Trades unionists won’t back indy if they think nothing is going to change

Already there has been mention of a general strike though I think that is more bravado that a serious possibility. But inflation is not going away any time soon and workers – especially those in the public sector – will respond by trying to protect the real value of their wages. This will form the background to any independence referendum.

Let’s start by seeing what inflation has in store for us. The Bank of England is predicting price rises will accelerate through this year to circa 11% on an annualised basis.

However, the ever-optimistic Bank thinks increases will moderate after that – though overall costs will not actually fall. The Bank’s Monetary Policy Committee thinks inflation will be back to an annual rise of 2% in two years’ time.

If this prediction is correct, then the heat will go out of the inflationary cycle. Clearly the Westminster Government is betting on this. If it can persuade or browbeat the trades unions into moderating wage demands in the interim, the economy should right itself. Anyway, that is the plan.

However, there is absolutely no assurance that inflation is going to moderate. Remember that last year the Bank of England was predicting that inflation would be a short-run event and that we would already be heading back to normal.

That seemed pretty far-fetched at the time and so it has proved.

Of course, we have had the impact of the Ukraine war, which has added to energy and food costs. But even before that, it was obvious that the disruption to global supply chains post-Covid was not going to be resolved quickly.

Looking forward, the OPEC oil producers are still in no hurry to pump more hydrocarbons. Then we have Boris Johnson telling us that the Ukraine war is likely to last years more – a sure indication that grain prices will continue to rise. We can also see core inflation spreading from the energy and food sectors into the rest of the economy.

A key indicator here is producer prices – what firms charge each other. UK output prices are up a massive 14% on the year, driven by more expensive metals and minerals. And above all, the UK labour market remains tight. None of this points to inflation returning to 2% next year.

The outlook is much the same elsewhere. US consumer inflation just hit an annualised 8.6%, above market expectations. US inflation is spreading outside of core areas, with airline tickets and used cars costing significantly more. Price rises in the EU are running at record levels.

Central banks are responding by raising interest rates. But this only adds to costs, at least in the coming year. The Bank of England has raised interest rates five times since December, with more to come. That’s added £320 to the cost of a £200,000 variable rate mortgage.

If inflation stays with us over this and the next wage bargaining cycle – as I think it will – then governments north and south of the Border will find it hard going to force employees to settle for significant cuts to their living standards. But are politicians correct to argue we all lose if we try to chase price rises with wage demands?

The historical example that is normally hauled out is what happened in the inflationary 1970s. Supposedly then, militant trades unions were able to demand and extract big-money wage rises.

But this only resulted in companies passing on the increases by hiking prices. Result: a wage-price spiral that ruined the economy, killed investment and led to permanent economic disruption.

The current Tory government is making great use of this toxic spiral being repeated.

However, what actually occurred in the 1970s is very different from how it is mythologised today. The detonator of inflation in the 1970s was not union militancy but the Vietnam War. In order to fight that war, America printed billions of dollars to purchase military equipment and raw materials.

US domestic prices doubled, the fastest rate of inflation in that nation’s history. Interest rates skyrocketed. Because the world used US dollars for trade, this extra cash soon spilled across the globe, raising prices everywhere. The 1973 Middle East War only added to the crisis, resulting in a global oil embargo. By 1975, UK inflation was over 20%.

It was at this point the role of trades unions became an issue. If inflation is cutting living standards at the rate of 20% per annum, the unions are going to try to protect their members. The inflation was not their fault but they had an obligation to defend the living standards of their members. That is what unions are for, after all.

But the then Labour government did not see it that way. Efforts were made to curb wage demands through state intervention. But this failed for one obvious reason: the inflation cycle was not caused by the unions, it was caused by exterior factors. Just like today.

The main difference between then and now was that strong unionisation prevented living standards from being hurt. For instance, in 1975 – the peak year in the decade for price rises – wages rose by nearly 30%.

As a result, consumer spending held up. This strong consumer spending meant the economy continued to grow.

Economic growth through the 1970s averaged around 2.6%, much better than in the past 30 years. The highest growth rate was in 1973 at 6.5%. Yes, there was the so-called Winter of Discontent in 1978 but this was caused by public-sector workers demanding equivalent rises to those in the private sector.

It is the job of government to deal with inflation, not force ordinary folk to carry the burden. In the public sector, there have been on-off pay freezes for the last decade.

I respect the more progressive wage policies followed by the SNP government in recent years but these represent only a marginal improvement over Westminster’s efforts, given Scotland’s lack of control over its own finances.

And the continuing squeeze on Scottish local authorities suggests there will be swingeing cuts in real take-home pay this year and next. Plus now we have SNP ministers trying to persuade trades unions not to go on strike because this is “irresponsible”.

We won’t persuade trades unionists to vote for independence if they think it will be business as usual on the wage front. This is especially true of Scotland’s half-million public-sector workers.

The SNP government should back local authorities borrowing to protect public-sector living standards over the next two years. The accumulated debt can be written off after independence.

The SNP government has to show it is willing to challenge UK Treasury orthodoxy.

At the same time the national movement has to back every worker who is striking to protect their living standards and those of their families.

Independence is not some abstract demand. It is about taking control of our lives, our economy and our natural resources from foreign ownership. That necessitates taking calculated risks.