News Column

MPC should consider jobless - O'Grady

September 5, 2014

Phillip Inman Economics correspondent



TUC boss Frances O'Grady has urged the government to widen the Bank of England's remit to take account of unemployment before its monetary policy committee raises interest rates.

Speaking before the start of the TUC's annual congress, when the Bank governor, Mark Carney, will make a speech, O'Grady said the success of the Bank's interest rate setters should be judged by their ability to keep unemployment low alongside an existing requirement to keep inflation at or near 2%. O'Grady, who has taken up the matter with Carney, will say that with unemployment still above its pre-crisis level and many people on low incomes heavily in debt, interest rates should remain at historic lows. At present, the Bank takes account of unemployment and wage growth, but as a secondary consideration to inflation and mainly to judge when increased wages will feed into higher prices.

A move to a dual remit would mimic the US Federal Reserve, which has long considered forecasts for unemployment and inflation as equally important when setting interest rates.

Carney is scheduled to address about 530 trade unionists on Tuesday morning and has agreed to take questions. He is expected to say again that interest rates will begin to rise in the near future, though he is also expected to tell the audience that rates are likely to peak at about 3%.

"I'm pleased that Mark Carney sees it as important to answer questions from shop workers and engineers. They will want to hear that he is not just making judgments about the economic recovery but also about the recovery in their incomes," said O'Grady.

The TUC general secretary is concerned union members are still struggling to recover from the financial crash after six years of below-inflation wage rises. "People increasingly feel that if we are seeing a recovery it is about time we had a chance to repair not only the nation's finances but also their own," she said.

"The idea that people should take real-terms pay cuts year after year is just not sustainable. Everyone should share from the benefits of the recovery, not just those at the top."

Some of the broader arguments over the economy are running in the TUC's favour after the success of French economist Thomas Piketty's book Capital and a succession of high-profile campaigns to protect public services and promote a higher minimum wage.

But O'Grady is aware the next parliament will prove a tough fight as scheduled budget cuts for local councils and other services bite further.

On the prospect of a Treasury run by Ed Balls, she will say only that she expects he will listen to the arguments put forward by workers more than George Osborne. Will there be industrial unrest if more cuts come after the next election? O'Grady will not be drawn, other than to say there are many ways to make public services work more effectively without resorting to privatisations and outsourcing contracts that have "ripped off the public", adding: "We were sold a pup on privatisation."

One of the threats on the horizon comes from Tory MPs campaigning for tougher trade union laws and in particular higher thresholds for strike ballots. O'Grady said low election turnouts were a broader problem after police commissioner ballots that averaged 15% and the 34% in EU elections, which would be invalid under plans suggested by Boris Johnson for union ballots.

The TUC has suggested to the business secretary, Vince Cable, that his department bring forward plans for electronic voting but there has been little progress a year after talks began.

"Our discussions with the Electoral Reform Society show it would be at least the same if not more secure than postal voting and would increase participation," said O'Grady.

Captions:

The TUC general secretary says workers are still paying the price of the 2008 financial crash Martin Godwin for the Guardian



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Source: Guardian (UK)


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