said that the government will have to “maintain a good line no matter how difficult it is” in salary negotiations. I saw it in the 1970s.”
Economists say the direct impact of the strike on the economy will be limited. Similar to the 1970s, although industrial unrest has spread from coal miners to gravediggers, unions can no longer shut down the economy and far fewer union members are concentrated in the public sector.
But at a time when many Conservative MPs want to prioritize tax cuts over additional spending, public services and public finances are fraught with problems.
Wage deals for public sector workers lag far behind what is being proposed for the private sector, where many employers are paying big bonuses to retain their understaffed staff. According to official data, average gross wage growth in the private sector was 8% in the three months to April, while average wage growth in the public sector was 1.5%, one of the largest gaps on record.
The government has been trying to keep the imminent payroll settlement at 2% and in some cases 3%, arguing that any further it will become the benchmark for inflationary payroll transactions across the economy.
Paul Johnson, director of the Institute for Fiscal Studies, said that the Treasury’s implementation of the cap would double the real wage cuts experienced by many public sector workers since 2010 as inflation nears double digits. This will cause major problems with recruitment. In addition to the risk that the strike will close schools and hospitals, the maintenance remains.
A pay raise that closely matches inflation would cost an additional £10 billion. Because the spending plan was set in cash terms, when inflation was expected to be much lower, it was unable to keep pace with inflation without hampering the provision of public services unless the Treasury sought more money.
“This is the biggest problem and most difficult decision for government this year,” said Johnson of IFS.
A rail strike next week will do less direct damage to the economy than past conflicts (most goods are transported by land and many commuters can work remotely), but business leaders are deeply concerned about the prime minister’s willingness to go to court .
“We expect the economy to be almost in recession. It won’t take long for us to plunge into a recession. . . “We’ve been in politics for weeks with a country that is facing a summer stalemate,” said Tony Danker, executive director of CBI Business, an employers’ group that described the rail strike as “particularly regrettable at once” said. . When the economy is under such pressure”.
Neil Carberry, CEO of the Recruitment & Employment Confederation, said strikes could become more frequent in the private sector as well as costs soaring for employers and workers alike. There will be conflicts in the next year or two than they have been in decades.”
Business groups add that union members are reporting a sharp rise in union activity, but private sector employers have often proven more willing to negotiate wages before disputes lead to industrial action.
Even where unions do not participate, workers are increasingly able to secure better conditions and better wages in the labor market, where there are as many vacancies as there are unemployed.
The Bank of England said on Thursday that businesses were still struggling to find employment despite slowing economic growth and were offering payroll deals an average of just over 5%. rose.
Brian Reading, a former economic adviser to Prime Minister Edward Heath ahead of the miners’ strike in 1972, argued in a recent paper that the decline of unions would not prevent workers from raising wages during times of widespread inflation. did. shortage of labor.
“Private-sector unions are less aggressive today, but they are stronger in the scarce skilled workers,” he wrote. “Public sector workers have popular support. . . There is no more cheap labor.”
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