Amid a series of union wage demands, 1970s historian DOMINIC SANDBROOK says the government must be tough
A few decades ago, as older readers will remember, the vocabulary of our political life was very different.
Britain in the 1970s was a strange land of government covenants and social contracts, industrial correspondents and picket line confrontations, wage standards and incomes politics.
On TV, burly men with huge glasses kept walking out of Downing Street, having partakes of the proverbial beer and sandwiches.
To the cameras, they muttered something about the government’s disappointing new wage offer, shaking their heads sadly at the thought of their starving members.
A group of women and local shoppers hold signs to protest against rising food prices and inflation-linked rising costs of living outside a supermarket in Tottenham, north London, on February 20 1971
Several weeks of negotiations would follow, with the prospect of a strike appearing ever greater.
Then, finally, the union leaders reappeared, brandishing a piece of paper on which the magic number – perhaps ten, 20 or even 30 per cent – was written for all to see, a shining symbol of their victory.
And during that time, in supermarkets and at gas pumps, prices kept climbing. Such was the way of the world.
Until recently, this all seemed like ancient history. But with inflation soaring, railroads shut down in industrial action, and rumors of an impending summer of discontent, the events of the 1970s are beginning to seem uncomfortably familiar.
And with union leaders pushing for new pay deals, Boris Johnson faces an unenviable choice. Does he want to emulate Harold Wilson, who gave the unions double-digit wage increases, only to see inflation peak above a record 26%?
Is he a Jim Callaghan, who insisted on tough wage limits, only to see Britain engulfed in the Winter’s nightmare of striking discontent?
Or is he a Margaret Thatcher, who refused to get involved in wage negotiations, but instead used the blunt instrument of high interest rates to drive inflation out of the system?
“As union leaders push for new pay deals, Boris Johnson faces an unenviable choice. Does he want to emulate Harold Wilson, who handed unions double-digit pay rises, only to see inflation peak at- above a record 26%?
“The RMT has demanded a raise of at least 7% for its members, while Network Rail is only offering 3%. But our railway workers are just the first in a long line that winds its way along Whitehall, with other employees demanding even higher raises.
Even a few years ago, when inflation was virtually non-existent, such parallels might have seemed ludicrous. But as in the 1970s, rising global commodity prices sparked an almost overnight explosion in union wage demands.
The RMT has demanded a raise of at least 7% for its members, while Network Rail is only offering 3%. But our railway workers are just the first in a long line that winds its way along Whitehall, with other employees demanding even higher raises.
Local government unions demanded 11% for social workers and other council staff. Teachers are talking about an “inflation plus” pay rise to a similar figure, with their representatives threatening to strike in the fall if they don’t get what they want. Nurses, for their part, want an increase of more than 12%.
At Heathrow, check-in staff belonging to the Unite and GMB unions have already voted to strike unless their wage demands are met. And criminal lawyers across England and Wales walked out yesterday seeking a 15 per cent pay rise for legal aid work, some in tears, rather implausibly, as their doorsteps -speech recited their requests.
Perhaps most alarmingly, members of the British Medical Association voted yesterday to pursue a whopping 30 per cent pay rise over the next five years, with strikes threatened this winter unless NHS bosses relent . So if you thought waitlists were bad now. . .
In public, the ministers pledged to stick to their policy of wage moderation. Chief Treasury Secretary Simon Clarke told a newspaper this week that the unions’ demands were ‘grossly excessive’ and insisted there was simply no money for bigger deals. sumptuous.
Treasury Chief Secretary Simon Clarke has spoken out against unions demanding pay rises, stressing that generous pay deals in the public sector would cost money “we just don’t have any”.
“For us to run after double digit numbers,” he argued, “would go directly against the interests of those doctors, those nurses. If we want this situation to resolve itself …the best thing we can do is not compound the problems by effectively offering the false premise that you can just keep paying people very high settlements, driven by inflation.
Unions insist they are simply trying to defend their members against the ravages of inflation. In reality, however, high wage increases would only add fuel to the fire, because as any economic historian knows, you cannot drive down prices by throwing more and more money at it.
Another obvious problem, as Mr. Clarke points out, is that generous pay deals in the public sector would cost money that we simply don’t have.
In the first year of the pandemic, we borrowed £310bn, followed by another £144bn a year later.
Pumping billions more into the economy would not only fuel the inflationary fire, it would leave us even more indebted.
As it stands, we already have to pay £83billion in interest on the debt this year. Going into even more debt to appease the unions may seem attractive in the short term, but in the long term it would be economic madness.
As Mr. Clarke notes, there is a compelling lesson of history here. When Harold Wilson became prime minister for the second time in March 1974, his bin was filled with union wage demands, as well as reports of soaring inflation in supermarkets and forecourts.
Desperate to fend off the threat of strikes, Wilson gave the unions what they wanted. First the miners, who were already on strike, won 32%. Then, as prices soared, came the deluge. Energy workers got 31%, civil servants 32%, doctors 35% and dockers 30%.
“In the end, it was only Margaret Thatcher’s harsh economic medicine, with interest rates peaking at 17%, that squeezed inflation out of the system”
What is extraordinary is that even the union leaders knew it was madness. Trades Union Congress leader Len Murray recalled that privately, his colleagues mutter: “Listen, we have to do something about this.
But in their own mind, their only responsibility was to their members. It was the government’s job, they believed, to draw the line. And if the government was too spineless to say ‘no’, then they and their members would just continue to take their earnings.
The result was a disaster. By the spring of 1975, borrowing had reached record highs, while inflation had reached a post-war high of 26%.
A year later, with confidence in the pound plummeting, Britain was forced to ask the International Monetary Fund for a then-record bailout of £2.3 billion. Privately, US Secretary of State Henry Kissinger remarked that Britain had “fallen into begging, borrowing, stealing. . . That Britain has become such a crook is a shame.”
In the end, it was only Margaret Thatcher’s harsh economic medicine, with interest rates peaking at 17%, that squeezed inflation out of the system. But the victory came at a colossal cost in bankruptcies, foreclosures and job losses, which could well have been avoided if previous governments had shown more courage.
With the economy in such a desperately delicate state after the rigors of the pandemic, Britain cannot afford a repeat performance.
Yes, I know rising inflation means we are all feeling the effects. But this time unions should be more socially responsible than a generation ago.
If they continue to aim for colossal wage increases, they will only increase the inflation they claim to protect their members from, which means we will suffer a bigger shock later.
As for the government, it should see this as a chance to show its courage and stick to its guns. It is true that a Summer of Discontent would be a grim prospect. But unless ministers stand firm, we could be faced season after season with rising wage demands – and month after month with soaring prices. Can Boris Johnson say ‘no’ and stick to it?
As we said in the 1970s, that’s the six billion dollar question. Or the $60 billion question, if unions get what they want.
Dominic Sandbrook is the author of Seasons In The Sun: The Battle For Britain, 1974-1979 (Penguin).