Not for the first time in recent months there is a somewhat 1970s feel to politics with the Government giving teachers a pay rise of 2.45% (with rises of 2.3% for each of the next two years). Thus no sooner had they set a notional public sector pay rise limit of 2% than they had breached it.

The police, who for very good reasons thought the Government would honour an arbitration award ended up with pay rise of 1.9% being imposed by Jacqui Smith, The Home Secretary. They will be spitting tacks tonight, having been told that the government’s parsimony was essential as a tool to help the fight against inflation. Now they discover that the teachers are, for some reason, exempt from the 2% limit.

Ed Balls may well try and persuade us that this award is ‘fair and affordable’ but then the Police might also say the same, given that the difference between their arbitration figure and the Government’s award was a mere £30 million.

A spokesman for the Department for Children, Schools and Families has tried to assert that an award above 2% does not mean the breaching of any pay limit.

What the Prime Minister said was that going forward public sector pay increases must be consistent with keeping inflation at 2%. This is the first of the settlements he was referring to. He didn’t say public sector pay would have to be 2%.

That was certainly not the impression that had earlier been conveyed, not least because of the setting of the Police pay rise at 1.9%.

The real reason for this, of course, is that the Government was taken aback by the ferocious reaction of the Police to the way in which they had been treated, with talk of them seeking the right to strike or taking some sort of action to protest their treatment. The teacher’s pay award strongly suggests that they have taken fright and have concluded that it would be politically disastrous to start a fight with every public sector group.

It was ever thus in the era of the Labour Government of 1974-1979 as first Harold Wilson and then James Callaghan fought and then appeased by turns first this group of public workers then that one. This was, of course, in an era of higher inflation than we have now, though today’s reports on food prices and energy prices from the Telegraph is further evidence that real inflation in the real world is significantly higher than Government and Office of National Statistics claim.

Trying to hold pay rises down did not work very well then and this award suggests that it will not work any better today. As each group comes along and uses such muscle as it has, some will be able to push the government over 2%, thus encouraging others to demand parity. Those that do not get above 2% may end up on strike. The police will see every award above theirs as another kick in the teeth. And given the way in which Labour has indulged in a highly profligate programme of creating jobs in the public sector, there are a lot more public sector workers than there were in 1997 which means more people to upset when the going gets rough.

Then we get into the game of this or that group trying to garner sympathy of the public in their dispute, one which the nurses, the Police and the firefighters traditionally used to win. This time the nurses too have only got 1.9% so they will be less than happy, although in terms of public sympathy, it has to be said they have done pretty well over the last ten years. Fortunately we no longer have the coal-miners nor coal mines dependent upon them that generated the worst of the disputes of the 1970s and 1980s.

The instant act of appeasement may well not have worked: teachers are still contemplating going on strike because the award does not meet their demands which are based on the Retail Prices Index which the Government (surprise, surprise) eschews in favour of the Consumer Prices Index: the former has inflation at 4.3% and the latter is currently at 2.1%.

In times past when inflation was genuinely quite low and remained so month after month and when the economy was doing sufficiently well to absorb above-inflation pay rises, none of this mattered. But the Government is mistaken on relying on the CPI as this is clearly not reflecting people’s real life experience which is that prices everywhere for food, utilities, fuel and the things we all need all of the time to function are going up far faster than the Government is acknowledging.

If this trend continues (and if the pound continues to fall against the dollar and the price of oil, priced in dollars, continues to rise, such may be inevitable), then 2008 will see a considerable increase in people’s perceptions that the Labour Government is no longer in control of matters economic. That may be fatal to its continued existence.