Rishi Sunak Faces A Most Unhappy Christmas

Barely weeks in power, the prime minister is fending off rebellions from within his party and strikes from without.

Martin Ivens

03 Dec 2022, 07:16 PM IST

Spotlight is on.

(Bloomberg Opinion) -- Could UK Prime Minister Rishi Sunak have expected such candid advice when he invited his mentor George Osborne back into No. 10 to talk strategy? The former chancellor and Tory Machiavelli told Channel 4 last weekend, “There’s a general sense that the government is not in control of events and that’s so dangerous.”

Waiting lists for hospital treatment are now counted in the millions, getting an appointment with a local doctor is basically a lottery, and services like passport provision are a byword for inefficiency. Public-sector workers are set to strike for pay rises that aim to bust the current inflation rate of 11%.

As Osborne sees it, the consequences for Sunak’s Conservatives look dire: “When we first came on your show, it was the Tories’ to lose … Now it’s Labour’s to lose.” On Thursday night, Sunak failed his first electoral test with a by-election defeat in Chester that saw a 13.76 percent swing to Labour.

Barely weeks in power, Sunak is fending off a series of crippling rebellions from within his own party. Now he must face a wave of industrial challenges from without. Unions representing railway workers, teachers, postal workers and, most politically dangerous of all, doctors, nurses and ambulance workers are threatening to withdraw their labor before Christmas.

Those with older memories recall the dark days of 1978-1979, “the winter of discontent,” which saw the dead left unburied and rubbish piled up in the streets. Back then, public-sector strikes finished off an ailing Labour government and ushered into power Margaret Thatcher, the Iron Lady, with a mission to curb the power of union barons. Her governments oversaw a collapse in union membership in private industry, but in the state sector, they remain a potent force.

The unions are now planning to coordinate their strikes in the National Health Service, while the railways are set to grind to a halt during the peak pre-holiday period. An unhappy Christmas seems assured.

Can Sunak take back “control?” The stakes are rising.

Watching in the wings are not only anxious voters but also markets. The prime minister and his chancellor Jeremy Hunt stabilized the pound after their fiscally conservative Autumn Statement, but traders would view a raft of government-sanctioned double-digit pay settlements as a backward step to “Trussonomics,” his predecessor’s unfunded tax and spending commitments. A wage-price spiral offers the prospect of “Buenos Aires-on-Thames” — not Brexiteers’ preferred Singapore model.

The public understands that inflation has eroded workers’ wages and has a special sympathy for nurses and doctors who worked on the wards during the pandemic. Every evening in lockdown, millions of Britons clapped and cheered on their doorsteps to applaud the efforts of health workers. Ministers appreciate that the same voters are hardly likely to boo them now that they assert pay claims.

The prime minister has appointed close ally Oliver Dowden, chancellor of the Duchy of Lancaster, to coordinate the government’s response to the strikes while appearing to keep an arm’s length distance. The clamor is for direct involvement.

For the first time in a century, the Royal College of Nurses has voted to strike after its leaders rejected a 4% pay offer recommended by an independent body. Their basic pay has fallen by 6% over the last 10 years. The RCN seeks a whopping 17% rise, 5% above the retail price index, the old official inflation measure.

Even though it’s hard to deal with the tension between these demands and keeping control of spending, the government has been slow to make its case or seize the initiative.

One of the UK’s leading health economists, Nick Bosanquet, who has decades of experience helping craft NHS pay awards, tells me that the government missed a trick by failing to set a pay norm across the board for the public services. A 5% target from the outset might have brought about a more rational discussion of what can be realistically afforded. Private-sector pay increases are running at 6.8%. Even now, the announcement of a 6% target might help. A recent 9.7% increase in the Living Wage for the low-paid was imprudent if politically attractive in the moment.

Some basic public education would help too. Ministers have allowed union leaders to make the case that their members need double-digit pay rises to offset inflation. But “a 10% price increase is not a 10% fall in income,” Bosanquet points out. If living standards are predicted to fall by 7% over the next two years, that hardly justifies double-digit pay awards this year. The Office for Budget Responsibility predicts that the ratchet effect of rising inflation and low unemployment is unlikely to persist next year. One person’s pay award can soon become another’s redundancy or tax rise.

Union members are ready to listen if presented with a reasonable case. Many are dedicated professionals, sensitive to the suffering that strikes could inflict on patients or customers. Unison, the largest public-sector union, failed to persuade 35,000 out of 50,000 ambulance staff to join a strike.

Mass furloughs, bail-outs and vast state pay-outs during the pandemic have created the expectation that Whitehall can cure all of life’s economic woes. Only compound economic growth can do that. Generous pay settlements without increased productivity spell bankruptcy. By many standards, the NHS’s productivity has plummeted in recent years as more doctors, nurses and ancillary workers have been hired and billions added to its budget.

That’s not to say the government can’t improve its social contract with low-paid health workers. If nurses are charged large fees to park their cars in distant hospitals, the government should help. Childcare costs are also a drag on employment. The government promises supply-side reform to enable carers to look after more children within the margins of safety — but that has been in the works for years.

No politician dares to point out that over-generous public-sector pensions and job security both outweigh any temporary gains made by private-sector workers. And I doubt this government has the strength to make a grand bargain over public-sector pay that takes these factors into proper consideration.

No. 10 disavows confrontation, hoping to win over the public as the unions’ strikes begin to bite the voters. But ministers need to keep the country moving or face another downward spiral in their electoral fortunes.