Andrew Haldenby: We can't let public sector unions take us back to the '70s

30 April 2008

Yorkshire Post, Andrew Haldenby, 30 April 2008

THE TV programme Life on Mars wasn't expected to be one of the BBC's biggest hits. But it drew a massive reaction from viewers, enough to warrant a second series.

The reason is that the 1970s culture that it depicted seemed like a different world. People enjoyed being reminded, for example, that the uncomfortable and unreliable Ford Cortina was once the height of motoring sophistication.

But given recent events, we would be forgiven for feeling that the 1970s are still with us. This week, the trade union leadership attacked the Conservative Shadow Chancellor for his suggestion that employment laws needed further flexibility. Last week thousands of teachers went on strike over pay, closing schools up and down the country. Over the winter, even the police took to the streets in protests at the pay deal they had been offered.

In fact, for the last eight years most public sector workers have received generous pay increases. Teachers, for example, have enjoyed pay increases of three or four times the rate of inflation in some of those years. Many NHS workers have actually received more salary for doing less work.

It was possible to increase pay in this way because the Government was increasing the whole public spending budget. But the Government has now lost its appetite for general spending increases and so the public sector unions are faced with tighter times. My view is that the current wave of strikes is sabre-rattling on the part of the unions to test the Government's resolve.

Both the Government and the Opposition have said that the right response to the unions is pay restraint. They have said that the strikes must be beaten because the public finances simply cannot afford anything more generous. This is true, but it is nowhere near the whole answer.

On the one hand, it is not a sensible long term policy to increase pay to the point that the public finances can't afford it, and as a result impose an emergency pay freeze. This is a boom and bust policy that should be left behind.

On the other, it is too black and white. Clearly some people working in the public sector deserve higher wages and others do not. Compared to many private sector companies, there is very little connection between the quality of public sector workers' work and their pay.

Public sector pay is still agreed nationally which means that it is arguably too high (on average) in regions such as Yorkshire and too low in London and the South-East. This means that we don't so much need pay restraint as pay reform. Another memory of the 1970s is that the Government agreed wages for millions of private sector workers in national negotiations (fuelled by the famous "beer and sandwiches" at 10 Downing Street). The private sector has moved on because companies found that it made more sense to negotiate pay individually or in small groups. But the public sector is still stuck with the old model, which is just as obsolete as the Ford Cortina.

What is required is a move to a reformed public pay system which is decentralised and which has a much closer relationship between what people are paid and what they do. There are already some examples of this kind of thinking in the public sector, on which Ministers can build. For example, city academies, which are new kinds of schools set up by the current Government, don't have to follow the national pay scales.

In the last academy I visited, the result was that teachers were getting paid more than the national pay scales. From public sector workers' point of view, this is the best reason for supporting a new approach.

If the public sector workforce is to be more successful in future years, it will be smaller, more productive and of higher quality. In this environment most public sector workers will be generating the extra resources that will justify higher salaries.

Some people have said that politicians will be nervous of making this case because they don't want to antagonise the public sector unions. But this is exactly the kind of issue that requires real political leadership. That means recognising that short term unpopularity is a price worth paying to achieve major gains in the medium term. In any case, a brave politician who advocated meaningful change in this area may well find heavy support both inside and outside the public sector.

I wish I could say that the public sector unions would support reform. But when I debated the issue with Mark Serwotka, the general secretary of the Public and Commercial Services Union, he said that the Government should actually negotiate one pay deal with all six million public sector workers. This would be not so much turning the clock back as stopping it altogether.

Just before Tony Blair left office, he wrote an article in The Economist magazine summarising the lessons of his decade as Prime Minister. One of his conclusions was that: "Public sector unions can't be allowed to determine the shape of public services."

That should be the motto of reforming politicians on all sides as they think about how to deal with public sector strikes in the future.

Andrew Haldenby is the director of the independent think tank Reform.