Aurelia Butler

As Britain prepares for its biggest rail strike for a generation, union leaders have warned that industrial action will spread across the country without government backing for wage rises.The issue is how wide-ranging such action will be, when it will occur, and how much of an impact it will have.This week’s rail strikes, led by the RMT rail union, revolve around salaries and redundancies — disputes echoed in other industries, as the government seeks to hold public sector wages below inflation. Mick Lynch, RMT general secretary, has suggested other unions might join in co-ordinated action, as his members “dig in” for a long stand-off with rail sector employers.The TSSA, which represents rail sector managers, and Aslef, the drivers’ union, are organising their own ballots with a view to launching action at some train operators later in the summer.A broader confrontation between the government and public sector workers is looming. Ministers are preparing to announce below-inflation pay deals for millions of teachers, doctors, nurses and local government workers whose earnings are already lower in real terms than they were in 2010, at the start of a decade of austerity policies. With inflation heading for double figures, Boris Johnson’s call — made last October — for businesses to raise wages to resolve labour market shortages seems long ago.Frances O’Grady, general secretary of the Trades Union Congress, said workers are now ‘facing low pay, insecurity and real cuts to their pay packets © Yui Mok/PAFrances O’Grady, general secretary of the Trades Union Congress, said people from all walks of life supported the rail workers and could take similar action if the government continued “picking a fight” with unions for political ends.Unions representing public sector workers have been calling for pay awards that would not only compensate them for rising living costs, but also regain ground lost over the past decade.But, despite increasingly heated rhetoric, some union officials privately play down talk of a “summer of discontent”. The RMT has long been one of the UK’s more radical unions, wielding more power than most because of its ability to bring the country to a halt.Others will want to test sentiment among their members carefully before trying to clear the legal hurdles that make it difficult to launch strike action at national level.“The decision to go on strike is never an easy one and the law makes taking action incredibly difficult . . . But if the government imposes below-inflation settlements on public sector workers, they’re likely to ask unions to run formal strike ballots,” said a spokesman for Unison, which has around 1.3 million members in public services. It is balloting some 25,000 of its members working in Scottish schools on possible action.Kevin Courtney, general secretary of the National Education Union, said pay was rapidly becoming a bigger issue than workload among teachers.“We are getting messages from people who are saying they can’t afford petrol in their car to drive to work,” he said, adding that the squeeze was worsening longstanding difficulties with teacher recruitment and retention.The NEU plans to run a “temperature check” to gauge the appetite for action among its members early in the autumn term, before holding a ballot for industrial action later in September or October.

Junior doctors — who last went on strike in 2016 in protest over changes to their contracts — are also gearing up for potential action as they reach the end of a four year pay deal. The British Medical Association, which has called for the government to compensate them for the real terms pay cuts suffered since 2008, said that if its demands were not met within six months, it could hold a ballot on industrial action early in 2023.The Royal College of Nursing, which represents almost half a million healthcare workers, contends that a pay rise 5 percentage points above inflation is needed to retain staff and draw new recruits to the profession. It is waiting to see the recommendations of the NHS pay review body, and the government’s response, before deciding on a course of action.Criminal barristers are stepping up action on legal aid and plan walkouts for several days over each of the next four weeks.More generally, while the scale of national action remains in doubt, both unions and employers say pay negotiations are becoming more fractious, with strikes becoming more likely to emerge at local level in individual workplaces in both the public and private sectors.Hackney is among the local authorities where strikes have broken out over a 1.75 per cent pay offer that was set nationally by the Local Government Association, in the teeth of opposition by three unions — Unison, the GMB and Unite. O’Grady said anger is rising among workers, not only because they were being asked to take a hit while corporate profits were rising, but because they felt the government had “abandoned working families” and was trying to gain political capital from a confrontation. “I’ve been asked a number of times where we are going to be coordinating action, and I wouldn’t rule that out,” she said. “But the point is that workers are coordinating themselves, not out of any deliberate strategy but because millions of workers are now facing low pay, insecurity and real cuts to their pay packets”. More

One of the Bank of England’s more hawkish policymakers has warned that the UK faces further rises in inflation if the central bank fails to increase interest rates as rapidly as the US Federal Reserve, causing the value of the pound to slip. Speaking online at a Market News International event, Catherine Mann said that a fall in sterling risked exacerbating high UK inflation, which she said five times was no longer just imported but “embedded” in companies’ domestic pricing decisions. With the official inflation rate likely to edge higher from 9 per cent for April when the May figures are published on Wednesday, further price rises coming from the weakness of the pound would intensify the cost of living crisis, the external member of the bank’s Monetary Policy Committee said.The pound, trading at $1.2232 on Monday afternoon, has lost 11.4 per cent of its value against the US dollar over the past year, although it has been broadly stable against the euro.With inflation already set to rise to more than 11 per cent in the autumn, Mann said further falls in sterling would be likely if the BoE raised interest rates much more slowly than the US Fed, which in turn would push up inflation further.Mann, who voted for a 0.5 percentage point rise in UK interest rates to 1.5 per cent last week, accepted that tightening policy quickly could hurt economic growth, but she thought the overall outcomes would be better if the BoE acted quickly to defeat inflation and then reversed course. “A more robust policy move . . . reduces the risk that domestic inflation . . . is further boosted by inflation imported via a sterling depreciation,” she said. “I open the door to a policy rate reversal in the medium term when the domestic supports to demand fade and when weakness in external sources of demand bite.”With the BoE having failed to predict the rise in inflation from 1.5 per cent in April 2021 to 9 per cent a year later, Mann said it was now evident that inflation was part of the normal process of UK companies setting prices.

Unlike BoE governor Andrew Bailey, who has said that 80 per cent of price rises came from abroad and the central bank could do nothing about them, the external member of the MPC said that “the incoming data on inflation show increasingly domestic embeddedness, persistence and momentum”.She said that of all the items measured by the Office for National Statistics, prices for nine in 10 of them were now rising faster than they had between 2012 and 2019. She thought that incomes were being hit, but spending might prove to be more resilient, further embedding inflation, particularly if the BoE was seen to be reluctant to tighten monetary policy. In what she called an “extremely stylised” model she noted that when the Fed typically raised interest rates by 1 percentage point, sterling would fall because the BoE would not follow suit and UK prices would rise another 0.5 per cent. More

To QE or not to QE? That is the question. The European Central Bank made it clear it would seek a new tool to contain eurozone sovereign spreads at its emergency meeting last week. Rising inflation and the promise of higher interest rates are just two hurdles in the way of a new quantitative easing programme and the continuation of the “Draghi put” on European debt.So far the market is playing along. Yields on Italian debt are back below levels that caused panic. But as the ECB forges ahead with its first rate rise in more than a decade, pressure on peripheral debt will resume. It will mean tightening via rate rises while selectively loosening to prevent “fragmentation”. To be successful, the next step in the European monetary and political experiment has to be more radical than the last.What the ECB will do is reinvest in existing maturities from its pandemic emergency purchase programme (PEPP). At about €15bn-€20bn monthly this would fall well below historic bond buying of up to €80bn monthly. It could choose to do the same with the public sector purchase programme maturities (PSPP), which would roughly double monthly purchases.Another option would be to sell down holdings of core German and French sovereign bonds and buy peripheral debt. Critics would point this out as a further step in the direction of monetary financing of government deficits. It would be open to legal challenge. Sterilisation of bond buying could also be tried, where counter measures offset any expansion in the money supply. Higher deposit requirements were used to do this in the relatively small securities markets programme in 2010. What the market really wants is another “whatever it takes” moment, invoking Mario Draghi’s 2012 commitment to preserve the euro. Underpinning that were outright monetary transactions, a bottomless bond-buying programme that shored up confidence in the euro without ever having to be used. ECB dithering only serves to extend the amount of time — and the pain — before a new bazooka becomes inevitable. More