Edward Heath U-turned. Will Osborne be forced to do the same?

By David Blanchflower Published 03 April 2012

Creating mayhem is unlikely to be a sustainable, long-run industrial relations strategy. The government already has troubles in the public sector with its cull of jobs – remember all that talk of the enemy? Now it has intervened in an ongoing private-sector negotiation between haulage contractors and tanker drivers and made matters markedly worse. No strike has been called and the two parties are flexing their muscles as they do in the midst of a negotiation.

A strike threat is not the same thing as a strike. A threatened lockout is not the same as a lockout. A breakdown of negotiations can occur because of the intransigence of either party. Not infrequently, strikes occur because of mistakes.

The chart shows that, over the past decade or so, the incidence of strikes has fallen sharply.

It plots the numbers of days lost to disputes since 1970 and does not account for the increase in the numbers employed, up from roughly 24.5 million to 29 million over this period. Strikes have not been a major issue in the UK for decades, certainly up until the public-sector workers’ strike over pensions in November 2011. This is in contrast to the 1970s, an era of protracted industrial disputes when we had three-day weeks, power outages and uncollected rubbish on the streets.

The biggest spike in industrial disputes was in September 1979, when 11.7 million working days were lost (compared to fewer than a million last November). A large part of the explanation for the decline in strikes is that globalisation has weakened workers’ bargaining power. There is an ever-present fear that firms could move production to China. Since 2008, during what is now called the “Great Recession”, private-sector workers have accepted reductions in hours and wage freezes rather than lose their jobs.

Pointless point-scoring

The Cabinet Office minister Francis Maude’s reckless comments, encouraging people to fill up jerrycans when there was no need to, unnecessarily created long lines at petrol stations, as well as panic, even though there was no planned strike. He should have followed Monty Python’s suggestion to “shut your festering gob”. It appears that the Tories thought they could score political points because the Unite union that represents the drivers is a major funder of the Labour Party. A Machiavellian interpretation is that this was all just a cynical attempt to move spending from April to March to help lift GDP in the first quarter.

The biggest concern about incompetence is in relation to the coalition’s handling of the economy. I have previously described the last five quarters for which we have data as the “Osborne collapse”. I take this period from the fourth quarter of 2010 until the fourth quarter of 2011. Until recently, official data suggested that the economy grew by 3.1 per cent in the previous five-quarter period under Alistair Darling – the period that I have called the “Darling recovery” – but by only 0.1 per cent under George Osborne. However, the latest data revisions published by the Office for National Statistics (ONS) adjusted the +0.1 per cent growth to -0.1 per cent. On top of that, the Organisation for Economic Co-operation and Development (OECD) lowered its forecast for the first quarter of 2012 to -0.1 per cent, which, when added to the -0.3 per cent for the fourth quarter (revised down from -0.2 per cent), would imply that the UK was in double-dip recession. But most of the cuts haven’t hit yet and the concern is that we are going to see rapidly worsening social consequences – which, in my view, would inevitably add to the government’s unpopularity.

Status symbol

So, what will happen next? There are several instances in recent history of how UK governments were forced into making U-turns on economic policy. The markets forced U-turns in 1967, 1976, 1981 and 1992. Of particular relevance now is Ted Heath’s U-turn on economic policy in 1972 that precipitated what became known as the “Barber boom”. This was forced on the Conservative government primarily by unemployment passing the socially unacceptable one million barrier.

The economics commentator William Keegan has pointed out to me that a big factor behind Heath’s policy reversal was a telephone call to Downing Street from the then chief constable of Glasgow, David McNee. He said that he could no longer be responsible for public order in the city if, with unemployment already high, the government did not rescue Upper Clyde Shipbuilders, which was threatened with closure. In response, in his 1972 Budget, Anthony Barber reduced income taxes and gave big tax concessions to firms to save jobs.

A crucial moment for the coalition could well come as soon as 25 April, when the ONS announces GDP growth for the first quarter of this year, especially if the number is negative, as it may well be. Such an announcement could result in one or more of the credit rating agencies removing Britain’s cherished AAA status. Osborne has claimed that maintaining this rating is an important goal of his strategy, so losing it would be a great blow.

In reality, it wouldn’t be that big a deal even if it happened. France and the US had their costs of borrowing fall when recently they lost their AAA status. The consequences of trying to keep it, with rising unemployment, falling growth and declining living standards, are worse than the costs of losing it.

The Chancellor is surely going to have to change tack. The only question is whether he will do so voluntarily or involuntarily.

Tags: Employment

View the discussion thread.

58 comments

Wed, 2012-04-11 08:33 — matthew fox (not verified)

super sorry it should read " remind me, the measure of... " and " remind me how to use.....

I won't use the lame excuse of typing too fast, eventhough I can touch type. Unlike Bozo555, I don't feel the need to brag.

Wed, 2012-04-11 09:07 — mike555

@Matt

Dismal as ever, and no answers again I see. You will get no apology from me as there is nothing to apologize for, why don't you tell us about the bailouts and when they occurred, then explain how they didn't help support the housing market?

House prices dropped in 2008 after the financial crisis hit, but this was after they tripled, then bounced back in 2009, I've been through the numbers with you before, so I won't do so again, and I've told you before you need to put the drops in 2008 in context, they still remain high. Your turn to answer for a change, though I suspect you won't be able to as usual.

Wed, 2012-04-11 16:42 — matthew fox (not verified)

Another no then Bozo555, come on you fraud, explain this " Big Bounce " I dare you.

Thank you for showing me what a complete scoundrel, you have got the guts to back up your fantasy.

Thu, 2012-04-12 15:36 — mike555

@Matt

A scoundrel and a fraud eh? Funny coming from someone who is unable to answer simple questions. I shall continue to answer your dismal ridicule because it's very easy.

"Another no then Bozo555, come on you fraud, explain this " Big Bounce " I dare you."

I see you want me to prove myself correct again. As you appear to have forgotten me going through the figures last time I'll do it again just for you:

Lets use the Nationwide stats because you've used them in the past. Prices were 149.7k in Q1 2009, in Q4 2009 they were up to 162.1k, by Q2 2010 they were back up to 168.7k. That is what I call a big bounce in house prices, especially during a financial crisis don't you think? Tell me I'm wrong, you won't be able to.

Wed, 2012-04-11 18:57 — matthew fox (not verified)

super sorry, it should read " what a complete scoundrel you are, you haven't got the guts.....

Thu, 2012-04-12 08:36 — mike555

Fri, 2012-04-13 19:28 — mike555

I wonder if Matt will answer anything or disappear again now I've proven myself correct? I think I can guess which based on past performance.

Wed, 2012-04-11 13:06 — Boomandbuster (not verified)

matt,

i'll abandon politeness because once again you show yourself to be an ignorant imbecile who is beneath contempt, can you even read? tell me then in your world what would happen to house prices if interest rates stood at 5%? have you suddenley invented a new world of economics where the costs of money has no impact on the costs of assets purchased with borrowed money. there is no a single credible economist who would agree with you alive today.

you are the worst kind matt because you aren't even a socialist just a privelaged little oik who dislikes tories based on what your middle class mummy and daddy told you. you never even put your brain into first gear. your disdain for the poor is even worse than a city banker, the fact you think its a good thing they can't afford houses and become stakeholders in society is just weird and almost fascist.

wait wait here come the hilarious insults, yes change my name a bit, then throw out some totally irrelevant facts about mrs t and not answer any questions for the milionith time. it's just so funny everyone is soiling themselves with laughter. please please please, any lefty poster come and defend matt.

there won't be one single left on here who defends him because he is a such a nasty pathetic moron. The very sad thing is with the lack of talent in the labour party this is the kind of guy who has a sporting chance of becoming a back bench mp. I'll resort to the matthew school of science.............it's a proven fact that labour mps have lower iq's than turnip just as base rate DO NOT affect house prices

Wed, 2012-04-11 19:09 — matthew fox (not verified)

Even by your standards, that was a poor rant. Abandon politeness, I doubt that, then again, you ditched logic and reason, years ago.

Do you mean " privileged " , what is a " milionith " ?

I take it calling me a " bafoon " what an expression of endearment?

Even when your trying to insult me, you fail miserable.

Thu, 2012-04-12 11:51 — Boomandbuster (not verified)

matt it's funny when you insult my grammar wehn YOUR email is littered with errors. so the debate on base rates and house prices is lost you just resort to insults. i think that makes the overall score Boom 12 Matt 0 now on matters economic.

you fail miserable - you sound like John Virgo though you'd be too upper class to know who a snooker player/commentator was, think YOU ARE missing a y there

even when your trying - should be you are or even you're

or are these just typos dear matt or are you just a complusive liar?