Why make poorest pay?

Jul 14 2008 by Kevin Rowan for The Journal

A FEW months ago when striving to determine a set of characteristics that defined ‘Britishness’ the Prime Minister included an inherent sense of fairness.

I wouldn’t disagree with that – we tend to have an aspiration to see rules applied properly and are affronted when others queue jump. Importantly too, part of that sense of fair play is expressed in our sense of social justice.

It is true that last week’s celebrations of the NHS’s 60th anniversary provided a reminder that this was about providing care to those who need it, through the collective contribution of all who can afford to pay for it.

Our whole taxation system is predicated on the ability to pay and – although there is certainly a good deal of softening at the edges with some creative ways for the very wealthiest to maximise tax avoidance – by and large those who get paid the most in wages pay the most taxes.

As a nation, generally, we don’t like to see those least able to cope with it facing the heaviest burden.

This week’s local government strike is a firm and clear expression of that very sense of fairness. The Treasury imposing a ceiling on wage rises in the public sector is anathema to that sense of fairness.

In his recent Mansion House speech, the Chancellor reinforced the need to keep a lid on “inflationary” public sector pay rises and was apparently backed up by the Governor of the Bank of England in suggesting that high wage settlements would be eaten up by inflation and interest rate rises putting up the costs of goods and mortgage payments. The latter point is certainly true, but the Bank of England does not see public sector pay as a driver of inflation at all, because it isn’t.

And private sector wages haven’t been behind the inflationary pressures the UK is enduring either.

Everyone in the UK is experiencing the effects of inflation – we see our food bills creeping higher and every time we go to fill the car up we see very clearly what is happening to fuel costs, emphasised again in our domestic energy bills.

The established wisdom is that these two sets of pressures are the real inflationary drivers. Making the lowest paid workers the scapegoat for today’s inflation is wrong on so many levels. Firstly, it will not contribute one iota to easing the pressures putting prices up; secondly, it will reduce consumer demand for some of the commodities contributing to regional economic progress – retail, tourism and hospitality; thirdly, the sense of unfairness will develop a growing resentment against a government that is meant to be regarded as all about social justice.

Kevin Rowan is regional secretary of Northern TUC