Big executive gains stoke up workers in queue for the pay bandwagon

Unions to ignore government guidelines and demand increases greater than rate of inflation
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A rise in overseas share markets was offset by a fall in the Halifax new house price index and in the new credit extended to consumers. The changes pushed the index down for the third straight week, falling from 98.89 to 98.34.

WORKERS in privatised utilities this week will get their first opportunity to exploit the current row over boardroom pay as the annual round of pay negotiations in the private sector begins in earnest.

Employees at PowerGen, where chief executive Ed Wallis made £1.2m out of share options last year, are due to submit their claim this Wednesday.

As the pay round begins - the vast majority of settlement dates come within the first four months of the year - directors' pay will be a key issue.

While unions are unlikely to cite boardroom remuneration as a principal argument in formal bargaining, there is little doubt that the issue has been exercising the minds of their members.

At PowerGen, employees' leaders are seeking an unquantified "substantial" rise and are unlikely to accept the present "going rate" in industry of 3 per cent. Many of the company's employees may feel that given the directors' share bonanza, they are worth considerably more.

The comment by Mr Wallis last week, that "I am worth what I am paid", will no doubt be quoted by union negotiators at the appropriate moment.

With unions also drawing up claims for submission to the regional electricity companies, the privatised utilities, employing more than 200,000 workers, will this year set a target for the rest of industry.

Sol Mead, national official for the electricity industry at Unison, the public services union, said there was no question of his members accepting less than the present inflation rate of 2.9 per cent at PowerGen.

"We are determined to maintain our members' standard of living, and we also want a fair share of the profits. Utilities have been doing very well for their shareholders and directors. It's about time they gave a decent rise to their staff.

"At PowerGen, we generate the electricity and we also generate the profits. The company is cash rich, you only have to look at the accounts to see that." PowerGen returned half-yearly pre-tax profits of £118m compared with £108m the previous year.

Directors' pay will also be an issue in the banking industry, where Peter Wood of the Royal Bank of Scotland comes top of the heap among quoted companies with a package worth more than £24.5m a year. Bank union negotiators will have their eye on increasing profitability and a rising inflation rate, together with an impending increase in income tax. City forecasters are predicting that the retail price index could show an annual rate of increase of 4.5 per cent towards the end of the year.

Despite ministerial assertions that wage rises should depend on corporate success, analysis has shown that most pay settlements have been struck slightly above the inflation rate, so there is a strong possibility that average wage increases could be above 4 per cent in the last quarter.

The Banking Insurance and Finance Union has submitted claims of 5 per cent, with a minimum rise of £500, at the Royal Bank, NatWest and Lloyds. Lloyds on Friday announced a 26 per cent increase in pre-tax profits to £1.3bn.

Noel Howell, a national officer at the union, said employees were "disillusioned and demoralised" in a sector that had lost 110,000 jobs over the last five years. "They see top salaries shooting ahead and directors with their snouts in the trough. They are increasingly angry about it. We have been told in previous years that we couldn't recei ve a decent rise because of bad debts. Now that problem seems to have abated, they are claiming they still can't afford it."

A symptom of the growing anger in the sector will be seen this Friday, when 6,000 Bifu members at Clydesdale Bank are due to mount the first of two 24-hour stoppages. The union wants 4 per cent with a minimum of £400, but management are imposing a 3 per cent package tied to individual performance.

Mr Howell said that a number of banks were still insisting on performance- related pay, despite the fact that it had proved to be "divisive and inimical to team-working". He said: "Banks are only interested in shareholders. They are not interested in customers or their staff."

In the engineering sector, unions' insistence on tracking, and if possible exceeding the inflation rate, seems to have delayed key negotiations. At British Aerospace, where the settlement date expired in January, talks are still continuing. One factor complicating bargaining sessions seems to be management's keenness to introduce performance-related pay, a system that invariably arouses union suspicions.

While negotiations in many companies have ostensibly been devolved from the centre, in practice head office still maintains firm control on the purse strings.

Philips, the Dutch controlled electronics group, is introducing performance- related pay for its 10,000 workers at 25 plants, but the scheme will be under tight scrutiny by management nationally.

While talk of a going rate is anathema to ministers, engineering companies are generally settling at about 3 per cent. After a period of relatively low settlements, electronics firms such as Rank Xerox, Sony and Panasonic are all agreeing to about 3 per cent or above.

Towards the end of the year one of the most influential deals will be struck at Ford, which comes to the end of a two-year deal in the autumn. For the last four years, agreements have been comfortably in excess of the retail price index with a built-in "inflation-plus" element in the second half of two-year deals.

There are already indications of some unrest in the motor industry. Leaders of 3,000 workers at Peugeot Talbot are holding a strike ballot after rejecting a two-year offer that would have provided 3.5 per cent from 1 January, followed by 4 per cent or the inflation rate a year later.

Kenneth Clarke's vision of an economy without automatic annual pay increases - indeed without a wage round - therefore seems unattainable. This year will almost certainly show once again that employees are demanding rises ahead of the inflation rate and that companies are largely prepared to concede them.

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