Inflation, cuts or strikes: play the world’s most depressing ‘choose your own adventure’ game

Nearly nine out of 10 teacher members of the NASUWT union who voted in a ballot have backed strike action (James Manning/PA)
PA Wire
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If you have a child in school, are awaiting NHS treatment or hope one day to take a train, strikes may not feel like they ever went away. But in terms of newspaper headlines, they have fallen by the wayside a little, as soaring mortgage rates have swallowed up media oxygen. That may be about to change.

As touched upon briefly in yesterday’s newsletter, ministers are split over whether to accept the recommendation of various independent(ish) pay review bodies for the public sector. The School Teachers’ Review Body is understood to have advised that teachers receive a pay rise of 6.5 per cent. Unions have rejected the Department for Education’s offer of an average rise of 4.5 per cent and a one-off payment of £1,000.

Members of the National Education Union subsequently walked out over two days this month, leading to many schools being closed. And today, teachers in England represented by the NASUWT union have voted in favour of industrial action in a dispute over pay, paving the way for further strike action in the autumn.

Meanwhile, over in the NHS, junior doctors in England are set to walk out for five days from Thursday, while consultants strike for two days next week. Both will lead to more cancelled appointments, further exacerbating waiting lists.

The issue, as ever, is money. As Ben Zarenko, an economist at the Institute for Fiscal Studies, points out in a must-read Twitter thread, this year the pay review bodies are being asked to balance three things. First, the need to recruit, retain and motivate staff. Second, affordability and third, the inflationary impact of pay rises. You may have noticed that these concerns are somewhat in conflict with each other.

The government is under no compulsion to accept the recommendations of the pay review bodies. Even so, each potential escape route is fraught with danger. To that end, let’s play the world’s most depressing ‘choose your own adventure’ game.

Option 1: You agree to the pay review body recommendations. You know the inflation risks public sector pay rises confer, but you think they’re exaggerated. Anyway, you’re more worried about the political, economic and health implications of rolling strikes.

But there’s another problem. Departmental budgets were set on the basis of pay awards at the 3 to 3.5 per cent level. So:

Option 1, sub-section a) Higher wages will be funded by borrowing.

Problem is, this will make it less likely the government meets its fiscal targets and promise to get debt falling, a key Sunak pledge. So:

Option 1, sub-section b) Higher wages will be funded by higher taxes.

This would enable ministers to meet the recommendations while also reducing the risk of ensuing inflation. But this would require the government to raise taxes, when many backbench Tory MPs want instead to cut them. So:

Option 1, sub-section c) The cash will have to come from existing budgets.

More bluntly, this means cuts to other parts of the education or health budgets. Paul Johnson of the IFS says for the NHS, that would represent a cut in the region of £2bn. So:

Option 2: Ignore the pay review bodies.

This prioritises the public finances and the quest to reduce inflation, but will unleash another wave of strikes across the public sector, making it less likely you meet another Sunak pledge on reducing the NHS backlog. I warned you it wouldn’t be fun.

Government is difficult even in the best of times. And these are not the best of times. I don’t want to parrot the line from Huw Pill, the Bank of England’s chief economist, who faced criticism earlier this year for telling people to accept they are poorer – while himself earning a reported £190,000 per year.

But we *are* poorer. Our living standards have taken successive hits as a result of Brexit, Covid-19 and then Russia’s invasion of Ukraine. And we hadn’t exactly bounced back from the Global Financial Crisis to begin with. As a result, the government is left with invidious choices at practically every turn.

In the comment pages, Martha Gill says everyone wins if we stop pretending private schools are charities. Ayesha Hazarika predicts mortgage rises spell one thing for the Tory party: doom. While Prudence Ivey says artists make London – we mustn’t lose them to the housing crisis.

And finally, after an era of coveting smart men, we are, I’m told, ready to play dumb again. Maddy Mussen explores how Ryan Gosling’s Ken brought himbos back into the spotlight.

This article appears in our newsletter, West End Final – delivered 4pm daily – bringing you the very best of the paper, from culture and comment to features and sport. Sign up here.

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