Leave pay to free bargaining

Pretty well every discipline thinks it knows the answer – businessmen, politicians, economists, academics, trade unionists and clergymen.

Needless to say there is no agreement.

Pay bargaining, and I spent most of my time between 1983 and 1988 engaged in this – smoke-filled rooms, whisky and tears at the ready, and a strike round the corner if you put a foot wrong – has no rules.

There are pay agreements, but they can’t easily give the answer to what is after all at base a naked conflict of objectives. Deep down it’s a jungle.

In the end most deals end up within a pretty common framework, repeated for instance in the Megaw report of 1982 on civil service pay, that pay and conditions taking one year with another should be enough ‘to recruit, retain, and motivate’ an adequate workforce, to which a cautious government added ‘within the limits of affordability’, thus effectively making the recipe a maximum as well as a minimum.

It’s a pretty obvious formula, – and most people on both sides, and the public – accept it is practical and fair. It’s flexible and pretty wide, and it can cope with a lot. For instance nurses who may be caught on affordability, and ludicrously paid footballers who get through on ‘motivation’ (as well as giving us all much fun). We buy into these.

But there are less acceptable outliers. There are lawyers getting Pounds 1m a year, and bankers who speak dismissively of bonuses of Pounds 500,000 or more.

They claim international comparison. But what about the tragic West African children, described as slaves, who don’t get much at all? And there are people much closer to home who lose out. What if anything should be done about these sorts of extremes, that go beyond the rules as accepted?

Generally it’s best to leave things to the market and to free bargaining.

Examples of state efforts to take a hand – remember the various wages and prices policies of the 1960s and 1970s – didn’t work. But public acceptance gets strained when faced with extremes.

Governments, employers, employees should be aware. A successful market economy and indeed society, depends on feelings of fairness and moderation.

Pay bargainers should watch out.

• Sir Peter Kemp is a member of the ICAEW and a former senior civil servant