Cost of Living: Public Well-being

Lord Hendy Excerpts

Thursday 20th October 2022 Lords Chamber

[Lord Hendy (Lab)]

My Lords, it is a pleasure to follow the noble Baroness, who has obviously made a flying start to her career in this House. I congratulate my noble friend Lady Drake on securing this important debate and on her eloquent exposition of so many aspects of the issues we are discussing. The noble Baroness, Lady Tyler, mentioned the survey conducted by the British Psychological Society and gave us some statistics. I would like to quote the chief executive, who said in relation to that survey:

“The cost of living crisis is critical, immediate and severe and disproportionately impacting those that need support the most. As well as the practicalities of being able to heat homes and put food on the table, people are also carrying the mental health load of living under this strain. We are incredibly concerned that many simply will be unable to cope, with nowhere to turn to get help as services are already stretched and struggling to cope with soaring demand.”


The Government have capped the price of energy, but the cap is estimated to cause average bills to rise by more than 150% over last year’s figures. Now the Chancellor has announced that that guarantee will last only until April, by which time the average energy bill is expected to be 400% greater than last year. Could anything be more calculated to undermine public well-being and increase

“the mental health load of living under this strain”?

The other side of the equation is income. Others have spoken of benefits and pensions; I would like to say a word about wages. Average regular pay is currently £574 a week. Its value in real terms has been declining for a decade. Wages are so low that, for several years, more people claimed universal credit who were in work than were out of work. The value of wages this year, under this Government, is falling faster than ever. The loss is, according to the ONS, on average at least 3.2% per annum. The latest figures show that the nominal wage increase is running at 5.4%, whereas the consumer price index with housing—CPIH—is rising at 8.5%. As noble Lords have pointed out, for food it is rising at 14%.

In the public sector, where average wage increases are running at 2.2%, the cut in the real value of wages is even more stark. Indeed, even if the 3.2% cut, on the basis of the ONS calculation, is the median annual wage loss, half of our workforce of 30 million are suffering greater wage cuts than that.

My noble friend Lady Primarolo referred to the OECD. In its annual Employment Outlook 2022, published a fortnight ago, it stated:

“The impact of rising inflation on real incomes is larger for lower-income households which have already borne the brunt of the COVID-19 crisis.”


The decline in the real value of wages by reason of pay not keeping up with prices is, of course, a global phenomenon—although, globally, the UK scores particularly badly on that metric.

The OECD highlights that one of the causes of the fall in real wages is that

“the proportion of workers who are covered by collective agreements in the OECD has steadily declined over the last three decades … weakening the bargaining power of workers … In the absence of countervailing power by organised labour, employers typically retain significant power to unilaterally determine wages and working conditions. Bargaining power is typically lower for vulnerable groups: while this is a source of concern even in low-inflation conditions, it becomes more serious in the current relatively high-inflation situation as these workers are not in a position to negotiate wage increases to keep up with price increases.”

The OECD recommendation is simple:

“Protecting living standards also requires rebalancing bargaining power between employers and workers, so that workers can effectively bargain for their wage on a level playing field … Rebalancing bargaining power, however, also means giving a new impetus to collective bargaining and, therefore, accompanying the efforts of unions and employer organisations to expand their membership and enlarge the coverage of collective agreements.”


This, of course, has been advocated by the International Labour Organization since the Second World War. Even the IMF has recommended the extension of collective bargaining, and nowhere is this more necessary than in the United Kingdom, where collective bargaining coverage has fallen from 85% in the 1970s to less than 25% of workers today covered by a collective agreement—from one of the highest coverages in Europe to one of the lowest. Yet high collective-bargaining coverage is one of the hallmarks of the most successful economies in Europe.

In the Transport Strikes (Minimum Service Levels) Bill, published today, I was appalled to see yet further restrictions on the capacity of workers to protect their wages by taking strike action where persuasion fails. But I was surprised and encouraged to read that the Bill imposes a mandatory obligation on employers and unions to negotiate a collective agreement. Unfortunately, such an agreement is confined by the Bill to agreeing a minimum service level in the event of a strike.

With this remarkable precedent having been set, I hope the Minister can tell us that compulsory collective bargaining will be extended to all sectors of the economy, covering pay and terms and conditions of employment—the matters that really affect the well-being of the half of our population whose work supports the entire population. If they took this step, the Government would be following many global precedents, notably in New Zealand and the practices of western Europe, as well as the exhortations of the ILO and the OECD. In doing so, they would be exercising the only real option open to them to address falling wages.