Real pay rises can tackle the public sector workforce crisis

Ministers are being neither honest nor realistic about protecting services when they claim settlements that keep pace with inflation are not an option, writes Joseph Evans

By Joseph Evans

14 Aug 2023

All is not well in the public sector. Recruitment and retention of the workforce has reached a crisis point. But there are solutions for any government with the courage to act – and the simplest involves less risk than ministers claim.

The NHS workforce gap was the worst on record last year, with almost one in 10 roles unfilled. Meanwhile recruitment into teacher training programmes was 40% below targets. These problems have been mounting for more than a decade: since 2010 the vacancy rate has quadrupled for nurses and quintupled for teachers.

Even worsening vacancy rates don’t capture the full extent of the crisis. Workforce churn is just as damaging as vacant posts. High leaving rates in the NHS, combined with record sickness absences, are piling pressure on the healthcare system at a time when demand for services is increasing.

The workforce crisis is contributing to the serious decline in the quality of many of the UK’s public services. Waiting lists for NHS treatment in England reached 7.6 million in June, while last year the attainment gap in schools reached a 10-year high.

Over winter it was estimated that failures in the healthcare system contributed to hundreds of preventable deaths a week. It is little wonder that measures of public satisfaction with public services like the NHS have been falling.

All this is the inevitable result of failing to invest adequately in the public sector, not least in terms of staff pay. Our new report for the Institute for Public Policy Research found that last year pay for the average public sector worker reached its lowest real-terms level in nearly two decades. 

After more than a decade of stagnation and decline, real pay for public sector workers had only just recovered to pre-austerity levels when inflation hit. Price rises then induced sharp declines in living standards, pushing real incomes to a 19-year low. 

Pay is crucial to recruitment and retention. More than half of civil servants who want to leave the public sector say it’s because they want better pay and benefits. It’s therefore no coincidence that numbers leaving the civil service altogether are at their highest level in more than a decade. 

Without a credible plan to increase pay, the public sector workforce crisis will worsen. When the government tabled pay increases which failed to match inflation, it fuelled a wave of strikes so large that the public sector lost more days to industrial action than in any other period since comparable records began in the 1990s.

“Even if pay rises were temporarily financed through borrowing, the government’s own sources show that the impact on inflation would be negligible”

The government can afford to give workers genuine pay rises by raising pay above inflation. The prime minister claims that higher pay settlements will fuel inflation, but this isn’t the case. Pay rises for public sector workers don’t directly raise prices because public services are free at the point of use. They won’t raise prices indirectly either if they are funded through taxation, because this would offset the additional money added into the economy.

Even if pay rises were temporarily financed through borrowing, the government’s own sources show that the impact on inflation would be negligible.

Instead of fuelling industrial disputes, the government should outline a clear roadmap for increasing public sector pay. This should include a commitment to reversing the real-terms pay cuts that public sector workers have suffered since the pandemic, as well as a long-term plan to sustain their purchasing power. At a minimum this must include a commitment to raise public sector pay at the same level as inflation, to ensure that rising prices do not undercut pay packages. 

An ambitious government could go even further by committing to rebuild the pay that public sector workers have lost in real terms since the late 2000s. Ministers have dismissed calls from junior doctors for pay restoration as “unrealistic”, but no one can deny that doctors and other public sector workers have suffered a severe decline in their incomes over the last decade. Rebuilding these losses over coming years would go a long way to restoring trust throughout the workforce.

Boosting pay is not a silver bullet which will solve all the challenges in the public sector. Any nurse or doctor working in over-stretched hospital departments will tell you that you can’t improve working conditions without also expanding the workforce and upgrading infrastructure.

Nonetheless, boosting public sector pay must be a crucial part of any plan to increase the quality of the UK’s public services. Many indicators of declining quality are caused or worsened by staff shortages, which are in turn exacerbated by declining living standards. Tackling the workforce crisis is worth the cost of raising pay.

The government therefore needs to outline a clear, robust plan for pay rises which rebuilds labour market confidence in key public sector professions. In the absence of such a strategy, we’re unlikely to see the end of the public sector workforce crisis any time soon.

Joseph Evans is an IPPR researcher and lead author of The public sector needs a real pay rise 


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