Budget 2021: Pay freeze anger as figures show rising cost to civil servants

IFS warns non-protected departments face new financial squeeze while Labour claims £30bn has been “cut” from NHS budget
Photo: Guy Bell/Alamy Live News

By Jim Dunton

04 Mar 2021

Civil service unions have reacted with disdain to chancellor Rishi Sunak’s 2021 Budget, with the impact of the government’s planned public-sector pay freeze and multi-billion-pound spending pressures looming for departments high on the list of concerns.

Prospect, which represents professionals such as engineers and scientists at government departments and agencies, said the financial impact of the planned pay freeze on civil servants earning the 2020 median salary of £28,180 had almost doubled in less than four months.

It said that when Sunak confirmed plans for only the lowest-paid public-sector workers to get a 2021-22 pay rise at November’s Spending Review, the Office for Budget Responsibility was forecasting that the Retail Price Index inflation measure would be 1.4%.

But in its latest update, published alongside yesterday’s Budget documents, the OBR said it was projecting RPI to be 2.6% in 2021-22, which Prospect said would equate to a “real-terms” pay cut of £300 more than expected in November.

Prospect deputy general secretary Garry Graham said the OBR’s latest projections for inflation would ramp up the impact of a decade of pay restraint for civil servants.

“All our public servants have worked tirelessly throughout the pandemic and in preparing for Brexit yet they face the reward of a pay freeze for their efforts,” he said.

“With RPI now forecast at 2.6% instead of 1.4% for 2021-22, that is now a real-terms £700 pay cut for the average civil servant. That means since 2010, their pay will have been cut in real terms by almost £7,000.”

Graham said public services had been notable in their absence from the chancellor’s Budget speech but delving into the detail of the Treasury’s red book – which gives further information on the Budget measures – offered “some worrying figures” to those who looked.

“There is a departmental impact hidden from view,” he said. “Day-to-day spending in departments in 2025-26 will now be £16bn less than had been planned pre-Covid, meaning substantial, as yet unspecified, cuts to what are already stretched finances,” he said.

Graham added that at a time when health and safety was so crucial to reopening the economy, it was “inexplicable” that Sunak had not found additional funds for the Health and Safety Executive, which he said had been “badly overstretched” by Covid.

Mark Serwotka, general secretary of PCS – the civil service’s biggest union, said Sunak’s failure to ditch the proposed pay freeze was “a disgrace and economically illiterate”.

“To aid any recovery you must raise living standards and protect the most vulnerable,” he said.

"To reduce inequality, stimulate growth and fund first class public services, we need a progressive taxation regime which ensures big business pays their fair share.”

Serwotka praised Sunak’s decision to extend the £20 a week uplift in Universal Credit for six months, but said the nation’s social security system was “not fit for purpose” and needed to be “fundamentally altered to take care of people who have been left behind”.

Stephen Timms, who chairs parliament’s Work and Pensions Select Committee, said it would be “very hard” for ministers to justify cutting benefits by £20 per week in September, at the very moment the furlough scheme is currently due to end and at a time when many jobs were likely to be lost.  

“The government must now use this time to come up with a long-term plan to make sure the benefits system can properly support people right the way through the next stage of our economic recovery,” he said.

Dave Penman, general secretary of the FDA union, referred to proposals to move 22,000 civil service jobs away from London by the end of this decade and Sunak’s confirmation yesterday that Darlington will host HM Treasury’s new northern campus.

He said it would be vital  for ministers to make sure that relocations and the creation of new regional outposts were seen as more than a tick-box exercise and that all proposals properly addressed the new centres’ staffing needs.

“Efforts to ensure that the civil service is representative of the whole country are welcome and enabling civil servants to build their careers outside of London is a good thing,” he said.

“However, any new regional civil service hubs, including the proposed new Treasury campus in Darlington, must include more senior roles and proper thought must be given to career-planning. 

“It is no good moving odd roles, there must be real opportunities for career-progression for civil servants in the new location, otherwise we will inevitably see a drift back to Whitehall.”

IFS warns medium-term spending plans ‘suggest new squeeze’ on public sector 

Institute for Fiscal Studies director Paul Johnson said Sunak had taken around £12bn a year out of pre-pandemic public sector spending plans in real terms at November’s Spending Review and yesterday “chose to trim” around £4bn a year from his cash plans for public-service spending from April 2022. 

Johnson said that while the plans were not firm, they were the basis for the future public finance estimates and that the actual costs facing departments by the time the reduced spending allocations were due to take effect were unlikely to have reduced.

“Since the NHS, schools and the Ministry of Defence all have budgets fixed in cash terms until later in the parliament, this new £4bn cut will fall entirely on other, unprotected services,” he said.

“Those areas – including perennially squeezed budgets like justice and local government – are now facing real-terms cuts in 2022–23. That’s a recipe for a very tricky Spending Review in the autumn.”

Johnson questioned whether those spending plans would be stuck to, and in particular whether the NHS could revert to its pre-Covid spending plans from the 2022-23 financial year.

“In reality, there will be pressures from all sorts of directions,” he said. “The NHS is perhaps the most obvious. Further top-ups seem near inevitable. 

“Catching up on lost learning in schools, dealing with the backlog in our courts system, supporting public transport providers, and fixing our system for social care funding would all require additional spending. The chancellor’s medium-term spending plans simply look implausibly low.”

Labour says budget contains £30bn funding cut for NHS England

Shadow health secretary Jonathan Ashworth accused Sunak of burying a “£30bn cut to day-to-day spending in the Department of Health and Social Care” in yesterday’s Budget.

Labour said NHS England spending would fall from £147.7bn this year to £139.1bn from next year, despite the ongoing costs to the NHS from Covid and a “huge backlog of cases” and waiting lists that had built up during the crisis.

Ashworth said that in November, the Health Foundation charity had estimated that clearing the backlogs and reducing waiting times would cost around £2bn a year over the next three years.

“The chancellor is failing patients, our NHS and its staff by cutting frontline services during a pandemic,” he said.

“With lists already at a record high, this will mean patients waiting even longer in pain for vital treatment.

“Yesterday’s Budget papered over the cracks rather than rebuilding the foundations of our country.”

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