Who do you believe: Sunak or the IMF?

ronib

Growstuff I agree that we need healthy and well educated people but there are some very alarming statistics on excess deaths which my husband is following with almost too much interest. I don’t want to think about it, it’s too depressing.

I certainly don’t think in terms of givers and takers. That’s far too emotional. Just try to visualise a population pyramid on a piece of paper. At the moment, I understand from some commentators that only half the pyramid is able to provide for itself and for the other half.

I'm not quite sure of the relevance of excess deaths. However, if they are proving to be an economic problem, the country needs to invest in trying to prevent them. In other words, we need an adequate number of well-trained medical staff.

“Public sector needs to catch up with private”

There are a lot of lower waged workers in the private sector on a “living wage” just like public sector, some are changing jobs to get a bit more.
The advantage with public sector jobs used to be job security and pensions, with privatization that has changed a lot. Even so I doubt that an administrator in the NHS could earn much more in the private sector, not many nurses could earn more changing career, same with doctors. Older workers are retiring early and doing lower paid jobs if they can afford it, those that have not paid off the mortgage are tied to their existing job.

The government are relying on this to keep the system going, despite the strikes where is a train driver going to get better wages?.

Growstuff I agree that we need healthy and well educated people but there are some very alarming statistics on excess deaths which my husband is following with almost too much interest. I don’t want to think about it, it’s too depressing.

I certainly don’t think in terms of givers and takers. That’s far too emotional. Just try to visualise a population pyramid on a piece of paper. At the moment, I understand from some commentators that only half the pyramid is able to provide for itself and for the other half.

The idea that people can be divided into givers and takers is nonsense, as is the idea that public services don't provide value and generate wealth. A first world country needs healthy and well-educated people.

Absolutely, ^growstuff* 👏

Public Sector pay has, over all, fallen considerably in real terms since 2010. Some sections have not done too badly, but, as the charts in this analysis from June 2022 show, most sectors have lost considerably. So this is our starting point.

www.theguardian.com/society/2022/jul/19/how-public-sector-pay-has-fallen-in-real-terms-in-charts


When it comes to comparison with private sector pay it looks as though public sector are doing well, but, as one ONS analysis I found points out, a considerable number of low paid jobs have been transferred from the public to the private sector, so this skews the figures. Over all, public sector pay increases have lagged behind the private sector.

Private sector employees tend not to be unionised, individual employees are not in such a strong position to negotiate pay increases. It would be interesting, though time consuming, to compare how the rates of increases of private sector profits correlate to private sector wage increases. I wouldn't be surprised to find that increases in private sector profits correlate more to increased dividend payments to shareholders and share buybacks than they do to private sector pay increases.

Over all, I doubt that private sector employees are in a position to negotiate your feared inflation busting pay increases, whatever the public sector employees might settle for.

Your figure of 19% increase claims is highly questionable. The only sector I have seen that figure in connection with is nurses. It is set high with a view to negotiating down. That's how negotiating works. Have you never bargained for anything?

As far as I'm aware most of the unions aren't setting such a high initial starting figure. They are asking for inflation, or just below inflation increases. You like googling, though, so perhaps you can prove me wrong on that point!

Wage/price inflationary spirals tend to occur with above inflation settlements.

Printing money to cover this is thought to be inflationary by some economists.

Perhaps these same economists could explain how the some £900billion of Quantitative Easing (in effect, 'money printing') which has been effected by governments since 2008 has not caused inflation, which has been running at about 2% until the supply shocks caused by the invasion of Ukraine?

Perhaps they could also explain how pay increases for public sector staff, such as NHS workers, education staff, civil servants and lawyers could possibly be inflationary since they have no effect at all on prices.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

I would deal with this separately as this post is getting too long.

Whitewavemark2 PhD scientists can command salaries in excess of £120k with start ups in the Uk plus share options. I understand how you feel about your son but in fact scientists with entrepreneurial skills can become very wealthy both here and abroad.
There’s no way that the State can compete with these financial opportunities . At the end of the day, it’s a personal choice about the direction of travel.

ronib

Casdon I think the point is 2 .3 trillion debt. I believe that is the elephant in the room.

2.3 trillion is just the public debt, including commercial and domestic debt it is nearly £8 trillion.

Casdon I think the point is 2 .3 trillion debt. I believe that is the elephant in the room.

ronib

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

It's not that simple. At some stage of their lives, the majority of people are in receipt of "state provision" (including pensions, child benefit/family allowance, free prescriptions, various top up benefits). However, for most people, this changes over a lifetime. Single, childless fully employed people in good health receive the least, but that can change almost overnight, if somebody becomes unemployed or falls ill. Life is a rollercoaster for most people with times when they are net contributors and times when they receive support. Paying tax acts as a giant and complicated insurance policy against the troughs. The idea that people can be divided into givers and takers is nonsense, as is the idea that public services don't provide value and generate wealth. A first world country needs healthy and well-educated people.

Casdon

ronib

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

You’ve missed the point ronib. The public sector need a large pay rise to catch up with the pay rises the private sector have had over the last 12 years. That’s all they are asking for.

Yes.

My son works for a government agency and the only time he has had a pay rise as opposed to in effect a year on year pay cut because nothing keeps up with inflation - even at 2%, is when he has had promotion.

The staff are highly skilled mostly scientists with Phd, and as a result the agency is now having incredible difficulties employing the calibre of people needed. They are choosing to work elsewhere including Europe of course.

ronib

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

You’ve missed the point ronib. The public sector need a large pay rise to catch up with the pay rises the private sector have had over the last 12 years. That’s all they are asking for.

Last post in reply to Whitewavemark2 about 2 per cent inflation

Yes indeed because Mr Sunak is refusing to pay 19 per cent pay increases to the public sector. It is a case of waiting for jam tomorrow but of course it is going to be a very long wait.

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

Whitewavemark2

ronib

I suggest that energy costs are coming down considerably over the summer months and that this will lead to a drop in inflation. The government is just sitting on its hands over public sector pay rises and once inflation is lower, then public pay demands will be settled at much lower percentages than currently requested. I suggest…..

I’m not confident that they energy costs to the consumer will be coming down, but I do think that there will be no more roses, with a fair wind of course.

I don't think energy costs will come down, either, though the Bank of England data seems to think they will in the course of the next few years.

See their CPI forecast chart (5th one down) on Richard Murphy's blog this morning

www.taxresearch.org.uk/Blog/2023/02/03/the-uk-is-facing-economic-failure-on-a-grand-scale-and-the-bank-of-england-is-just-compounding-it/

But the current high prices to the consumer need to be compensated for now in inflation linked wage increases.

Have learnt not to believe politicians and especially since the Johnson fiasco.

ronib

MaizieD the purpose of Mr Sunak sitting on his hands do you mean? Yes to avoid hyper inflation?

Hyperinflation is also not expected. In fact inflation is expected to gradually drop now to below 2% by 2026.

ronib

I suggest that energy costs are coming down considerably over the summer months and that this will lead to a drop in inflation. The government is just sitting on its hands over public sector pay rises and once inflation is lower, then public pay demands will be settled at much lower percentages than currently requested. I suggest…..

I’m not confident that they energy costs to the consumer will be coming down, but I do think that there will be no more roses, with a fair wind of course.

Hyperinflation will not be the result of giving pay rises in line with inflation. Where do you get that idea from?

But I wanted to know what was the purpose of your statements about people being reliant on the state, and taxation?

MaizieD the purpose of Mr Sunak sitting on his hands do you mean? Yes to avoid hyper inflation?

ronib

MaizieD have you factored in that about 50 per cent of the population is in some way reliant on the State? So incoming tax revenues are limited to half the population and that public sector workers are numerically huge?

The stupidity level of trade unionists is not the question. Demographics is.

Frankly, I don't see what this has to do with your suggestion about Sunak's possible strategy.

I can't answer it unless you can clarify its purpose.

MaizieD have you factored in that about 50 per cent of the population is in some way reliant on the State? So incoming tax revenues are limited to half the population and that public sector workers are numerically huge?

The stupidity level of trade unionists is not the question. Demographics is.

"It doesn’t matter which economists you happen to agree with the same principles apply, if you spend too much or even propose unjustified spending the value of the currency falls."

Just to clarify this as it's not entirely true. Japan has more than twice the debt as a percentage of GDP than the UK, the US also has a higher level of debt but both the yen and the dollar are stronger than the pound. It's not just about the level of debt it's who holds the debt (the Bank of Japan holds 70% of their huge debt whereas the Bank of England holds less than 30%) and also confidence ie a country can have high levels of debt but if holders of that debt are confident that the money is safe then the currency stays stable. Truss and Kwartang didn't cost their budget and the market reacted accordingly!

The rate of inflation will come down because it measures the difference in prices over a year. When energy prices rose after the Russian invasion of Ukraine they caused a big difference between prices in, say, April 2021 and April 2022. The percentage increase is 'inflation'. But now that prices have stabilised there won't be a big increase to record between April 2022 and April 2023. So the inflation figure will be lower.

The lower inflation figure will not have been the result of any government or Bank of England measures. It's just a consequence of energy price stabilisation.

However. Prices will still be at the high level established last year and workers still need the pay increases they've asked for because they are coping with these highly inflated prices right now, and have been all year.

I don't think that union leaders are stupid; they won't fall for the spurious reasoning ronib suggests might be put into play.

Though I can see that it might be accepted by a few voters who can't exercise some logical thought...

I think you could well be right ronib.

I think Sunak may be a little wiser than some people credit him with.
But it all depends of course on peoples' points of view on where they want the country to go anyway.