It is widely reported that the chancellor, Rishi Sunak, intends to impose a pay cap on most public sector workers.  Sunak is expected to usher in a new era of public sector pay restraint as he is faced with a deficit that is on course to hit a peacetime record in 2021.  We should view this move as the attack upon those for what it is, an attempt to weaken and undermine organised labour and pay ​restraint ​for all but frontline NHS staff an attempt to divide workers and avoid public outcry.

Unions reacted angrily to the prospect of a wage freeze, Mark Serwotka, general secretary of the Public and Commercial Services union, said: “Civil servants along with millions of other public sector workers have kept the country running throughout this pandemic, and the last thing they deserve is another pay freeze.”

A new report by the Centre for Policy Studies (CPS) said private sector workers had suffered far more from the economic impact of the disease.  The centre-right think tank said measures were needed to ensure the labour market was not unfairly weighted towards the public sector.

Ive no doubt that the chancellor will attempt to use the Pandemic as an excuse for Austerity 2 but this is the wrong approach and yet again the conservatives appear to fail to understand lessons from Austerity 1.

Stifling wages below inflation should never be accepted.  Instead we should set out a program that will see a return to 2008/10 levels of pay over the short term.  With a minimum of inflation+ thereafter

There is a very good reason why Neo Liberals like Austerity as since austerity 1 public sector employees, who he proposes to further restrain, have seen their wages fall in real terms by 20% whilst the richest have seen their collective wealth grow by hundreds of billions of pounds

Alfie Stirling wrote for Left Foot Forward about NEF analysis showing the true economic impact of austerity:

“The calculations make for grim reading. The isolated impact of government policy has reduced GDP growth every single year since 2010.

After compounding this effect year-on-year, the effects of austerity are expected to have suppressed the level of GDP by almost £100 billion in the 2018/​19 alone.

To break this number down another way, it means that deliberate policy from government over the past nine years has had the standalone effect of suppressing incomes and expenditure in the economy by just under £1,500 per person and more than £3,600 per household, in this year alone.”

Our call must be to borrow more, employ more and spend more to drive the economy as it has never been so cheap for the government to borrow money and the government should take full advantage of the markets to issue bonds that can be paid back over decades or even centuries, we recently learned that Britain used 40% of its national budget to buy freedom for all slaves and the monies were only paid off in 2014, 181 years later.

Wage restraints will have a negative effect upon the economy and for the current economic model to survive we need money to enter and move about the local economy. When we get paid properly we buy more and thus more people are employed to service that buying.

What we need to drive the economy is large scale spending, and spending on activity where the main cost is wages to a directly employed workforce which is why large infrastructure projects are often the key as, they cannot be shipped in, or outsourced to other countries but are done by people living in the local area with PAYE going back to the treasury and their pensions invested in infrastructure and reducing the future dependency upon the public purse.

The government should invest extensively on labour intensive works such as

  • Solar and wind farms from manufacture to installation
  • Insulating homes from manufacture to installation, with a means tested contribution from the householder which would replace the flaw in the current scheme which only supports those who can afford a significant contribution.
  • Reforesting and creating habitat
  • Flood defence and repairing waterway erosion
  • Creating cycle and walkways.

Writing in Tax research UK (14/05/20)Richard Murphy writes

The cost of UK government borrowing 1946 to 2020

I have already shown that there is nothing exceptional, odd or worrying about UK public debt now, and will not be even if it increases significantly.

But it’s not the debt people say that they worry about: they say that we should worry about the cost.

Well, that’s not an issue either:

Data is from the House of Commons Library GDP data is from the Office for Budget Responsibility.

“In cash terms, we have the highest government debt we have ever had.

But the cost is exceptionally low, and even if we increase what is described as borrowing as a consequence of coronavirus the impact will still be very small given current, exceptionally low interest rates, which look like they will persist for a very long time.

Please do always recall, that every penny the government spends on interest becomes someone’s income – and most of it in the UK.  And there is good reason for that: UK national debt is just a savings mechanism.

There is nothing more menacing or threatening about it to our wellbeing than the amount saved in banks and building societies.”

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