A little more than two years ago Rishi Sunak stood outside 11 Downing Street flanked by the head of the TUC, Frances O’Grady, and Carolyn Fairbairn, the boss of Britain’s leading employers’ group, the CBI. The photo op was meant to demonstrate a new spirit of tripartite solidarity that would help see Britain through the pandemic.
The TUC had played a big part in plans for the furlough wage subsidy scheme and the chancellor was eager to show his gratitude. Announcing the government’s emergency economic package to parliament, Sunak thanked the TUC for its “constructive conversations” with the Treasury.
That spirit of consensus has departed. The talk of a new era of “beer and sandwiches” – shorthand for the days when ministers, organized labor and employers sat down to seek agreement on pressing issues – has been replaced by union bashing. Sunak now accuses the rail unions of being irresponsible for taking industrial action over pay, jobs and working conditions.
The government’s openly aggressive approach to the unions is relatively recent and was certainly not evident at last year’s Conservative party conference, where Boris Johnson said he was “pleased” to see wages rising faster than before the pandemic began. There was, the prime minister added, going to be no return to the “same old broken model” of low wages, low skills and low productivity. The message was clear: the Conservatives were on the side of the workers.
Tony Wilson, director of the Institute for Employment Studies thinktank, says he is not surprised that relations between the government and the unions have soured. “It was always a false dawn that the furlough scheme was going to herald a new era of partnership. It was a marriage of convenience.”
Three things have caused the atmosphere to change. First, the government is a lot less popular than it was in March 2020, when Johnson was still enjoying a honeymoon after winning an 80-seat majority at the December 2019 election.
Second, workers have emerged from the pandemic in a much stronger position than they or ministers expected. Despite fears that shutting down the economy would lead to mass unemployment, the jobless rate is back to pre-crisis levels and there are labor shortages in many industries. Even though trade union membership is half the peak level of 13.2 million reached at the end of the 1970s, employers have been forced to pay more in order to attract and keep staff.
But the most important factor has been the cost of living crisis caused by the strength and duration of inflation. Desperate to find a scapegoat for the stagflation afflicting the economy, ministers have focused on unions seeking to protect the living standards of their members. Ministers have sought to make political capital out of the industrial unrest by talking about “Labour’s strikes”.
Paul Nowak, the TUC deputy general secretary who was part of the furlough talks, says: “Trade unions worked closely with the government to protect jobs and keep people safe during the pandemic. Ministers could have carried on in this constructive spirit.
“But they have decided to pick a fight with unions to distract people from their failings and the cost of living emergency. Instead of inflaming tensions, and pitching worker against worker, the government should be getting people around the table to find a fair resolution to this rail dispute.”
Nowak says government plans to bring in agency staff to replace striking workers are “unworkable” and will simply poison industrial relations.
Some Conservatives think the government is adopting a high-risk approach. Writing on the ConservativeHome website, the former Cabinet minister David Willetts said: “Overall, pay is rising less than inflation. This is not some inflationary spiral. It looks as if the adjustment to our being poorer is partly happening through pay rates. The disappointment of expectations which inflation brings is particularly felt amongst workers. They are unhappy, but they are not getting an explanation of what is going on around them which is honest about the economic pain and recognizes who is bearing it.”
Torsten Bell, director of the Resolution Foundation thinktank, says Britain is not used to high inflation, which is putting “huge strain” on the relationship between employees and employers.
In the private sector, Bell adds, the debate is about whether workers should suffer through falling real wages or whether employers should take the strain through raising prices or cutting profits.
“It is slightly more acute in the public sector because the trade-off is between pay and tax.
“The government has announced big tax rises and has a red line against announcing any further increases. It wants to cut taxes and is therefore desperate not to build in any spending pressures. It is as much about taxes as about a possible wage-price spiral.
“But the government needs a narrative so it makes the unions and the Labor party the problem.”
History suggests ministers will struggle to regain the political initiative even if workers heed the warnings about wage-price spirals and accept below-inflation settlements. Governments that preside over periods when real wages and living standards are rising tend to be popular; those that don’t are often removed at the next general election.
“A lot of this is about politics,” Wilson says. “It is the only conceivable way the government can make the cost of living crisis Labour’s fault. But it is hard to make 10% inflation the fault of the RMT.”