Aurelia Butler

Rishi Sunak is hoping that a split among health unions will allow the government to settle a long-running NHS pay dispute next month, as new figures on Monday revealed the vast disruption caused by strikes.About 195,000 NHS appointments, including hospital operations and scans, had to be cancelled last week in England because of four days of industrial action by junior doctors. The prime minister admitted the strikes could make it “more challenging” to meet his promise to cut waiting lists for NHS treatment.Ending the NHS pay dispute is critical for Sunak, with opinion polls showing the public continue to support striking nurses and with the state of the health service set to be a key issue at the next general election.

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The prime minister has been contending with the biggest wave of strikes in the public and private sectors for decades, as workers demand higher pay amid the cost of living crisis.While the pay dispute with junior doctors appears intractable, Sunak is hopeful that a wage deal can soon be reached with about 1mn other health workers covered by so-called Agenda for Change contracts, including nurses, ambulance staff and porters.He insisted on Monday that a 5 per cent wage rise for 2023-24 and a one-off payment for last year was “reasonable”, and Downing Street said it was the “final” offer. Last week members of the Royal College of Nursing rejected the offer, in spite of it being recommended by the union’s leadership — throwing into confusion Sunak’s efforts to end months of public sector industrial action.The prime minister’s allies have calculated that if NHS workers accept the pay deal, there would be a snowball effect, with pressure mounting on public sector workers in other areas to end their strikes. Senior government insiders said on Monday they were “hopeful” that the RCN’s rejection of the offer could be overcome next month if members of other big health unions voted to back it.

The final verdict on the pay deal will not become clear until a meeting on May 2 of the NHS Staff Council, a body that could decide to accept the offer in spite of resistance from RCN members. The body represents unions or staff associations whose members are covered by Agenda for Change contracts.Ten of these have been consulting members on whether to accept the pay deal, with most ballots closing by the end of April. The council operates an electoral college-type system, with bigger unions carrying greater weight. Unison, whose members decisively accepted the offer last week, has the most votes, raising the prospect that, provided a number of other large unions — notably the GMB — also support it, the deal could be approved.“It all depends on what the GMB do,” said one government insider. The GMB leadership recommended the pay deal and is currently balloting its members.The union will get the result of the vote on April 28, and GMB insiders said the outcome was likely to be “very close”.If the NHS Staff Council accepted the latest pay deal, precedent suggests that the government would simply impose it on members of the RCN and any other unions that rejected it. In 2018, for example, another pay offer for NHS workers secured the support of every union on the council except the GMB. Its members ended up having the settlement forced on them. In such a situation, the RCN would have to decide whether to carry on with strikes in the hope of securing a better offer. After its members rejected the offer last week, the union leadership announced a 48-hour strike starting on April 30.Sunak tried to play down the significance of the RCN vote, noting that only 54 per cent of the union’s members voted to reject the pay offer on a turnout of 61 per cent.“When you look at the turnout, it’s a minority of members of that union who are voting to strike,” he said. But according to YouGov polling, the public continue to support striking nurses. The research firm’s most recent survey showed that 67 per cent of people backed the strikes.The sensitivity of the NHS was highlighted in a separate YouGov survey showing that voters made health their second biggest issue, behind the economy and ahead of immigration and asylum.

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In spite of political pressure to settle the pay disputes, Sunak and his chancellor Jeremy Hunt have argued that the overarching priority this year is to bear down on inflation, which they blame for the wave of strikes.Speaking in Washington last week, Hunt said core inflation of over 6 per cent was “directly related to pay rises”.He added: “The worst possible thing we could do for junior doctors, nurses . . . or anyone is to manage the economy in a way that they are still worried about 10 per cent inflation in a year’s time.” Consumer price inflation stood at 10.4 per cent in February.However the industrial action in the public sector — including strikes by civil servants and teachers — has added to an air of chaos at a time when the prime minister is trying to exude an air of managerial competence after the turmoil of his predecessors.Voters will have their first chance to deliver a verdict on Sunak’s performance on May 4 in the local elections in England. Greg Hands, Conservative party chair, has tried to manage expectations by warning the Tories could lose 1,000 seats. More

Geopolitical rifts caused by rivalry between the US and China could push up inflation by 5 per cent and threaten the leading positions of the dollar and euro, Christine Lagarde has warned.The European Central Bank president said in a speech on Monday: “We may see more instability as global supply elasticity wanes; and second, we could see more multipolarity as geopolitical tensions continue to mount.”Disruption to global supply chains would hit “critical sectors” such as the electric-car industry, she said, pointing out that the US is “completely dependent” on imports for 14 critical materials and Europe relies on China for 98 per cent of its rare earths supplies.“If global value chains fragment along geopolitical lines, the increase in the global level of consumer prices could range between around 5 per cent in the short run and roughly 1 per cent in the long run,” Lagarde told a Council on Foreign Relations event in New York.Some countries could also reduce their dependence on the dollar and euro, she said, citing “anecdotal evidence” of increased usage of the Chinese renminbi or the Indian rupee in cross-border trade, and greater stocks of gold being used as an alternative reserve asset.As developing countries trade more with China, which has become the world’s biggest exporter, they are inclined to increase their holdings of renminbi as reserves, Lagarde said.“So far, the data do not show substantial changes in the use of international currencies,” Lagarde said. “But they do suggest that international currency status should no longer be taken for granted.”Janet Yellen, US Treasury secretary, last year called for companies to prioritise “friendshoring” of supply chains by investing more “with countries we know we can count on”. Beijing has sought to limit its dependence on foreign countries’ technology in response to US restrictions on semiconductors and chipmaking equipment exports to China.Lagarde said a long period of “relative stability may now be giving way to one of lasting instability resulting in lower growth, higher costs and more uncertain trade partnerships.”Her comments reflect wider fears among policymakers at last week’s annual meetings of the IMF and World Bank that rising political tensions will weigh on the global economy by disrupting trade, weakening growth and pushing up inflation.Yet Lagarde said she preferred to be “determined” rather than “pessimistic” about the challenges ahead, calling for “greater policy cohesion” through countries co-operating to tackle problems.If countries worked together, such as to secure supply chains or diversify energy production, they could create “a virtuous circle of lower volatility, lower inflation, higher investment, and higher growth”, she said.“But if fiscal policy instead focuses mainly on supporting incomes to offset cost pressures — in excess of temporary and targeted responses to sudden large shocks — that will tend to raise inflation, increase borrowing costs and lower investment in new supply,” she warned. More

Slovakia has become the third EU country to ban food imports from Ukraine, brushing aside warnings from Brussels over the potential illegality of the move.Poland and Hungary announced their bans at the weekend, with all three countries saying that a mountain of imported Ukrainian grain was depressing prices and causing hardship for their farmers. Warsaw and Budapest’s bans will last until June 30.The European Commission, the bloc’s executive arm, has warned that trade is a joint EU competence and governments cannot take unilateral measures.The EU dropped tariffs and quotas on Ukrainian foodstuffs until June after its invasion by Russia because of fears that the world could go hungry.But much of the Ukrainian grain entering the bloc has remained in neighbouring countries, leading to protests by farmers.On Monday, Slovakia said it would bar all cereals, soyabeans, sugar, fruit, vegetables, wine and honey. Ukrainian food can transit the country but only in sealed containers.Bulgaria and Romania told fellow member states at a meeting of diplomats in Brussels on Monday that they too were considering a ban, according to EU officials. The Czech Republic, where farmers are also complaining, said it preferred a European solution.Some countries expressed fears that the division over Ukraine would play into Russia’s hands. The commission is set to pledge further aid from its €450mn emergency agricultural reserve in the next few days, officials said. Poland, Bulgaria and Romania were offered €56mn recently and the next tranche will probably be extended to Slovakia and Hungary, although the total has yet to be announced. Despite the bans, EU countries will probably prolong tariff-free access for Ukrainian food for another year at a meeting on Thursday, two diplomats told the Financial Times.

“There is a qualified majority of member states who want to extend,” said one. The European Commission said on Monday that Brussels was still seeking details of the legal foundations for the measures implemented by Poland and Hungary, limiting imports from Ukraine. It said that “unilateral action” was not possible by member states under EU trade policy as it was a matter of exclusive Brussels competence. It is rare that member states impose national restrictions outside an emergency such as the Covid pandemic.“We need to understand under which basis these countries are introducing such import bans,” the commission said. “It’s important to continue supporting Ukraine in these very challenging times while, of course, we are aware of the impact on EU farmers.” More

Policymakers need to abandon the illusion that they can use monetary and fiscal stimulus to engineer economic growth without stoking inflation or breeding financial instability, the head of the Bank for International Settlements has warned.Agustín Carstens, general manager of the BIS, an umbrella body for central banks, called on Monday for governments and central banks to stop seeking quick fixes to boost the economy every time recessions hit or growth faltered, and instead embrace the need for deeper reforms.“To generate resilient and sustainable growth, there is no alternative to working on the supply side of the economy. Structural reforms are politically difficult, we know. But we also know that there is no free lunch,” he said at an event at Columbia University in New York.Carstens argued policymakers were in large part to blame for the inflationary crisis, saying the vast stimulus deployed during the Covid-19 pandemic had fuelled demand while supply was artificially constrained.“With the benefit of hindsight, it is now clear that policy support was too large, too broad and too long-lasting,” he said. But this was simply the culmination of a long period in which policymakers had run the economy too hot. “Quiescent inflation fostered the belief that monetary and fiscal policy could smooth out every economic downturn and prolong expansions with little constraint,” he said.He also said rising public debt, coupled with low-for-long interest rates, was the “root cause” of recent episodes of financial stress — such as the collapse of Silicon Valley Bank, and the UK turmoil around pension funds.The immediate priority now was to restore price stability, Carstens said, and this could mean interest rates needed to stay higher for longer even if governments felt the pinch as debt service costs rose.“There is no time to lose. The longer inflation lasts, the more likely is a shift to a high inflation regime,” he warned.Carstens’ comments echoed recent calls from the IMF for governments to rein in borrowing more quickly, in order to help central banks battle high inflation and financial instability.“Fiscal policy will also have to play its part,” he said, arguing that by reining in spending, governments could dent demand. That would limit the risks of financial turmoil as further rises in borrowing costs would not be necessary. It would also leave governments with more firepower if they needed to intervene in a solvency crisisVítor Gaspar, head of fiscal policy at the IMF, made similar arguments at the fund’s annual gathering in Washington last week, warning that the US and China were driving a risky increase in the world’s public debt burden.

Carstens said that beyond the immediate fight against inflation, the bigger challenge would be to put both monetary and fiscal policy on a more stable footing, by moving away from the ultra-loose settings of recent years and giving policymakers more room for manoeuvre when shocks came.This could mean being more tolerant of persistent shortfalls of inflation from central banks’ targets, he said — because this would reduce the need to keep interest rates unusually low for long periods, and would therefore limit the associated side effects of risks building up in the financial system.It would also mean doing more to stop governments overspending, through the design of fiscal rules and by giving independent fiscal councils “greater bite”. More

I’ve been wondering about this, given that the Biden administration’s various fiscal stimulus plans are releasing not only trillions in government money into the economy — but also $435bn in private sector investment. Much of it is in new growth industries such as electric vehicles and other clean technology, but it’s also going towards semiconductors, biomanufacturing and heavy industry. As commerce secretary Gina Raimondo has made clear, this stimulus effort will be judged on how that money gets used, and unions have a crucial role to play as a counterbalance to private industry.There is a major Teamsters contract negotiation at UPS beginning today. UPS does package delivery, which I would argue is important, but in terms of future economic growth probably not as important as, say, electric vehicle facilities, which I would love to see unionised. Certainly, recent unionisation efforts at places like Starbucks would be less impactful than in such high growth industries. Indeed, I fear that the use of “domestic” rather than “union” labour in the Inflation Reduction Act provisions may be a missed opportunity, or worse, when it comes to both the capital/labour balance and transatlantic relations.When EU firms come to the US, they prefer to operate in “right to work” states where it is easier to fire, and harder to unionise. Research shows that European companies had been upping their investments in right to work states in the US even before the IRA rollout. As I wrote back in 2019, “over the past 25 years, multinational firms based in Europe have made 36 investment deals with state governments throughout the US — deals worth $8.5bn in subsidies and tax benefits. Of those, 18 were based in just six ‘right to work’ states in the Deep South”.Those moves have only increased since the stimulus money began flowing, and the war in Ukraine created supply chain issues for some European groups. The deals with “right to work” states have been good for European companies, but terrible for European labour unions — indeed, some have complained about this aspect of the IRA. (As a side note, I’ve heard that big European groups actually lobbied for the use of “domestic” versus “union” to take advantage of this arbitrage of their own continental standards — I don’t have specific examples yet, but I will be doing some reporting on this topic.)But whatever the case, this presents an opportunity for labour on both sides of the Atlantic to do something that politicians in the US and Europe aren’t doing so well these days — to work together around how the IRA and other stimulus measures are going to roll out to create a more resilient economy. As I mentioned in my response to Ed’s last note, there have been some tweaks to the IRA already, and there will be more. It would be great to see some strategic thinking on the part of labour about how to leverage those opportunities.For starters, I’d love to see a really big, public transatlantic push around the unionisation of the clean energy supply chain. This would help to grow unions in the places jobs will grow, and create some much needed US-EU common ground (which totally exists — the interests of labour in both places is to avoid lower standards as corporations look for ways to cut costs). It would give labour access to data about how all the stimulus is rolling out.That’s crucial, because right now, thanks to federal budget cuts over the past several decades, even the people in the White House who are trying to tally up the economics of the IRA don’t have all the data points they need. As I’ve written, supply chain mapping is becoming a burgeoning industry in the private sector. But in lieu of stronger federal data collection and/or some public mandate to force companies to share supply chain data (which wouldn’t be popular), they are likely to hoard that information. That would make it tough for the administration to police the stimulus money, and for policymakers to better understand the effects of Bidenomics.Anyway, my take on the political polarisation of our era is that it is largely about globalisation allowing capital to trump labour almost everywhere (which is the nature outcome without tweaks to the system or a stronger union movement). It seems like there’s a real growth opportunity here for unions, if they can think more creatively, and across borders.Ed, as the IRA money rolls out, I’m curious to know what part of this huge fiscal experiment you will be watching most closely?Join Salman Rushdie, Jamie Lee Curtis, Ta-Nehisi Coates, Barbara Sturm, your favourite FT writers, and more on May 20 in Washington, DC, and online to experience our weekend paper come to life at our FTWeekend Festival. Register now and as a newsletter subscriber, save $20 off using promo code NewslettersxFestival.Recommended readingThere were two very good pieces I read this week in the opinion section of The New York Times. First, Tressie McMillan Cottom’s piece on why she’s looking at the south to better understand the future of America. On that note, I was pleased to hear recently that Financial Times reporters plan to spend more time in southern states for our 2024 election coverage.I also thought that this piece by folk artist Ketch Secor, on how country music can help push gun reform, was kind of brilliant. Ed, this is a solution that neither of us thought about while discussing the topic a few weeks ago!I recently bought a copy of historian David Cannadine’s The Undivided Past, which looks at how cultures start to define themselves by what they love, and end up defining themselves by what they hate. I can’t think of a better read for our time. I had lunch with Cannadine recently, and he told me that this book didn’t get much attention when it was published in 2013, but it’s his personal favourite.In the FT, Philip Coggan is quite right that we should buckle up for many more years of turmoil during the great unwinding of monetary policy. And don’t miss investor and artificial intelligence expert Ian Hogarth’s terrific FT magazine piece on why we must slow down the race to AI. I particularly enjoyed how he laid out the development of AI so clearly.Edward Luce respondsRana, I’ll be looking at implementation. This applies to the Chips act, the IRA, infrastructure and other projects. As we’ve debated before, I don’t think industrial policy will get a full bang for its buck unless it is single-minded, which very much does not apply to the semiconductor reshoring drive. I expect that to be disappointing as a result. On the IRA, it is possible the volume of green subsidies is so large, they will prove to be a game-changer, as a recent FT survey of surging US manufacturing commitments indicates.I was interested to see that centre-left commentators, like Ezra Klein, Catherine Rampell and Matt Yglesias clearly share my concerns about the Chips act. Klein writes about “everything bagel liberalism”. You cannot expect companies to solve equity problems in their communities, or be anything other than deterred by the dozens of other conditions with which these subsidies are freighted. I would call it failure by design but it is clearly unintentional. Liberals just can’t help themselves. As regards blaming inequality on globalisation, I would urge you to widen your lens from the United States. In some countries, such as the US and UK, inequality has become considerably worse since the 1980s. In others, such as Canada, the Nordics and Germany, it is only moderately worse, or hasn’t deteriorated at all. Since most of the latter group are more globalised than the US, I would submit that you are looking in the wrong place. The right place to look is at the strength of domestic safety nets, the degree of fiscal redistribution and the quality and depth of worker training and apprenticeship schemes. On all of these measures, America and Britain are laggards. The fault lies not in globalisation but in ourselves. In a related matter, I recommend Swampians read this FT column by our former colleague, James Crabtree, on why the west is in the grip of a decoupling delusion. We are simply displacing the assembly of finished products to countries like Vietnam and Mexico, which are seeing corresponding surges in intermediate goods imports from China. Your feedback And now a word from our Swampians . . . In response to “Europe will bend to America’s will on China”: “There is a great saying going around in diplomatic circles in Washington: Europeans hate US leadership, but they hate the lack of it even more. Looks like Paris has not heard it. Former secretary of state Colin Powell once remarked: this is a 200 years old marriage, and we spent most of that time in the marriage counsellors office. But it is a marriage, and the alternative would be terrible, whether it is just separation or full divorce.” — Andras Simonyi“I would argue that although there is definitely a thin line between a realisable European policy and a European utopia, Macron is to be commended for voicing his global views without restraint, in the grand tradition of French statesmanship.” — Victor de Serière, Amsterdam, Netherlands More