Wage Stagnation & The Conservative Party’sIdeological War on Workers
The current cost of living crisis can be placed firmly in the context of the Conservatives’ antipathy to the strife of the working class, says Thomas Perrett
In October last year, the Office for Budget Responsibility (OBR) found that average real wages will be lower in 2026 than they were in 2008, as earnings grow by 3.9% compared to inflation of 4.4%.
The cost of living crisis, which has seen the energy price cap soar by a record 54% and inflation rise at its fastest rate in four decades, has rendered obsolete many aspects of the UK’s post-pandemic economic recovery. Despite Office for National Statistics (ONS) figures showing that wages rose by 3.8% between November and January, take home pay has declined by 1% adjusting for inflation.
The Chancellor’s Spring Statement, criticised extensively for its inability to adequately up-rate benefits or to levy a windfall tax on profitable North Sea oil and gas firms, effectively issued a stealth tax on workers by freezing income tax thresholds until 2026.
Sunak’s decision, announced last year, which had been expected to bring in £8 billion worth of revenue, had assumed a far lower inflation rate than currently exists, meaning that 1.25 million people will now be dragged into paying a 40% income tax rate, with a further 1.5 million compelled to pay basic rates of income tax.
Had the income tax threshold increased in line with inflation, according to the OBR, workers would begin to pay the 40% income tax rate at £56,270, rather than £50,270, by the tax year 2025/26. This would have increased the personal allowance on earnings by £1,500, meaning that workers would be better off by £300 per year by 2026.
“Freezing income tax thresholds is a poorly targeted measure, which would increasingly benefit more affluent individuals,” says Sam Robinson, a researcher at the centre-right think tank Bright Blue.
Indeed, Britain’s persistent wage stagnation is a concerted, ideological war on workers. Successive Conservative governments have sought to loosen labour markets, diminish workers’ bargaining power, and protect the investments of the wealthy, engendering widespread economic insecurity. That the UK is the only developed country to raise taxes on working people during the cost of living crisis is no accident.
Following P&O Ferries’ widely-publicised sacking of 800 of its staff, set to be replaced with cheaper agency workers, the Conservative Party’s acquiescence to ‘fire and rehire’ policies have come under considerable scrutiny.
Labour Deputy Leader Angela Rayner tweeted: “This Government has enabled poor business practices that exploit workers,” adding: “Fire and rehire must end. This is destroying lives”.
Despite vague commitments to end exploitative employment practices that have driven down wages, including a “dismissal and re-engagement code” aimed at providing compensation for victims of fire and rehire strategies, Conservative MPs recently abstained on a motion tabled by Labour to outlaw fire and rehire practices, which passed by 211 votes.
The Conservatives’ compensation solution was derided as inadequate by Frances O’Grady, General Secretary of the Trades Union Congress (TUC), who told the Independent that: “While a statutory code is a baby step forward, it won’t deter rogue employers like P&O from trampling over workers’ rights.”
The Government’s response to the P&O sackings demonstrates that wage stagnation is not an aberration, but is the consequence of a series of anti-labour policies that have weakened the power of trade unions and allowed bosses to devalue and undercut organised labour.
Successive Conservative governments since the 1980s, seeking to curtail demand-pull inflation, which they alleged would devalue creditors’ long term savings and de-incentivise businesses from investing, have implemented a series of union reforms which saw trade union membership decline to just 9% by 1990 – its lowest level since 1948. A 2012 Living Commissions study confirmed that these policies had their desired effect, as wage growth became increasingly disconnected from productivity.
The Conservatives’ sustained attacks on organised labour have culminated in significant economic hardship and job insecurity across the country, which has contributed to stagnating wages. A recent TUC report found that the number of workers on zero hours’ contracts climbed to more than 1 million in the final quarter of 2021, as Black, Asian and Minority Ethnic women were twice as likely to be employed on these contracts as white men.
The report, which concluded that real pay had fallen by 1.6% in healthcare, 4.6% in education and 4.2% in public administration, showed that workers were suffering the longest pay squeeze since the Napoleonic Wars. Examining the consequences of flatlining post-pandemic real pay, it found that approximately 17% of the lowest-paid workers said that they would likely struggle to afford basic necessities over the next six months and that 29% would struggle to afford more than the basics.
Moreover, the decision by the Bank of England to raise interest rates in the hope of curtailing inflation further reflects the state’s priorities; rather than ensuring that wages rise in line with inflation, and that collective bargaining measures are in place to allow workers to bid for higher pay, the establishment seeks to reduce aggregate demand and stymie wage increases.
The cost of living crisis has laid bare the meagre protections in place for workers, who will live with the consequences of soaring energy bills and commodity prices without secure work or the ability to unionise.
The rise of in-work poverty, the record numbers of workers on zero hours contracts and the longest pay squeeze in decades – if not centuries – are consequences of a protracted, ideological war in which the Conservatives have consistently prioritised the investments and savings of banks and big businesses over the bargaining power and autonomy of the British working class.