Are we really in this together?

In real terms, we are heading for another year where the majority of us will have a pay cut.  Research by income data services suggests pay awards in the private sector will trail inflation by half. In the public sector pay is frozen as part of the spending cuts, so inflation effectively means a more severe pay cut than that of the private sector.

This is of course to be expected during tough times, as both private and public sector organisations seek to cut costs, and in the context of rising unemployment, many will simply be grateful that they are in employment.  2011 will no doubt be tough on everybody, with the VAT rise, higher energy bills and general inflation raising the cost of living at the same time as this austerity kicks in.  But for those who are not in employment, then there is also the double whammy of cuts to benefits that could see many people at risk of losing their homes.

If we were all in this together then no doubt it would be easier to take. But as most of us face lower living standards in 2011, we should bear in mind that pay awards at the very top continue to rise. The total pay packages of board members of FTSE 100 companies rose by a staggering 55%. The financial industry, despite effectively being an industry that can only exist with government support and security, has been able to restore its bonus culture.

Those receiving such awards may defend themselves by pointing out top performers need top rewards. But as anyone lucky enough to have investments knows, this just isn’t the case. As the TUC have pointed out, many of the companies concerned have not seen improvements in share prices, yet board members have still rewarded themselves. (Not that share price should be the sole judge of whether a company is successful).

So when we face increasing costs of living, and reduced public services and safety nets, we should remember that despite what the Chancellor says, we are not in this together.  Many of the very people who caused the crisis are now demonstrating this very fact. No doubt in a few years when the finances recover and public sector workers seek modest pay rises, we will be hearing calls for restraint and responsibility from the economists and business leaders on the city payroll. Let’s just hope we don’t have a short memory.