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Ian Brinkley
Economic Advisor
Ian Brinkley

TUC can aim for higher pay or to keep as many jobs as possible, but not both

Authors: Ian Brinkley Ian Brinkley

12 September 2012

The TUC was yesterday (11 Sept) reported to be moving towards backing co-ordinated industrial action to increase public sector pay. This is of course a perfectly legitimate goal for trade unions to pursue. Trade unions have also committed the TUC to campaign for maximising the number of jobs in the public sector in order to sustain quality public services. These are also legitimate goals. However, these objectives are not, under current circumstances, compatible. Unions can either campaign for higher pay for their members or keep as many of them as possible in jobs in order to preserve services, but not both.

Pay policies invariably impact more on some groups of public sector workers than others. However, this particular pay policy impacts on low paid public service workers less than on better paid workers. Those on less than £21,000 are guaranteed an increase of £250 – not much, but when every penny counts even modest increases matter. Moreover, even with a pay freeze, the average pay-bill per head is still rising as people move up pay spines through progression and promotion. The OBR’s latest forecast, published in March 2012, shows that in 2012-2013 the public sector pay bill per head is assumed to grow by just under 1%, and then to increase by 2.5 - 3 % in each subsequent year of the forecast period through to 2016-2017. The pay policy also allows the NHS and schools to recycle the savings from pay restraint into sustaining posts rather than contributing to deficit reduction. The OBR estimates that if implemented in full, this measure could save up to 50,000 jobs. It is not clear how this would be compatible with a policy that prioritises higher pay.

Unions might argue that the sum of money is not fixed, and could be expanded if the government relaxed fiscal tightening. This is unrealistic. There is a good case to be made for relaxing the deficit to invest more in the physical and electronic infrastructure, in science, design and technology, and in more and better quality apprenticeships for young people. These are all measures which can be plausibly presented as enhancing competiveness and restoring growth. No OECD government is going to be able to say with any credibility to the international markets or to other governments that they are easing up on tackling the deficit in order to pay public servants more.

I have to admit at this point to some self-interest. I worked for many years at the TUC and eventually became Chief Economist and then Head of the Economic and Social Affairs Department.

What would a better approach look like? I would like to suggest three changes.

Firstly, the unions could offer a trade-off of continued pay restraint against guarantees on the pace and scale of workforce reductions and active engagement in developing longer term and innovative responses to increase public sector productivity. This might be on the lines of the Social Pact operated with some success by the Irish trade unions, but also drawing on recent experience in the UK car industry, where unions were able to come to deals with employers in order to preserve jobs. The government might reject such overtures or say they are unworkable, but the unions would be in a much stronger campaigning position as a result.

Secondly, the annual Congress consumes valuable resources and attention and does not help unions develop a more strategic approach – holding the Congress every other year or even every four years would encourage more long-term thinking and debate.

Thirdly, the unions could form an arms-length policy research body which, free of the short-term political constraints of General Council oversight, would be able to develop imaginative long-term thinking on the role of unions in the future labour market and the modern economy and articulate well thought-out, responsible and realistic policy suggestions that might command wide support. The TUC has in place high quality and experienced research capacity and some of that could easily form the core of such a body.