To wonder where all the money is going to come from to increase wages?

[girlfriend44]

Genuine question. Re people who are striking for more money.

Where do they think the extra money is going to come from to increase all their wages and how will this keep inflation down?
Can the government really afford to pay everyone more?

Quarantine easing. Just print more money. It’s fine.

Led by Donkeys have just stuck a sign on her yacht ‘Pandemic Profiteer’

The only way you could do that would be from an increase in productivity in the private sector, and we have low productivity.

And we have low productivity because we have low public investment in aresa such as education, health and transport. The answer is not cuts, it's investment.

Private healthcare is a whole different ball game. They can pay big bucks because there will be big bills and lots of nice state contracts too.

You have to understand that these people don't believe in public services free at the point of use. The just want rich people to get richer and if that means the rest of us live in penuary so be it.

It's not correct that the only way to fund additional spending is through increased taxes, or reduced spending, or increased borrowing. At least not in the longer term which is the right way to view public finances.

The best way to fund increased spending on, e.g. pay (or anything else) is for the economy to grow faster than borrowing, so that debt as a proportion of GDP is falling even if it is growing in raw numbers.

If the Tories had grown the economy like the last Labour Government did, there would be far more fiscal headroom to fund pay increases. And actually, a Labour Government probably wouldn't have let pay become so bad in the first place, so workers would be more willing to ride out a couple of tough years to get over an inflation spike. But after thirteen years or needless austerity, public sector workers just can't take another real terms pay cut.

We have vast public investment in transportation and infrastructure : Crossrail HS2 !!!!!. And healthcare is over 40% of all public sending and growing, with a £12b injection to cover backlog on top of an increase in NHS funding.

They will have to improve offers in some way though. Some of the public sector have had pay freezes and 1% rises for most of the last 12 years. If the nurses and teachers get a better deal they will need to offer something to the civil service to get them back off strike.

There are probably loads of situations where money could be redirected that we don't know of; aren't privy too.

One example is the Tax break on private schools. I am sure some people don't agree with it. I do.

There are probably many other ways it could be found. That you may or may nit agree with?
The bar in the house of commons?

amp.theguardian.com/commentisfree/2023/jan/12/keir-starmer-private-school-tax-breaks-charitable-labour-education

I understand everyones comments about the government finding the money etc etc etc.

The thing i cant understand is what we are trying to achieve here. Stick with me as i am not the best at explaining things.

So we have big inflation at the moment because everything is expensive, all the materials are expensive and cost of living is just impossible. For decades people have borrowed money they cant really afford because borrowing was cheap. It hasnt taken much of a increase for it to hit a lot of people hard. Yes :-)

The govenrment is trying to reduce the inflation by reducing peoples ability to spend. Ie raise interest rates. Make mortgages more expensive so they cant buy houses. In general just making things harder. Yes :-)

So if we give nurses/teachers/blue light workers/everyone else that is due a wage rise an inflation busting wage rise.........WHAT HAPPENS NEXT?

From where i sit the teachers and the rest who get this big (Justified) pay rise end up in status quo. No worse off but essentially just treading water or possibly slightly better off. The economy gets a bigger boost because some rather large parts of society get a bit of security and start to move the economy on again, possibly back into increased inflation...........BUT what about the other HUGE chunk of the population who are left behind. The ones who didnt get that pay rise and have to deal with ever increasing inflation. The vast majority of our society who arent lucky enough to work for big institutions and havent got unions/rest of the public fighting their corner.

I can only forsee huge pain for those that havent got much to begin with. There is going to be even bigger gaps between the haves and the have nots.

Am i missing something?

Teacher's pay (like most of the public sector) has not increased in line with inflation, nor with average private sector pay, for over a decade. This is coming to a head now because everyone has a breaking point. As a PP said, this has been caused by mismanagement of the economy under successive Tory governments, and the only way to change things is to properly grow the whole economy.

I think the government should agree to actually fund the pay rises they have already offered teachers for this year, and agree a medium-term (3-5 year) strategy to bring education funding (including teacher salaries) back up to where they would have been if they had kept pace with private sector wages.

They won’t budge to inflation matching, maybe hold out so inflation drops first then reduced offer. But will see

I don’t predict borrowing or taxes will increase more

Public servants have been underpaid for far too long (I am not nor have I ever been one by the way!)

i am a public servant and I don’t agree. I think a huge majority of public servants would have a huge shock if they went to the private sector. I honestly think if my colleagues when to the private sector for a year they’d never contemplate striking again. I am paid less than I was in the private sector. But there are many advantages and one is vastly different workload.

The money for the COVID measures was borrowed and still needs to be paid back.

They will no doubt raise income tax on higher paid people.

They don't tax wealth which is generally 'old' money.

Tax on private school fees will raise some money which needs to be offset against the additional costs resulting from the people pulling their kids out because they can no longer afford it.

The discontent will just shift up the payscales.

Someone up thread put it more elloquently but the NMW pay rise of 9% means it is hardly worth
the additional stress for hardly any more money.

Just listening to LBC and they are talking about pensions for public sector. Wow!!!!

Sticking plasters to fix what is broken and vanity projects is not the same as meaningful investment.

You're making a classical mistake, which is assuming that countries are like households. They're not. Balanced budgets at the risk of slipping into recession is precisely the wrong move in circumstances like the present.

Here's a thread that does an excellent job discussing the strikes and the present-dat British economy:

mobile.twitter.com/RichardJMurphy/status/1620701720132337665

Your experience is not universal. My DH is private sector. His hours are more flexible, his pay is triple mine and he certainly does not have the emotional load of my job every day.

The govenrment is trying to reduce the inflation by reducing peoples ability to spend. Ie raise interest rates. Make mortgages more expensive so they cant buy houses. In general just making things harder. Yes :-)

Most people who are asking for pay rises aren't rich. They are the ones who have been cutting back: no new shoes, holiday in UK (which is good for the economy, tbf) not buying new cars, etc etc etc.
They move from branded goods to supermarket own brand, or cheaper brands. Or cut down on the fun things.

Some are choosing between heating and eating, new coat or new shoes for their kids.

Imagine now if they have more disposable income. Will they stash in a tax-efficient offshore bank, or will they buy the coat AND the shoes? Heat AND eat. Maybe spend more on holiday, buy more treats.

That multiplies not only among the people with more disposable income, but to the shops and services they use. And that is how to get the economy moving by making money move around

Incidentally when interest rates are high those who can take their money out of the economy and save it. Savings aren't good for getting an economy moving.

This is a simple way of explaining the Keynsian multiplier. Which is something this government don't believe in, i think

There's a few things you're missing.

First, those on benefits, including UC and Pensions, will have their benefits uprated in line with inflation. So they will be no better but no worse off in real terms.

But second, most economists say that providing decent pay rises for public sector workers would not fuel inflation. The inflation problem hasn't been caused by consumer spending, it's been caused by the war in Ukraine and higher production and trading costs brought on by both Covid and Brexit. Reducing consumer spending power of the several million public sector workers will not affect those prices significantly.

What is actually needed is growth. If the economy had grown under the Tories as it did under Labour, the economy would be about $1 trillion bigger than it is now. And that would mean the Government having about $440 billion (about £350 billion) extra for public spending.

So why is the public sector struggling so much to retain people?

The Education Secretary this morning was quite clear that she had no way of explaining why teachers couldn't have a pay increase in line with inflation.
There is a massive difference to a pay increase that is in line with inflation and what the goverment is currently offering to many vital workers, who will be poorer this year and every subsequent year as a result.

Labour were in on the upward swing just before a global crash. Other countries would have been experiencing the same upswing. Do you think if they were still in they would just have sailed through pandemic and war on same trajectory?

Thanks for the reply.

I must say most of the teachers/firemen/nurses etc i know are on pretty decent wages. Can afford bigger houses, better cars, more holidays than the average person tbh. I dont begrudge them it, but they are definately not doing without compared to a LOT of other occupations. I know a couple where one is a teacher and the other a fireman living in Scotland. Their joint household income is way above £100k and they have huge house, nice cars and multiple holidays.

So if they and the others that are struggling in similar circumstances get a pay rise.....what will they spend it on. Well if the last 20 years has told us anything, they will spend it on houses. Bigger houses or second houses. I dont begrudge them but thats what extra money for them will mean.

As i said earlier.......they will stand still. Possibly improve. But what about the huge amount of other people working to get by, not on inflation busting benefits etc?

If the 'where's the money coming from' question is actually serious, I'd humbly suggest rejoining the customs union as a decent economic stimulus that would increase tax revenues.

No - if Labour had been in Government, we would probably have seen sound economic growth in the 2011 to 2020 period.

Then when the pandemic hit we would be entering it with:

(a) lower debt to GDP because of nine previous years of higher growth
(b) higher wages because of (i) less unnecessary austerity and (ii) stronger incentives for profits to be invested in private sector growth or wages rather than hoarded.

So a Labour Government wouldn't have avoided the economic hits of a pandemic and a war.

But they would have been able to weather those hits much more effectively, with much more fiscal headroom to get through them.

The IMF have kindly answered that question for you.

www.bbc.co.uk/news/business-64452995