Civil servants face a new era of pay restrictions after the government has indicated a public sector pay freeze is set to form a key part of Rishi Sunak’s spending review next week.
In a series of briefings overnight, the Treasury indicated that pay rises for workers across the public sector could be capped at 1% in 2021/22, although front-line NHS staff could get be in line for higher increases. As well as civil servants, the limited pay deals will also apply to teachers, local government employees, and health service managers.
Sky News reported that Rishi Sunak was expected to limit pay rises in the public sector to the same level as inflation, or lower, for the groups affected. CPIH, the Office for National Statistics' preferred measure of inflation, currently stands at 0.9%.
The decision would be in line with Sunak’s warning when he launched the spending round in July to expect “restraint” in future public-sector pay settlements.
“In particular, it will be vital that public-sector pay awards made during the review take into account the wider economic context,” he said at the time. He also stressed that while public-sector pay was rising, wages in the private sector had fallen back during the coronavirus pandemic.
“Therefore, for reasons of fairness, we must exercise restraint in future public sector pay awards, ensuring that across this year and the [Comprehensive Spending Review] period, public=sector pay levels retain parity with the private sector. Departments’ pay modelling should reflect this fairness," he added.
The latest indication of pay restraint comes as the Centre for Policy Studies said a 1% public-sector pay cap, which would keep wages frozen in real terms, could save as much as £11.7bn by 2023.
A report from the right-leaning think tank, published today and flagged in briefings as forming part of the government’s thinking, said private-sector workers have suffered more than those in the public sector as businesses cut hours, wages and jobs.
It proposed a number of possible models for pay limits. A full public-sector wage freeze for three years would save a cumulative £23bn over three years, while if NHS staff were excluded from the freeze, the savings would fall to £15.3 billion over the same period, according to the analysis. A 1% pay cap for all public servants except NHS staff would save £7.7bn.
However, the CPS said public-sector workers would still be allowed to progress up pay bands.
CPS director Robert Colvile, who was one of the co-authors of the 2019 Conservative Party manifesto, said “the economic impact of the Covid-19 pandemic has been severe, but the pain has not been shared equally”.
He added: “Healthcare workers aside, it is difficult to justify generous pay rises in the public sector when private-sector wages are actually falling. At the same time, there is a need to control public spending and reduce the structural deficit which the pandemic is likely to have opened up.
“The chancellor should redress this imbalance by showing restraint when it comes to pay and pensions in the public sector.”
However, unions have reacted with fury to the indications of the chancellor’s thinking, which will be revealed in full next week.
FDA general secretary Dave Penman told BBC News that the decision would amount to the government ignoring workers who have played a crucial role in supporting the public during the Covid-19 pandemic.
“Of course incredible NHS staff have been the forefront, but so have care workers, so have local authority workers, so have civil servants,” he saod.
“This pandemic has demonstrated how much the government relies on the entire public service.
“The government needs to be clear about the messages sent into those people. Ministers stood outside the doorstep and applauded six months ago; all of those warm words are really going to ring hollow if six months later, [public sector workers] are then chosen to be the ones who have got to pay the price.”
The PCS union was similarly outraged, calling the proposals “a grave insult to millions of hard-working government workers whose dedication has kept vital services running during the pandemic”.
The union highlighted civil servants' work during the pandemic including delivering the job retention scheme, dealing with millions of Universal Credit claims, keeping government departments and the justice system running, and running the UK border.
PCS general secretary Mark Serwotka said civil servants had already suffered 10 years of pay restraint since 2010.
“Civil servants along with millions of other public sector workers have kept the country running throughout this pandemic and the last thing they deserve is another pay freeze," he said.
"Private companies have been allowed to secure lucrative Covid contracts to the tune of £17bn, yet ministers are not prepared to reward their own staff for all the incredible work they have done this year.
“If Rishi Sunak fails to pay public-sector workers properly, there will be widespread anger and industrial action cannot be ruled out.”
Also commenting on the reports, Prospect general secretary Mike Clancy said pay limits would be “economically illiterate” at a time when the economy needs additional demand to pull it out of its coronavirus slump.
“Whether it is responding to the pandemic or dealing with the challenges of Brexit, our members work in the public sector has never been more important,” he said.
“The government needs to rethink. If they want fairness across the economy they should heed our call for an independent pay review body and stop public-sector pay being a political football.”