Just over a decade ago, we were in the midst of ‘Tory austerity’, with deep cuts to public spending impacting many people’s lives. But this was accepted, perhaps somewhat surprisingly, with little protest. Workers in the public and private sectors barely batted an eyelid at pay freezes because inflation was so low and they were just grateful to have a job as the unemployment rate rose to around eight percent. The only protests outside Belfast City Hall were from one part of the community and were linked to national flags. But fast forward to today and the recent protests on Donegall Square North were about what we like to call bread-and-butter issues rather than identify politics. What has changed is that despite unemployment recently hitting record lows and employment and job opportunities never being higher, morale amongst the workforce (predominantly public sector) has barely been lower. Malaise amongst everyone across the community from teachers and nurses to road gritters, as well as in the private sector, is rife, and public services appear to be unravelling by the day. The fact that we have no functioning NI Executive makes a bad situation worse.
How did it come to this?
To put it in a statistic, the median wage of a full-time public-sector worker when adjusted for inflation is now almost nine percent (£3,400) lower than it was in 2012, and indeed is back to where it was in 2000, almost a quarter of a century ago. And almost all of the decline has happened in just two years of pain. By comparison, the median private sector wage when adjusted for inflation is still much higher than in 2012 and only very slightly (less than one percent) down on two years ago. And all of this is happening just a few years after we all saluted frontline public sector workers and promised to ensure they would get the recognition they deserved after their efforts in the pandemic. These real-term salary declines are also before you factor in the significant increases in taxation, childcare costs and mortgage interest payments which are potentially adding thousands to annual household bills.
Little wonder the public sector is striking back.
Part of the problem is that with no NI Executive in place currently, our local politicians aren’t able to do anything to resolve these immediate wage pressures. But a lot of the issues stem from a time when we did have an Executive and the politicians didn’t do anything when they were in power about public sector reform, workforce planning and long-term investment. This has been compounded by the political focus, indeed fixation, with Brexit since 2016.
The reality is that the UK and NI economies have been serial under-investors. The low growth we are reaping today is partly (a large part) linked to the (lack of) capital investment sown over the last 20 years. NI has been investing less (or underinvesting more) than England, Scotland and Wales. This problem pre-dates Brexit.
Not investing for the long-term eventually comes home to roost. One day the ‘long-term’ arrives. Unfortunately, the ‘long-term’ of 15-20 years ago in health, education, water infrastructure has now arrived. We are reaping the politics of short-termism. Brexit has created a host of additional problems that we didn’t previously have. But these took up a significant amount of political bandwidth over the last 7 years. The opportunity cost here is not focussing on fixing existing issues that were within our gift when we had an Executive and times were better. In the first decade of devolution, the Blair / Brown government presided over increases in wages and public spending above the rates of inflation. This is why Mervyn King, who was governor of the Bank of England, called it the NICE (non-inflationary, continuous expansion) decade. This was arguably the sweet spot for introducing public sector reform and much-needed tough measures in Northern Ireland, but the Stormont Executive of the time instead indulged in populism and handed out goodies instead. This NICE scenario isn’t coming back any time soon and even a Starmer / Reeves government is going to face a fiscal straight jacket. A new term in the political vernacular may well be ‘Labour Austerity’.
Getting the Executive back up and running and getting initial pay deals agreed is only the first step in dealing with the problems. The reform and radical change needed cannot wait any longer. And it’s going to have to come at a time when the environment is least conducive. One of the conundrums the politicians are going to have to solve is improving the pay and benefits of frontline public sector workers whilst also reducing overall costs. This inevitably means looking at efficiencies elsewhere and effectively restructuring the business model of Northern Ireland’s public sector. That means unavoidably reducing the headcount of the public sector and doing what the private sector is doing in dealing with underperformance and utilising means of increasing efficiency such as employing AI.
Public sector workers need to be valued and paid appropriately to generate good public sector outcomes. So that needs to change. But change is a two-way street. Underperformance needs to be dealt with too. The reality is that a job for life for an underperforming public sector worker or retaining a worker whose job could be better done by technology doesn’t represent a good public outcome.
We need to deal with the reasons behind the public sector striking back. But we also need to see the force of public sector reform reawaken.
This article appeared in the Belfast Telegraph on 23rd January 2024