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18 November 2022

Labour needs a radical alternative to Jeremy Hunt’s wages of misery

As ever more workers take strike action to defend their living standards, Labour must be on their side.

By John McDonnell

After the chaos of the last two months the obvious aim of Jeremy Hunt’s Autumn Statement was to reassure the markets that the “grown ups” are back in charge and have a plan to balance the books. Hunt especially wanted the markets to know that the Bank of England and the government are no longer pulling in different directions but are, as he put it, marching “in lockstep”.

And it’s true. The problem is that their common agenda of austerity and higher interest rates is pushing us into a deepening recession. Although some economists are predicting, and the government is praying, that it may be a relatively shallow recession, after 12 years of austerity most people do not have the financial resilience to avoid the hardship this will inflict upon them.

The Office for Budget Responsibility’s report estimates that living standards will fall by 7 per cent over the next two years, “the largest since ONS records began 1956-57”. Average real wages are not expected to return to 2008 levels until 2027. Unemployment is forecast by the OBR to rise from 1.2 million to 1.7 million, while the Bank of England predicts a rise to over two million.

Housing is often the key indicator of how people are faring because when people budget most will prioritise keeping a roof over their heads. In the second quarter of this year mortgage repossession orders increased by just under 500 per cent compared with the same period last year and landlord repossession orders by over 160 per cent, government statistics show.

People are on the edge and unless wage settlements match inflation, more will fall off it. Wages were the unspoken dark cloud hanging over Hunt’s statement. Although he made much of increases in the NHS and schools budgets, the reality quickly dawned that wage settlements at anywhere near what nurses and teachers are asking would wipe out any increases in funding.

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Other departmental budgets fared even worse as they were expected to swallow both inflation and wages cost increases. The result is that Hunt has set the scene for a potentially titanic clash between the trade union movement and the government.

With the energy price cap being lifted to an average of £3,000, tax thresholds being frozen to raise more from workers, and mortgage repayments and rents surging, many more people are questioning how they will be able to get by. There is a growing atmosphere of frustration and, for those already enduring in-work poverty, desperation.

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[See also: The Autumn Statement was an elegy from a Conservative Party in mourning]

This is why increasing numbers feel they have little option but to demand an inflation-proof pay rise and to resort to strike action if necessary. If NHS managers or headteachers or the leaders of any of our public services seek to protect pay the result will inevitably be cuts to services. A visit to any A&E unit in the country is enough to demonstrate how stretched the health service is and how dangerous any further cuts would be.

Ask any headteacher about their school’s budget and you will hear that after 12 years of austerity in education, job cuts are the only method left to balance their budgets. Having lost £100bn in central government funding since austerity was initially introduced in 2010, many local councils, Labour and Tory alike, are near bankruptcy.

Neither the Chancellor nor the Labour front bench have wanted to raise the question of wages in the debate over the country’s finances so far. But the issue will not go away and in the coming months it is likely to become the most pressing political and economic issue of the day.

So Labour needs to agree a strategy to deal with the wages question as soon as possible. It is a crucial test of whether the party has a credible economic programme that will fully fund our public services and protect workers’ living standards.

Hunt and Rishi Sunak believe that they have trapped Labour by delaying the bulk of the spending cuts and tax rises until after the next general election in 2024. In fact, it makes the Tories appear as if they have pre-emptively accepted defeat and won’t be around to impose the planned cuts.

The inadequacy of Hunt’s budget has created a sizable political space for Labour to publish its alternative programme for government, a plan based upon redistributive taxation to fund our public services and address the poverty and inequality that scars our society. A programme for securing stable, long-term investment in our infrastructure and people and the mobilisation of our economy to tackle climate change.

If published as a detailed five-year plan for the first term of a Labour government it could both inspire support among the electorate while reassuring the markets that a competent government is ready to take office.

[See also: Jeremy Hunt’s political balancing act won’t satisfy an angry public]