Starmer isn’t prepared for the inevitable union showdown

Labour may soon be swept back to power by the widespread revulsion against the Tories. If so, the party’s union paymasters are expecting the good times to roll again.

But their hopes and the priorities of a new Labour government will surely clash sooner rather than later, not least given their energy plans.

Labour has promised a “New Deal for Working People”. Some of this does not directly involve the unions – a higher national living wage, restrictions on zero hours contracts, a day one option for flexible working – but several proposed measures would appear to benefit them.

These include repealing the 2016 Trade Union Act and the 2023 Minimum Service Levels Act and allowing electronic strike ballots.

These changes may marginally increase the ability to call strikes, though in all honesty the Conservative legislation was performative rather than effective in reducing industrial action, while opposition to electronic voting now looks like pointless Luddism.

Other measures include a right to enter workplaces to promote union membership, time off for union equality officers, and a vague proposal to make union recognition easier.

None of this seems likely to do very much to increase unionisation, however.

In 1979 more than half of all employees were in unions; today only around 22pc - and those mainly in the public sector.

Many unionists continue to blame falling unionisation on the Thatcher-Major changes to the law – banning closed shops, ending unofficial strikes and intimidatory mass picketing, introducing secret ballots.

But declining membership is an international phenomenon: between 1980 and 2019 unionisation in OECD countries fell from 36.5pc to 15.8pc. Across the EU, legislation has embedded unions in “social partnership” structures which positively encourage unions, yet membership continues to fall.

Another aspect of Labour’s New Deal is a proposal to revive national sectoral bargaining. This is being sold as a way of boosting pay across the economy, setting wage rates which cannot be undercut.

Sectoral bargaining grew up at the end of the 19th century, as employers’ associations were created to counterbalance the growing strength of industry-wide unions – and to mitigate the threat to established firms of new entry: all had to pay a standard wage rate.

But national collective bargaining has long been in decline. More than 200 employers’ associations were recognised by the Government’s Certification Officer in 1976. Today just 38 are accredited. Larger private businesses are now often part of multinational corporations which set their own pay levels and structures across the organisation, rather than being part of a national wage-setter. Sectoral bargaining is rare in today’s Britain. It persists in several EU countries, though Germany, like us, has largely abandoned it.

Reviving sectoral collective bargaining will be difficult. In many sectors, businesses don’t even recognise unions at all.

It is said that Labour will try first to implement sectoral bargaining in social care. But this sector has few big employers – there are 18,000 organisations offering adult care, many very small. This would not be some modern-day Engineering Employers Federation.

Such an arrangement would more closely resemble the old Wages Councils, which used to set pay in sectors with low unionisation. With the state paying for half of all social care, this would likely turn into yet another area where the Government is forced into confrontation with unions.

How damaging might this be? Labour governments have been dashed on the rocks of union intransigence in the past, most obviously in the Winter of Discontent which did for the Callaghan government and ushered in Mrs Thatcher’s long dominance.

The love-hate relationship between unions and Labour usually begins well, with National Plans or Social Contracts – or “New Deals” - which offer sweeteners to the unions, but soon deteriorates in the face of economic reality.

Tony Blair wisely resisted the pressure from the unions to repeal the Thatcher-Major reforms, and kept the unions at arms’ length during his glory days. But what would a Keir Starmer administration do?

A new Labour government will face unions which it claims to want to strengthen, but whose main target will inevitably now be that same government.

With straitened finances, Rachel Reeves cannot allow big pay increases for public sector workers and sectors depending on government money.

Plans to increase productivity will be near-impossible to carry out without the ability to buy off the militants. On the railways I would expect no more progress in introducing driver-only operation, changes to ticket offices or duty rosters than the Tories achieved. Nor would I expect NHS unions to agree to whatever tentative steps to reform Wes Streeting makes.

And if Labour sticks to its pledges to increase recruitment to the NHS and to schools this surely involves pay restraint which will spark renewed industrial action.

This time round there are two new dimensions to the age-old conflict between government and unions. One is local government finance, with a number of near-bankrupt Labour-run local authorities facing major cuts in employment of unionised workers. Will the Government bail them out? If not, we can expect 1979-style industrial strife.

The other issue is the accelerated move to net zero which Labour is pushing.

Keir Starmer’s pledge to convert the UK to fossil-free power in less than six years’ time has been roundly attacked by the GMB union, many of whose 500,000-plus members are in the oil and gas sector and stand to lose their jobs. Of course, their members will not be the only ones to baulk as the implications of net zero really hit home.

So don’t expect Labour’s New Deal to improve industrial relations. Its effects will be too limited to buy off militancy. As always, the crunch will be over what money is in the pot for pay increases. And at the last look it was a five-pound note, two old buttons and a pile of IOUs.

Len Shackleton is professor of economics at the University of Buckingham