There has been a curious 1970s flavour to politics this week. The argument over police pay arrested my attention not because of the dishonest ratting on a commitment to honour the arbitration that recommended their pay award but because of the reasons advanced for such ratting.
The ratting thing is par for the course, something which this government does without a backwards glance, so commonplace is it. The reasons for its ratting are, in short, that the Government must hold to a maximum level of pay rise for public sector workers lest others demand pay rises greatly in excess of the pretended level of inflation which would then create an inflationary spiral for such pay increases that would begin to fuel the fires of inflation itself.

Those of you old enough to remember will remember the world of the late 1970s when the governments of Harold Wilson and James Callaghan endured a constant struggle with their paymasters, The Trades Unions, over pay rises. Indeed Grocer Heath also thus struggled, but not being made of the same stuff as his successor as Tory leader, failed and sank without much trace in 1974.

This was an era of high inflation and control of prices and incomes was seen as an essential tool in its control. It is difficult to believe now but in the 1960s we had something called the “Prices and Incomes Board” (PIB) run by an owlish chap called Aubrey Jones, nominally a Tory but so wet you could shoot snipe off him.

To this entity, set up in 1965, the government would refer proposed price and wage rises. The first three, for example, related to price rises in the cases of ‘standard’ bread and flour, soap and road haulage rates. Once a report had been made the government would then attempt to get a particular industry to operate the report’s recommendations. By the end of its first year in operation it had made five reports in relation to prices, all of which had largely been followed. Two wages references had also been made. Unsurprisingly the Unions simply ignored them.

This dirigiste attempt to control prices and incomes was, as any free marketeer will tell you, doomed to failure and the incoming Heath government duly wound it up upon coming into office. Heath, however, was as beset as Wilson had been by inflation, and in 1973 separate entities, the Prices Commission and Pay Board were set up under the Counter Inflation Act 1973 to try once again to control the uncontrollable. Heath’s government had already tried to rein in prices and pay and had introduced (unbelievable as it is to our ears today) a 90 day pay-and-prices freeze in November 1972.

The Pay Board was abolished almost as soon as Wilson got back into power in the summer of 1974 (as part of the price he had to pay to his paymasters in the Unions) though the Prices Commission lingered on until abolished by Margaret Thatcher. As we now know she was to transform the British economic scene and this constant but fruitless battle of the government to emulate King Canute in trying to deflect the tide of the market was, thankfully, brought to an end.

Whilst it was going on, however, I well recall the constant lecture to the Trades Unions (who were as boneheaded then as they are now) to the effect that the government could not concede this or that pay rise because everyone would want as large or a larger one which would in turn inspire the next group of public sector workers into demanding yet more. Thus would be created the inflationary spiral, as indeed we discovered.

It is astonishing to us now that, in a world even then dependent on overseas trade, any government of a western Democracy should think realistically of trying to control prices and incomes. But when one thinks that the miners were, at one point demanding in excess of 40% by way of a pay increase and the Wilberforce Commission had recommended a pay rise of 30% (a figure which had been accepted by Heath’s government) one can see why politicians, brought up on the notion that governments could control such things, should reach for statutory means to control inflation.

That they were not merely wasting their time, but were in fact bonkers, is now something we accept as a sine qua non of the market economy and is the direct legacy of Margaret Thatcher’s brutal lessons of the 1980s (one of her outstanding and, one hopes, everlasting, achievements) which threw all such notions of State control out of the window.

Thus it came as a shock to hear Jacqui Smith, who has all the skill and charm of a second rate sink comprehensive school teacher, lecturing us this week about the reasons for public sector pay restraint in relation to the Police Pay award in terms that were not merely redolent of the 1970s but in the same words.

Which brings me (stop groaning at the back there) to the point. We have noticed out here in The Sticks in recent months substantial rises in prices in the basics of life, food, fuel (obviously) and all those things which emanate from the supermarkets. The rises have been well above the current levels of either the Consumer Prices Index (CPI) or the Retail Prices Index (RPI) (2.1% and 4.2% respectively in October).

There has been all this year a steady and inexorable rise in this or that commodity at the supermarkets which I (and I appreciate that this may reveal the extent of my economic illiteracy) always think of as being as good a true reflection of inflation as you can get, given the wide variety of goods from all over the world that require an enormous variety of means of production to create them and of transport to get them here. I imagine that your average elector certainly sees the supermarket as a more accurate reflection of inflation than anything the Government puts out. The Police, of course, are, by and large, average electors. For them striking is illegal, but it is lawful for them to talk of it and the fact that they are so doing may reflect the pinch they are feeling, a pinch that may be more universal than the government is letting on.

Now the price rises have gathered pace. I reckon the CPI and RPI figures are fantasy stuff: the true rate of inflation is somewhere between 10 and 15%. Not scientific, I know, but I have got into the habit of disbelieving government statistics, even if they do come from a notionally independent Office of National Statistics.

Is this sudden resurrection of the language of the era of high inflation the harbinger of something worrying in the state of our economy? Does the Government have a fair inkling of stormy waters to come? Is that why there was a sudden interest in an autumn election, because Macavity knows something nasty is on the way?

I know not.

But the abrupt (and to my mind utterly dishonourable) decision to rat on the police pay arbitration is so odd that it is positively striking.

Perhaps my esteemed colleague Wat Tyler, who has just posted on police pay at Burning Our Money might care to enlighten us……..

Advertisements