As further strikes are announced, the words of Labour Group co-leader Cllr John Allcock in The Argus last month bear repeating:
As we approach this festive time of year, we often think of others and reflect on past times. It doesn’t feel so long ago that we were in lockdown clapping for NHS staff and other key workers. This was encouraged by the government and the national media, and we quite rightly praised our amazing NHS staff – doctors, nurses, ambulance drivers as well as other public sector staff such as refuse collectors and teachers for the work they undertook in extremely difficult conditions.
These difficult conditions haven’t gone away for our NHS staff who have experienced brutal cuts in pay, while being asked to do more in an under resourced system. NHS nurses’ pay has been squeezed by 8% on average, the Royal College of Nursing (RCN) says some experienced nursing roles have had real-terms wage cuts of as much as 20% since 2010.
Our health care workers are struggling to survive. We have all heard stories of nurses needing to use food banks. This is nothing short of shameful for a country that’s ranked the 6th wealthiest in the world. Nurses have had enough and for the first time in its history the Royal College of Nursing has called a strike.
The Office for National Statistics (ONS) says that private sector pay grew 6.9% between August and October 2022 while public sector pay grew 2.7%. This was among the largest differences ever seen between the two. But both figures are still below inflation – the rate of 10% at which prices are currently rising. The ONS also demonstrated that over the last decade, the wealth of the richest 10% of households has grown 574 times faster than that of the poorest 10%.
Rishi Sunak and his Conservative Government are condemning the strikes, so far refusing to talk and find a negotiated settlement. They are consistently running the line that inflation will rise and the that the difficult economic environment (that they caused) will only get worse if wages rise.
It’s interesting how this economic convention that wages drive inflation is promoted. Let’s look a bit deeper. The inflation we are seeing is caused by several other factors:
- the supply chain disruption caused by Covid;
- the reduction in the workforce which impacts on productivity;
- the chaos of Brexit; and
- the fallout from war causing high energy and food prices.
We often forget that money does not just disappear. When one person spends it another one gets it. But big business does profit.
Here is a simple example I saw that helped me understand this. A company charges £100 for its product. The split of that £100 was £40 for bought-in products for resale, £40 to the company’s employees and £20 to profit. With inflation, the company’s supplier increases its prices by 10%, so it has to pay £44 for the products it buys in. It then claims this means it must increase its own prices by 10% as a result. So, it ups the price it charges to £110.
Now the company’s employees want a pay rise. They are offered 5%, and without a union are forced to accept it. So, the cost of employing its workforce has now increased to £42. But what has happened to profits? Of the £110 it now charges, because everyone has increased prices by 10%, £44 is going to supplier companies and £42 to its workers. And that leaves £24 as profit, which is an increase of £4 (20%) – double the rate of inflation!
The reality is that workers are not creating an inflationary cycle, because they do not have the means to do so. But the way in which this inflation is panning out, giving those already wealthy way above average pay rises, is feeding straight into a serious inflationary cycle.
Three things could help fix this:
- big increases in corporation tax for larger companies
- higher income tax for the top 5% of income earners.
- Equalisation of taxes on income and wealth – it’s clearly disproportionate that the taxes on wealth like capital gains tax are charged at much lower rates than those charged on income.
We can’t ignore all this and watch people suffer, while others get richer. We must call out the Tory lie that workers must not be paid inflation-matching pay rises because with will create an inflationary cycle.
One of the main things that tax is used for by governments is to finance public services. I believe tax is a good thing if applied fairly and spent wisely and I can’t think of more important things to spend it on than investing in our country and our City’s health and education.
So, let’s get behind our local nurses and ambulance drivers and show our gratitude and support at this festive time and into the New Year. They well and truly deserve it.
Cllr John Allcock
Originally published in The Argus on Tuesday 27th December 2022.