Lies and more lies over pay

Chancellor Alistair Darling has joined forces with Mervyn King, the Governor of the Bank of England, to admit their inability to prevent spiralling prices and deepening recession. Except for one thing. In order to protect corporate profits they have launched an assault on the living standards of public and private workers by denouncing any attempt to keep pay levels in line with inflation.

They used a twisted, but expected logic. Whilst the problems in the economy are due to global conditions beyond the control of government, this doesn’t prevent them from holding UK workers responsible for causing inflation. Darling and King warned of the dangers of a return to the 1970s, when, they allege, big wage increases were the cause of spiralling price rises.

The facts, however, are stronger than the misinformation (and ignorance) of the defenders of capital within New Labour and the Bank of England. Stephen Roach, head of Morgan Stanley Asia, is one of the world’s most respected investment bankers. Writing last week he had to admit that things were different: "Today’s stagflation risks are very different from those that wreaked such havoc 35 years ago. Unlike in that earlier period, wages in the developed economies have been delinked from prices. That all but eliminates the automatic indexation features of the once dreaded wage-price spiral – perhaps the most insidious feature of the ‘great inflation’ of the 1970s."

And a year and a half ago, Roach really showed what had happened to wages in the period since the 1970s when he wrote: "At work is a powerful asymmetry in the impacts of globalisation and global competition on the world’s major industrial economies namely, record highs in the returns accruing to capital and record lows in the rewards going to labour." In plain English, the real value of wages has fallen over the last three decades for many workers, while profits (and bonuses) have gone in the other direction. Not our fault then.

Meanwhile Dave Prentis, general secretary of public sector union, Unison, grabbed some headlines for himself, threatening to bring down Brown’s government over pay. Prentis is worried that his members are deserting not just New Labour, but also deserting the unions which have sat on their hands for decades as jobs have been exported and living standards fallen.

But behind the posturing, Prentis is still trying to keep his members tied to New Labour. His conference speech ended with these tired sentiments: "Gordon Brown and Labour need to become, once more, the party with vision, the party that marks itself out as the champion of working people, of social justice and fairness, of the poor and the vulnerable: the party of high quality, properly funded public services, finally breaking the costly chains of privatisation."

This is not going to happen and Prentis knows it. His members are angry because Unison refused to oppose a three-year pay deal in the NHS which, with inflation going through the roof and 40% energy price rises to come, looks and feels like a pay cut. Unison’s rank-and-file will have no confidence in Prentis’s drum-banging while cosying up to New Labour at the same time. They are going to have to force the union leaders to act, and then watch them like hawks, in order to defend their standard of living. When the anger of Unison and other low-paid trade unionists blows, as it surely will, it could easily sweep both Prentis and New Labour away with it.

Gerry Gold
Economics editor