UK strikes: are pay review bodies fit for purpose? | Daily News Byte

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The way UK public sector wages are set is being called into question after high inflation and tight government spending put the system of independent pay review bodies under severe strain.

With striking nurses and ambulance workers in a standoff with the government over pay, and the results of teacher ballots for industrial action in early January, unions are increasingly debating whether public sector pay review bodies are the right means of determining wages.

The eight organisations, which cover 2.5mn public sector workers and negotiate £100bn worth of pay a year, have withstood periods of high inflation in the past – notably in the late 1980s – and have until now had the support of both unions and the government. But this year, controversies have eroded trust in the system.

How much stress is the pay review system under?

This is perhaps the most difficult period in its history. Born out of a pay conflict between the government and NHS doctors in 1963 and subsequently extended to 45 per cent of public sector workers, independent pay review bodies have traditionally been supported by all parties as a means of setting wages while maintaining public sector revenues. in broad alignment with similar private sector remuneration.

But public sector unions have lost faith in the independence of the pay review body’s recommendations and many are now threatening to boycott the process next year, demanding direct collective bargaining with ministers instead.

Pat Cullen, general secretary of the Royal College of Nursing, said her union had “been cloaked in trust funding this process for years” and patience was now running out.

“The government is using the pay review body to cover and for this particular reason unions like ours are seriously looking at whether we will now participate,” she said.

Elsewhere in the health sector, the GMB union, which represents ambulance drivers, has said it is pulling out of the process next year and will not submit evidence to the NHS pay review body. The United union, which claims to represent 100,000 public sector workers, said the bodies were “not fit for purpose”. Senior health sector managers represented by a joint venture between Unison and the First Division Association say the “writing is on the wall” for a pay review system.

Kevin Courtney, joint general secretary of the National Education Union, told the FT that education unions were widely considering boycotting the process next year because “the government was hiding behind it. [pay review bodies’] So called freedom”.

On the contrary, ministers fully support the process. The Department of Health and Care said the pay review bodies were being staffed by independent industry experts and encouraged unions to take part in the process next year.

“The pay review bodies carefully consider the evidence submitted to them from various stakeholders, including the government and trade unions,” it said. “They base their recommendations on a number of factors including the economic context, cost of living, recruitment and retention, NHS staff morale and motivation.”

Is high inflation causing the problem?

No. Gerry Cope, chair of the NHS Pay Review Body from 2011 to 2017, said the 2022 review should be recalled, adding that the evidence considered by the body was gathered in February and “was probably out of date by then. [the report] was published in July.

But in its report, the body expected inflation to rise to 10 percent, not down from October’s peak of 11.1 percent, so higher price increases alone are unlikely to be behind the problems.

This year the pay review system has struggled with higher prices to match three-year departmental spending plans assuming 2 percent inflation, as well as disappointing tax revenues due to a long period of weak economic growth. In addition, the UK is poorer because it has to pay higher prices for energy, which is mostly imported.

A column chart of annual increases (%) shows that nurses' salary settlements were generally above inflation until 2010 and have fallen behind.

As a result, public sector pay levels have been poor compared to the private sector. Private sector wages grew at an annual rate of 6.9 percent in the three months to October, compared with 2.7 percent in the public sector.

By contrast, in the late 1980s, when the then-headline inflation rate reached 10.9 percent, productivity growth was much stronger and spending reviews were conducted annually—so as to quickly adjust for higher inflation. Tax revenues were also rising and the government met the NHS Pay Review Body’s recommendations to keep pay in line with inflation.

Professor Richard Disney of Sussex University, who has sat on multiple pay review bodies in the past, said the gulf between the government’s offer of a 3 per cent pay rise and the union’s demand for 19 per cent suggested there was a damaging loss of confidence. system

“The review body’s call for recall is a mistake; It risks dragging an independent body into what is now an industrial dispute between the government and NHS staff unions,” he warned.

A line chart of annual growth in average weekly earnings, including bonuses, seasonally adjusted shows that public sector wages lag the private sector by a record margin.

Are pay review bodies independent?

Members of the pay body are appointed by ministers but according to Cope they “strongly guard their independence”.

However, union leaders complain that the freedom of those who sit on the body is compromised because their amount is set by the government and given affordability constraints, departmental spending plans and the government’s 2 percent inflation target. It is necessary to take.

Disney said these terms limit what organizations can determine as a reasonable settlement. “You don’t want to recommend something that is likely to be rejected [by ministers],” he said.

But he added that organizations have more freedom today than at other times – such as when they had to impose a government-mandated public sector pay freeze in the post-2010 austerity years.

Ben Zaranko, senior economist at the Institute for Fiscal Studies, said the Treasury’s spending plans played a big role in the outcome of the pay review recommendations and while affordability was important, other parts of the remit given to institutions had little meaning.

“There is no reason wage review bodies should be fine tuning [public sector] The wage economy affects broad inflation,” he said, adding that it was the work of the Bank of England.

Is there a solution to the impasse with the unions?

With the government already starting the 2023 pay review and unions debating whether to participate, resolution of the 2022 dispute is essential for next year’s process to make sense.

Disney said the 2023 process would take too long to reflect public sector pay cuts compared to the private sector, so he urged ministers to find extra money for one-off non-coordinated payments in the meantime to settle disputes.

“There is no doubt that the Treasury will resist making significant payments in the face of its anti-inflation strategy, but . . . the rise in earnings presents a much lower risk of raising the rate of inflation than some other fundamental drivers,” such as energy prices, he said.

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