Tel. +44 (0)20 7287 4414
Tel. +44 (0)20 7287 4414
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

Bruges Group Blog

Spearheading the intellectual battle against the EU. And for new thinking in international affairs.

Inflation and pay claims


Strikers are all evil, of course. I know because I was a teacher in 1987 and the newspapers made it clear how wicked and greedy we all were; a change from the cheery contempt everybody has for our profession. Now it's overpaid railway workers and horrid grasping doctors. Nobody in the public sector should be allowed to withhold their labour or otherwise inconvenience us in the slightest. Don't they know their place?

Nevertheless, after all the harrumphing it still has to be said that when the RMT and BMA seize on official inflation measures to justify their claims they open a can of worms.

For a start, which index should we use, RPI or CPI? RPI includes housing costs and in 2010 the Coalition Government announced its intention to switch to CPI for State Pension increases because it tends to yield lower figures. (There is a CPIH, which includes owner-occupier housing costs - 'the most comprehensive measure of inflation' - but for some reason there was no proposal to use that!)

On the other hand old people are more likely to vote so the 2010 Government also introduced the 'triple lock' guarantee, which said pensions would rise by the highest of CPI, average earnings (NAEI) or 2.5%. Then post-Covid lockdowns NAEI soared and the triple lock was suspended for 2022/23 (but will be reintroduced for this year.)

Obviously, the whole thing is a fix. As George Carlin used to say, 'be happy with what you got, they don't give a —— about you.' It's becoming fashionable to decry democracy; but imagine what would happen if you didn't have the vote: as the poet Coleridge wrote, 'RULERS… are as bad as they dare to be.'

The Conservative government of 1979 set itself the task of slaying the inflation dragon (though at what cost to our industrial sector?); by contrast almost the first act of the ConLibs in 2010 was to stop issuing new Index-Linked Savings Certificates, which act signalled where they stood in the battle between the banks and the people. When the value of money is as elastic as bubble gum it is almost impossible to assess how badly you have been cheated.

Even the chosen index can mislead. The Consumer Prices Index is based on a variable basket of goods and services; the items in that basket will not be typical for everybody - for example, e-bikes are now in there. Nor will the weightings: low earners may spend a higher proportion of income on basic foodstuffs, while the highly paid may lay out a lot more on education. Even the cost of specific items can be tweaked: both here and in the US there is a notion called 'hedonic adjustment', deflating prices by their increase in use-value - if a new computer has twice the memory for the same money as the old one, then the price can be said to have dropped (even though you personally may not need the extra computing power.)

The concept of what is fair gets lost in a fog of this kind of data. We look for easy answers and simple measures, just as climate change seems very stupidly to be all about carbon monoxide.

About fifty years ago the Government tried to resolve pay issues by official recommendation. In 1974 the Halsbury Committee recommended an average increase of 30 per cent for nurses. Later that year the Houghton Report led to a 27 per cent increase for non-university teachers in 1975; a teacher who had been in the job at the time told me 'the staff car park filled up with new cars.'

The bonanza didn't last. Thanks to our predilection for involvement in others' wars OPEC punished the West with the 'oil shock' and inflation smacked down the workers once more - and set them against each other, some trying to match the pay of people in similar work elsewhere in the country, others (more highly skilled and qualified) striking to maintain their pay differential. The teachers' cars got older and rustier, and then - belatedly - the swine took strike action.

Here we are again; back to the Seventies, but with a weaker economy and hugely more private and public debt. Some (especially American commentators I read) say we are heading for a major economic disruption worse than the Great Depression.

The government will not be able to keep everybody's standard of living up to what we have been accustomed to enjoying. Nor will it be easy for all the strikers to find better pay and conditions elsewhere - this is a global crisis and in a thunderstorm there is no point in trying to find a drier tree to shelter under. Get what you can - 'be happy with what you got' - but the big challenge is going to be, not wealth parity but maintaining social cohesion.

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Director : Robert Oulds
Tel: 020 7287 4414
Chairman: Barry Legg
The Bruges Group
246 Linen Hall, 162-168 Regent Street
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United Kingdom
Founder President :
The Rt Hon. the Baroness Thatcher of Kesteven LG, OM, FRS 
Vice-President : The Rt Hon. the Lord Lamont of Lerwick,
Chairman: Barry Legg
Director : Robert Oulds MA, FRSA
Washington D.C. Representative : John O'Sullivan CBE
Founder Chairman : Lord Harris of High Cross
Head of Media: Jack Soames