Monolithic public sector pay deals should give way to flexible arrangements to suit individual needs

Widespread strikes have prompted plenty of comparisons with the 1970s. Sometimes pundits add jokes about the revival of Abba and Kate Bush.  But such comparisons are overblown. The trade unions do not have the equivalent power to “hold the country to ransom.” Another difference is that in the 1970s they would usually win. This time they seem destined to lose. The funds are not there. Even if the Government wanted to just create another £100 billion of funny money via Quantitative Easing by the Bank of England to fund all the pay demands, it seems unlikely that the financial markets would indulge such profligacy after all that has gone before.

This is not to say that the Government should be entirely passive. Matthew Lynn, writing in the Daily Telegraph, notes that the strikes have already boosted private alternatives. Coach operators are putting on extra services to ease the train strike. Courier services have increased market share as a result of the Royal Mail being disrupted. Private ambulance services have expanded. (Prompting an indignant headline in The Guardian about them “cashing in” on the strikes in outraged tones. Evidently, the sick should stay untreated at home as a gesture of solidarity.)

Lynn adds:

“It would help if the Government eased rules and regulations to encourage that. There are plans to make it easier to draft in agency workers to replace striking workers, but they should be accelerated. Where necessary, licences and permissions should be granted instantly to allow alternative services to spring up. While they need to be properly regulated – no one wants unsafe coaches clogging up the motorways – the red tape and paperwork could be reduced. Any of those changes would help companies step into the markets that have been disrupted by the unions.”

John Penrose, the Conservative MP for Weston-super-Mare, recently welcomed the decision by the Office of Rail and Road to approve five new services a day westwards from London to Bristol Parkway and on to Carmarthen adding:

“Regulators and Ministers should be approving loads more choices like this one on other routes across the country too. It would give passengers more reliable and cheaper services from a variety of firms, so if one has problems with strikes or breakdowns the others will still be working.” 

Another response from the Government could be to protect the public by requiring minimum service levels to be maintained. It could also ban strikes in essential services and raise the threshold required in ballots of trade unionists for strike action and increase the minimum notice period. There has been much speculation about when legislation will be brought forward and how tough it will be. Also overdue is an end to the “check-off” system, where the state collects the trade unions subs for them via the payroll.

But a more radical approach would be to consider whether these collective pay negotiations are still suited in this modern era. Should not a more flexible approach be applied to suit the needs and abilities of the individual?

Robert Colvile, writing in the Sunday Times, considers the cost of public sector pensions:

“Every year, the state pays another 18 per cent of salary into the average employee’s pension pot, compared with 6 per cent in the private sector. This sends the raw hourly pay gap between public and private shooting up to 21 per cent…

“If the government tried to take away these rights by force, it would face the mother of all fights. But what about giving public sector staff the right to take more of their pay upfront, rather than let it pile up in their pensions (and ideally making that the default for recruits)? That would deliver the huge pay bump nurses want, while easing the long-term pressure on public finances.”

Indeed. Such an option should be offered to each public sector worker. A teacher or ambulance driver with home-owning parents might be expecting a substantial inheritance at some point – so might be less concerned about a large pension. Others might be more anxious to provide for a comfortable retirement.

During the summer Tory leadership campaign, there was an earlier retreat from Liz Truss over a proposal to vary public sector pay according to region to reflect differences in the cost of living. It was presented as an attack on the north. But flexibility would be of benefit to all parts of the country and should go further than regional rates. Teachers pay and conditions should be negotiated on an individual basis – with the head teacher or the academy trust. We should dispense with pay scales and the “School Teachers’ Review Body”. Chief Constables should be empowered to hire and fire – varying the pay levels for police officers in the way that makes the most effective use of their budgets. One NHS Trust might find it needs to pay more to avoid paying expensive agency staff. Another NHS Trust might find it is paying more than it needs to and could reduce its wages bill to allow more funds for equipment.

These changes would be resisted by the trade unions – understandably so as it would render them pretty irrelevant. But their members would be empowered. They would have greater choice and more reward for hard work and success. It should be conceded that some managers might have reservations. Individual negotiations would increase their workload. Treating each member of staff as an individual might be less convenient than making arrangements en masse. But the prize would be a better motivated workforce – able to see a just reward for their service and recognising strike action as an absurdity.