IFS: squeezed departmental budgets will need to find savings for pay deals

Think tank calculates pay deals announced yesterday will cost around £800m a year


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By Richard Johnstone

25 Jul 2018

A series of public sector pay deals announced yesterday, which confirmed that civil servants are in line to receive the lowest raises across public services, will put further pressure on departmental budgets, a leading think tank has said.

Analysis by the Institute for Fiscal Studies concluded that pay deals of between 2% and 3.5% for 2018-19 for public servants including soldiers, teachers and prison officers would cost around £800m a year. Although chief secretary to the Treasury Liz Truss announced the Department for Education would provide £500m from its central budget for teachers’ pay, and other departments had been able to find savings from underspends, these will be a temporary solution. “Other savings within departments’ squeezed budgets will, at some point, need to be found,” the analysis stated.

Yesterday’s pay deals were in excess of the 1.5% that Treasury pay guidance has limited civil service pay increases to. The three trade unions in the sector – the Public and Commercial Services union, Prospect and the FDA – have jointly called for this pay remit to be withdrawn and called on ministers to be take greater responsibility for civil service pay.


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“They need to understand that this year, like no other in recent history, all public servants are starting from the same place on pay, so ministers will be judged on the outcomes achieved,” FDA general secretary Dave Penman wrote in Civil Service World. “Will ministers be champions for their civil servants or simply buck passers? They will have to decide, but what they won’t be able to do is hide.”

In their analyses of the pay awards, IFS researcher Jonathan Cribb and IFS fellow Luke Sibieta said the fact the Treasury had stated it will not provide new money meant government departments will have to find the money.

“We estimate that today’s announcements will cost around £800m per year extra compared to the 1% increases previously planned for – with the largest cost to the Department for Education and the NHS,” they concluded.

Also responding to the pay announcement, Trades Union Congress general secretary Frances O’Grady said the increases were “a long way from good enough” and highlighted that many public sector workers will still get pay settlements that are less than inflation.

“Every public sector worker deserves a proper above-inflation pay rise. And all pay rises must be fully funded without raiding departmental budgets. Otherwise it will only damage frontline services and put staff under greater stress," she said.

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