Labour have agreed pay deals with NHS staff, public service workers and now train drivers – but they’ve handed the conservatives an effective attack line.
Are Labour really beholden to “union paymasters”? And can they sustain pay rises while cutting the winter fuel allowance?
Hannah Barnes and George Eaton discuss on the New Statesman podcast.
Also in this episode, Hannah and George look at the crisis in prisons, and Labour’s plan to house inmates in police cells. Can Keir Starmer and new prisons minister James Timpson hold Britain’s overflowing prison estate together?
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Selected transcript
The following is a verbatim transcript from key sections of the podcast episode.
On Labour’s pay deal with train drivers:
George Eaton: The argument Labour’s made is that the rail strikes were costing the economy 800 million in lost ticket revenue. The cost of settling with the rail workers was 100 million. Now, that’s the approach they’ve really taken across the board. That’s the reason you’re seeing all of these real terms increases. It’s actually the approach that Margaret Thatcher took when she came into power in 1979, often forgotten now.
Conservatives love to tell the story of Thatcher, the sort of warrior who smashed the militant unions and took on a sort of blazing public sector. But when she came in, she accepted all the recommendations from the public sector commission that Labour had actually established.
Now, why did she do that? She didn’t want sort of industrial strife early on in her premiership. The other point that economists make, such as the IFS, is that public sector workers have suffered real terms pay cuts. So it’s 15 per cent for doctors since 2010, 9 per cent for teachers and 6 per cent for nurses. So these pay increases go some way to redressing that.
Labour’s gamble is that if you make working in the public sector more attractive, you’ll be able to recruit more people. Then you can look at seriously improving public services and reforming them. That’s the wager they’ve made.
Hannah Barnes: One of the reasons that we had this blockage before and so many strikes in the last 18 months or so was that these conditions were attached and the rail companies, the train companies, and the previous conservative government said, look, you have to accept these changes to your terms and conditions to rosters because it’s far too expensive and the public essentially are paying out millions to prop up the railway.
Has that gone away? Was that overblown? Or how is Labour going to fix that?
George: So when I spoke to an aide from the Department for Transport this week I said, “look, what do you mean?”
They said they want to modernize the railway. So they say, “we’re not being prescriptive at the moment, but we want to come up with a serious long term workplace agreement.”
My sense is that they’re looking to relations to turn the page, start a new era, and then they will get serious about what changes they need. The proof will come down the line.
Hannah: But the risk presumably is that in order to get those changes through, the unions will ask for more money.
George: It’s going to be a constant balancing act. Rail unions have quite a unique power in terms of public sector unions to literally bring things to a standstill. I think from the government’s perspective, it’s got a little easier because inflation’s now just above two per cent and nearly back to target.
But as I say, across the public sector, Labour are just looking to open a new era of relations and change the mood music and this rolling era of crisis where we saw the highest number of strikes since 1989. So they say it’s not as if everything was going well before.
On winter fuel payments:
GE: I think winter fuel payments is a genuine problem for Labour. Much bigger than the accusations about union paymasters. I think partly because the cut was done in isolation. You weren’t having cuts to benefits for say, working age people or tax rises on working age people at the same time, although taxes overall are still going up.
And it’s a problem because Rachel Reeves is only proteceting the very poorest pensioners. Of the 11.4 million pensioners in the UK ten million are going to lose the benefit which is £200 for pensioners under the age of 80, £300 for those over the age of 80. Now, energy bills are set to rise to over 1,700 this winter. This has been a massive political issue.
The winter fuel payment was something introduced by Gordon Brown in 1997 to try and ensure that all pensioners were protected during cold winter months, and now it’s being taken away with little advance warning. There was no mention of it in the Labour manifesto. They didn’t promise to keep it; they didn’t promise to scrap it either, though. Asked about it during the election – and they weren’t really – but very occasionally, and they say “we have no plans to”.
So this actually took Labour MPs by surprise. One says to me that announcing this cut in isolation is almost suicidal. Another said that they’ve had more letters on this issue than they have over any other issue for years, including the war in Gaza. And this is in, quite a warm August.
Now, governments learn that if you antagonize pensioners, you know about it. Tony Blair in his memoir likens angry pensioners to Rottweilers on speed. This was a row that came up after Gordon Brown increased the state pension by just 75p: technically in line with inflation at the time, but it looked miserly because the economy was growing.
Now we’re not in a big period of economic growth, though actually the economy has improved which I think also makes it tough. The argument’s not just that you’re giving pensioners too little. You’re taking money away from them.
Labour say that we are going to protect the triple lock, that will ensure that the state pension rises. But I really struggle to see how this isn’t going to be a big headache for them in the autumn and winter. I think they will have to announce further support for poorer pensioners.
I think at the moment it’s about nine tenths of pensioners losing the benefit. You know, Martin Lewis said the benefit is now too narrowly targeted. It’s only the poorest pensioners who get it, you’re ignoring those who are just about managing.
HB: Yeah, but if you do that obviously then the savings become far less.
GE: Exactly. That’s the argument that Rachel Reeves’ team make. They say, this is saving £1.5 billion a year. We had a terrible inheritance from the conservatives. We’re not in opposition now.
One aide said to me, “We can’t just comment on problems, we have to try and solve them.”
HB: They’ve got the problem of how you govern when there’s no money, basically.
GE: Yeah, or less money. And of course you will get Labour MPs saying, “why not raise taxes on the wealthiest.” So this is really going to be a running sore.
Previous governments have been very careful, including Conservative ones, very careful to protect winter fuel payments, though Theresa May did propose means testing them and had to abandon that after her loss of her majority.
There is not a happy tradition of taking on pensioners. And Rachel Reeves will have to be quite bold if she thinks she can tough this out.
On the crisis in prisons:
HB: While it received no attention during the election campaign, I spoke to insiders at the time who warned of the dire state of the prison system. They even suspected that it might have influenced the timing of the election, too, with Rishi Sunak calling it earlier than expected knowing that it would face a crisis of capacity in the summer.
Within a week of taking power, Labour then announced emergency measures to free up some prison places saying that thousands of prisoners would be released after serving 40 per cent of their sentence rather than the standard 50 per cent. But then came the riots and hundreds of arrests and charges. And George, that’s meant the need for more emergency measures.
GE: Yes, so they’ve announced Operation Early Dawn, as it’s known, which means that people will be held in police cells until capacity is available in prison cells. This has been used before by Rishi Sunak’s government. As [Keir Starmer] is saying, the big picture is that the prison system is in crisis, has been for a long time.
I interviewed Charlie Taylor, the chief inspector of prisons earlier in the summer and, he pointed out amongst many things that sentences contrary to public perception perhaps have got longer and longer and they’re the longest they’ve ever been at the same time, you’ve got a much higher proportion of the prison population who a recall back to prison, having been released and broken the conditions of their license.
HB: And you’ve also got the highest proportion ever who are on remand – so, waiting to go to court and or be sentenced. Operation Early Dawn, when it was used in May, I believe, by the Conservatives, it really was not popular with the police. They said, “it’s not our problem that your prisons are full. We’re going to carry on arresting people.”
And Charlie Taylor said to me, early release is the only solution in the short term. He says, you either have to turn the taps off or you have to pull the plug out of the bath and turning the taps off isn’t an option. You can’t ask the police to stop arresting people. You can’t ask the courts to stop sending people to prison. And ultimately you have to find a way to empty the bath. The bath being prison, of course. So very unpopular. Obviously you only do it in an emergency but we’ve had this sort of capacity problem for a good 12 months now.
But it’s not about spare places across the estate, is it? It’s about where they’re needed. So as of last Friday (we get these weekly figures) there are 1300 places roughly across the prison estate, but that includes women’s prisons, it includes the youth estate. They’re not necessarily where we need them for the people who’ve been rioting or causing disruption.
GE: Yes, the riots have been a headache on multiple levels, obviously, but most obviously in the case of the prisons because Keir Starmer has taken a sort of unyielding line on law and order, has been prepared to hand down sentences that some regard as unfair.
There’s a debate going on about that, and there’s debate about the limits of free speech and what’s a reasonable opinion and what’s incitement to violence and so on. But on a practical level, it has meant even more pressure on the prison system and this is going to be one of the defining challenges for Labour in this term, I think.
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