RMT PAY BULLETIN: August 2016

 

Headline forecasts

Inflation rate: Average new forecast

July 2016 RPI inflation (change in cost of living relative to same time one year earlier) was 1.9%

For the final three months of 2016, annual RPI (according to the latest forecasts) will rise to 2%

For the final three months of 2017, annual RPI (according to the latest forecasts) will rise to 2.9%

 

Average earnings growth: Average new forecast

Over the course of 2016, average earnings are predicted to increase by 2.4%

Over the course of 2017, average earnings are predicted to increase by 2.5%

 

Transport co shareholders receive big dividend payments, while workers’ pensions are under-funded

Jan 2003 – Dec 2015: National Express paid £548m to shareholders, but just £255m was allocated to pension costs. Meanwhile, at FirstGroup the size of the workers’ pension fund deficit is being obscured (by switching from valuing pensions with RPI inflation to using the inferior CPI measure).[1]

 

 

 

Forecasts in detail: RPI inflation[2]

Predictions for RPI inflation made by a range of forecasters are:

 

Q4 2016

Average forecast (non-City): 2.1%

Average new forecast: 2%

Average forecast (City): 2.1%

Highest recent forecast: 3.4%

Lowest recent forecast: 0.9%

Median recent forecast: 2.1%

 

High RPI Q4 2016 forecasts to quote to employers in pay negotiations are:

ITEM Club (3.1% – forecast made in August 2016), Citigroup (2.7% – forecast made in August 2016), Experian Economics (2.6% – forecast made in August 2016), Centre for Economics and Business Research (2.5% – forecast made in August 2016)

 

 

Q4 2017

Average forecast (non-City): 3%

Average new forecast: 2.9%

Average forecast (City): 3.1%

Highest recent forecast: 4.5%

Lowest recent forecast: 2.3%

Median recent forecast: 3%

 

High RPI Q4 2017 forecasts to quote to employers in pay negotiations are:

National Institute of Economic and Social Research (3.7% – forecast made in August 2016), Citigroup (3.6% – forecast made in August 2016), Société Générale (3.4% – forecast made in August 2016)

 

 

Forecasts in detail: Average earnings growth

Predictions for average earnings growth made by a range of forecasters are:

 

2016

Average forecast (non-City): 2.3%

Average new forecast: 2.4%

Average forecast (City): 2.2%

Highest recent forecast: 3.4%

Lowest recent forecast: 1.4%

Median recent forecast: 2.4%

 

High average earnings growth forecasts for 2016 to quote to employers in pay negotiations are:

Economic perspectives (2.8% – forecast made in August 2016), ITEM Club (2.6% – forecast made in August 2016), Beacon Economic Forecasting/ Capital Economics/ ING Financial Markets/ Santander GBM/ Scotiabank (2.5% – forecast made in August 2016)

 

 

2017

Average forecast (non-City): 2.4%

Average new forecast: 2.5%

Average forecast (City): 2.2%

Highest recent forecast: 4.8%

Lowest recent forecast: -1%

Median recent forecast: 2.5%

 

High average earnings growth forecasts for 2017 to quote to employers in pay negotiations are:

Economic Perspectives (3.5% – forecast made in August 2016), ITEM Club (3.4% – forecast made in August 2016), Beacon Economic Forecasting/ Goldman Sachs (3.1% – forecast made in August 2016)

 

 

Recent RMT Settlements

Company	Award	Effective From
Train workshop and maintenance
Alstom West Coast Traincare (WCML and PSG grades)	2.2% on base salary and London Weighting Allowance (plus 37/42 adjustment)	1 April 2016
Wabtec	Year One ·         2.9%   Year Two ·         March 2017 RPI (min 2%, max 3.6%)	1 April 2016     1 April 2017
Cleaning and catering
Churchill (E Midlands Trains contract)	Increase of 50p per hour on the basic hourly rate No compulsory redundancies for the lifetime of this existing contract An additional day’s annual leave for all members	1 April 2016       1 July 2017
Road Transport and Buses
DHL Preston Brook Warrington	1.5% on basic pay Increase to the overtime and rest day rate from 1.25% to 1.5%	1 April 2016
Stagecoach Yorkshire Chesterfield Depot (Drivers)	10p per hour rise for all rates and grades Introduction of a 10 minute (taking bus out of depot) or 5 minute (not taking bus out of depot) paid sign-on allowance for all duties Introduction of a 5 minute signing off allowance for all duties 10p per hour rise for all rates and grades	1 May 2016 Asap, not later than end Oct   23 April 2017   29 Oct 2017
Stagecoach Yorkshire Chesterfield Depot Engineering Grades	Year One 1.25% on all hourly pay rates Further increase of 1% on all hourly pay rates   Year Two Increase of 1.25% on all hourly pay rates Further increase of 1% on all hourly pay rates	1 May 2016 2 Oct 2016   7 May 2017 1 Oct 2017
London Transport and other Metro
Alstom Metro Trains	2% to basic rates of pay	1 April 2016

 

 

Recent non-RMT settlements

Company (Sector)	Award	Effective From
Asda – N Ireland (Retail)	·         3.9%	1 April 2016
Crown Paints (Manufacturing)	·         2.625%	1 April 2016
Western Power Distribution (Utilities)	·         2.5%	1 April 2016
2 sisters (Food processing)	·         3.1%	1 April 2016
RS Components – Corby (Distribution)	·         2.2%	1 June 2016
JD Williams Logistics (Distribution)	·         2.7%	1 July 2016
Construction Industry Joint Council agreement (Construction)	·         2.5% ·         2.75%	25 July 2016 25 July 2017

 

 

We use RPI and not other measures of inflation such as CPI or CPIH

RPI, which includes housing costs and excludes high earners’ spending, is the only inflation measure to use for negotiating pay (referencing average earnings is no longer recommended).

 

RPI is also used to calculate index-linked government bonds, privately issued index-linked bonds, National Savings and Investments, Corporation Tax, Business Rates, Alcohol Duty, Tobacco Duty, Gaming Duty, Air Passenger Duty, Vehicle Excise Duty, Climate Change Levy, car and van Fuel Benefit Charge, regulated rail fares, regulation of water and sewerage charges, indexation of British Telecom’s wholesale charges and interest payments on student loans.

 

 

CPI is designed for comparing different EU countries’ economic performances and not for internal UK purposes. It excludes housing costs (though includes stockbrokers’ fees and foreign students’ university tuition fees), is calculated to a mathematical formula less responsive to price fluctuations and doesn’t adequately reflect changes to ordinary workers’ cost of living: so says the Royal Statistical Society.

 

Any attempt by an employer to link a pay award to CPI or a new variation CPIH must be refused and should be logged with the union’s National Policy Department.

 

Yours sincerely,

 

 

Mick Cash

General Secretary

[1] Last two sentences of page 43: http://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/indexed-pdfs/2016%20ARA/FirstGroup%20plc%20Annual%20Report%20and%20Accounts%202016.pdf

[2] The average of forecasts generally suggest a modest rise or fall.

 

While forecasts can be useful in indentifying a plausible trajectory for inflation and average earnings, the data is unreliable.

This is especially the case during periods of heightened volatility – such as now.

 

Accordingly, the main use of forecasts to us is as a negotiation tool with employers

and not as an accurate predictor of changes in our members’ cost of living.