The harmony between Labour and Britain’s trade unions

SIR TONY BLAIR, a former Labour prime minister, had a joke about critics on the party’s left flank. “An old colleague of mine said: ‘Come on Tony, now we’ve won again, can’t we drop all this New Labour and do what we believe in?’ I said: ‘It’s worse than you think. I really do believe in it.’”

Sir Tony’s gag is a good way to understand the relationship between today’s Labour government under Sir Keir Starmer and Britain’s trade-union movement. The unions are having an unusually fruitful period. On entering office Rachel Reeves, the chancellor, signed off a raft of pay increases for public-sector workers. Plans to shrink the Whitehall workforce have been ditched. The methodology by which minimum wages will be set is to give greater weight to the cost of living.

The big prize is the Employment Rights Bill, which will be brought before Parliament this autumn and which is intended to tighten up Britain’s notably liberal labour market. It will create broad new individual rights, such as an entitlement to parental leave from the first day of employment. More significant for the unions are the collective rights—including a repeal of requirements to lay on minimum services during strikes, new rights to recruit members in workplaces and lower thresholds to industrial action.

For some, this is a story of weak Labour ministers dancing to the tune of a movement that bankrolls the party. But the party’s dependence on union donors has weakened dramatically under Sir Keir’s leadership; and union membership has fallen from 32.4% of the workforce in 1995 to 22.4% in 2023. The unions are in favour because of an unusual degree of convergence in their view and that of the government—that the labour market is a wellspring of Britain’s economic woes.

This does not mean that the hard-left is back. Labour’s commitment to fiscal discipline is real, as is its ambition to boost investment. Its plans for workers’ rights have already been tempered to reflect businesses’ concerns. The unions are not as militant as they once were. But to echo Sir Tony, it’s worse than critics think. Labour really does believe in it.

Whereas Sir Tony’s government was said to treat the unions like embarrassing relatives, now they are a “close family friend”, says Paul Nowak, the general secretary of the Trades Union Congress (TUC), which met in Brighton this week. “We’ve got open lines—in the same way business organisations have—to Rachel and her team. Jeremy Hunt [a former Tory chancellor] just refused to meet us.”

Biography explains a lot. This is an overtly class-conscious cabinet. One MP notes that many of its members grew up in industrial England during the Thatcher revolution and came of age as opposition politicians during the years of austerity. Previous chancellors have rightly regarded a liberal labour market as a boon to inward investment. Ms Reeves argues that an overly flexible labour model has contributed to low capital investment, weak productivity and less time for family life. In her book on female economists, she writes approvingly of the work of Joan Robinson, who coined the term “monopsony”, the power of a monopolistic employer to push down wages, against which unions “are a good and proper counterbalance helping workers get what they deserve”.

This philosophy is seen elsewhere in government policy. In approving the pay settlements, Ms Reeves argued a case for public-sector pay that was often made by unions but less often by Conservative chancellors: that low pay had led to avoidable industrial action and poor staff retention. It is seen in immigration policy, too. The French government has for years told their British counterparts that weak labour-law enforcement (rather than poor border security) was to blame for encouraging illicit migration to Britain. This government agrees: it has made targeting nail bars and car washes the centrepiece of its efforts to end small-boat trafficking.

Such consensus is unusual. The Labour governments of the 1960s and 1970s were scarred by continual conflict with the unions as disorderly strikes stoked inflation. Sir Tony expanded individual workplace rights (introducing the minimum wage, for example) but he regarded union power as the wrong response to globalisation. “I don’t see that divergence of interest today, because the unions and the government aren’t in conflict about the need to regulate labour-market flexibility,” says Alan Bogg of the University of Warwick.

Political incentives have changed, too. For New Labour’s modernising electoral project, the cloth-cap world of the TUC was a liability. For Sir Keir, seeking to reconnect his metropolitan party with its working-class heartlands, it is an asset.

Even so, the potential for future tension is obvious. One front is the government’s dash to decarbonise British industry, which alarms unions representing oil-and-gas industries and sectors such as steel. Another flashpoint is Sir Keir’s promise of public-sector reform, which remains embryonic. The most obvious is public-sector pay and capital budgets. On September 10th Sir Keir, the first prime minister to address the TUC since 2009, warned delegates that future pay settlements would be subordinate to economic stability. Mr Nowak says there is an impatience. “Members will be saying, ‘You’ve got a 174-seat majority, when are things going to change?’” It is all very fraternal now. But the mood can quickly sour. ■