New Labour wants pay cuts

It was ever thus. When the capitalist economic system plunges into crisis, the burdens are expected to be carried by those who have to work for a wage. That is the real significance of chancellor Alistair Darling’s plan announced today to impose three-year pay deals on over 5.5 million public sector workers.

He wants to tie teachers, nurses, NHS, local government workers, civil servants and others into one-sided agreements that impose below-inflation settlements. His plan comes hot on the heels of prime minister Brown’s announcement at the weekend that the norm for pay rises should be 2% while inflation is currently running at 4%.

With fuel, food, housing and transport costs continuing to rise – and these are the main items of spending for ordinary households – there is little sign that inflation will fall in 2008 or subsequent years. So, in effect, working people are being asked to take a cut in real take-home pay to help an economy they have no control over and a New Labour government that is tied hand and foot to big business interests.

A 2% rise is fine, of course, if you’re the prime minister on £188,849 a year. An increase of that order would come to over £3,750. A cabinet minister struggling to get by on an annual salary of £137,579 could always do with an extra £2,750. But for most people on average salaries, already struggling to pay their bills, an effective cut in pay is simply unacceptable.

Even the pussycat trade union leaders are concerned that their members will react angrily to the news. The TUC has attacked the 2% pay target arguing that ministers are "on a collision course with six million public servants" because the deal represents a significant cut in living standards. General Secretary of the TUC, Brendan Barber, said: “The problem is last year we saw the government impose pay deals of only around 2%. Inflation was running at over 4%, so millions of public service workers saw themselves facing a real cut in their living standards.”

Karen Jennings, head of health at Unison, whose leaders have gone out of their way to support New Labour’s anti-working class policies, said any three-year pay deal “would really need to be a very decent, fair award” and open to review if conditions changed. Whether these noises will be translated into action to defend living standards is another matter, but the union leaders are clearly sitting on top of a volcano.



Chancellor Darling is politically economical with the truth when it comes to justifying the 2%, three-year deals. He claims it will give workers certainty about pay rises and help reduce inflation. In reality, Darling is trying to patch up a growing hole in government finances that results from the growing financial and economic crisis. Revenue is in decline and government departments are preparing to make substantial cuts that affects everything from the arts to NHS spending. The government is even preparing to deny prison officers the right to strike to get their way.

When it comes to big business, however, there is a different reaction. Northern Wreck – sorry, Northern Rock – has received over £25 billion in a futile effort to keep the mortgage bank afloat with no guarantees that taxpayers’ money will be returned. There are funds for reckless and wasteful wars in Iraq and Afghanistan and for the “war on terror”, which has seen staffing at spy agency MI5 double.

All the sacrifices in the world will not put the wheels back on the global capitalist economy. A period of growth funded by large-scale debt and borrowing has come to an end. The government is hardly in control of the situation, which is dominated by the operation of blind market forces. It will take some doing, but if rank-and-file union members can force their leaders into action the government could be facing an autumn and winter of discontent.

Paul Feldman
AWTW communications editor