Public Sector Pay Bumps Were Always on the Cards

Though Keir Starmer sits brooding amongst the ruins of his cancelled holiday, he’s at least taking the opportunity to do some work. It’s been six weeks since Labour entered government (two of which were dominated by racist rioting across much of the country), but the new administration has already made some big decisions when it comes to the sticky issue of public sector pay.

Yesterday it was announced that the government and the train drivers’ union ASLEF had reached an agreement over pay. If accepted by the membership, train drivers will receive a 14.25% pay increase – backdated for the last two financial years.

Though the train drivers’ salary bump is likely to cost over £100m for the taxpayer, it’s a pittance compared to the cost incurred by transport strikes in the last few years. The precise sum is contested: the government claims strike action knocked £500m out of the economy in 2022-2023; the RMT puts the figure at £5bn between June 2022 and June 2023. But however you look at it, strike action is more expensive than this settlement.

The government’s proposed pay agreement with ASLEF comes hot on the heels of a 22% pay offer to settle the junior doctors’ dispute, and a public sector pay increase of 5-6% for six million workers. This is unlikely to be the end of it. GPs are still in dispute, demanding an 11% pay rise, and college teachers are lobbying to be included in public sector pay awards. With 40% of universities in deficit and higher education workers still in dispute over pay, pensions and workload, the higher education sector is in real financial trouble. Labour is far from putting all the very expensive problems to bed (expensive problems which, as ministers will have no qualms about reminding you, were inherited from the Tories).

Was any of this in Labour’s “fully costed” manifesto? Was it heck. Though Rachel Reeves & Co. were giving it the big one, claiming they wouldn’t know the state of public finances until getting into office, and could only promise to ‘get round the negotiating table’ on public sector pay, even idiots could see they were inevitably going to have to spend more money than had been laid out in the manifesto. There was no route to resolving the staff retention crisis in the NHS, or bringing disruptive strike action to an end, without significant pay awards. I do so hate to say ‘I told you so’.

Labour’s supporters argue that some degree of obfuscation was necessary to get the party over the line: tax hikes or big spending pledges risk turning off the electorate, and Starmer was fighting for every single vote. Winning the argument is less important than winning power. However, there are also drawbacks to doing a volte-face the minute you get into office. Labour hasn’t divulged how these latest pay deals will be paid for – will it come out of existing budgets, tax rises, or changes to fiscal rules? And this vacuum has been filled by their opponents’ narrative.

With yesterday’s pay deal, the Conservatives are framing Labour as favouring the unions over pensioners. They’re using Reeves’ scrapping of winter fuel payments for most pensioners as a cudgel to beat the government – and there are signs that this argument has sympathy amongst parts of the electorate. Unless Labour comes up with an alternative story about where it’s getting the money for public sector pay bumps, voters will assume the government is robbing Peter to pay Paul. And that’s a kind of resentment that the right can thrive on.