Spring Statement: Below-inflation civil service pay awards ‘seem a certainty’

Union chief says further restraint will be “catastrophic” for public sector workers
Mike Clancy. Photo: Prospect

By Jim Dunton

25 Mar 2022

The general secretary of the civil service professionals’ union Prospect has expressed fears the government is planning to subject public sector workers to new wage restraints following the lack of increased spending provision for departments in this week’s Spring Statement.

Mike Clancy said a detailed analysis from think-tank the Institute for Fiscal Studies showed it was civil servants and other public sector officials who would be “paying the price” for chancellor Rishi Sunak’s “lack of ambition”.

He was speaking after a briefing at which IFS senior research economist Ben Zaranko warned “below-inflation pay awards seem a certainty” for civil servants and other public sector workers.

On Wednesday the IFS flagged Sunak’s failure to address new financial pressures faced by departments as CPI inflation edges towards 8% and the public sector “GDP deflator” measure is expected to hit 4% this year.

It said the lack of new cash made October 2021’s three-year Spending Review settlements around 10% less generous and would signal a new public-sector spending “squeeze” if the situation was left unaddressed.

Yesterday, IFS director Paul Johnson told the briefing event that leaving departmental spending allocations unchanged from October in the light of rising inflation was “effectively cutting spending on public services in real terms”, relative to previous plans.

Johnson said the exact scale of the cut was a little uncertain. But he dubbed it “significant” and warned that the result would “almost certainly mean some hefty real [terms] pay cuts across the public sector” despite the past 12 years of restraint.

There will be positive pay awards, but they’ll be below inflation

Zaranko told the event that although average pay in the public sector was now 2% lower than it was 12 years ago, and despite Sunak’s pledge to end the 2021-2022 pay freeze affecting most civil servants, there was little chance that inflationary pay rises would be delivered.

“It seems likely that we’re going to have positive cash pay awards, given the spending plans in place and the levels of inflation that we’re seeing, but below-inflation pay awards seem a certainty,” he said.

“Pay makes up about half of all public-service spending and what happens with that lies largely within government control. So what happens there will affect the cost pressures facing departments. It’s not just an imposed thing.”

Zaranko said the extent to which public sector pay was allowed to rise would be a “really tricky” issue for Sunak and would probably be “one of the big stories” for the government over the summer and the early autumn.

Civil service unions argue that the pay restraint that has been a constant fixture since the coalition government was formed in 2010 has cut the real-terms value of average pay by around 20%.

Zaranko noted that while official Treasury policy was for public sector pay to “retain broad parity with the private sector”,  it was now falling in real terms after “more or less” tracking the private sector in the two years before the pandemic struck.

Zaranko said the government would need to find an additional £3bn to increase public-sector pay in line with the 1.3% increase in private-sector pay that the Office for Budget Responsibility projects for 2022-23.

He added that the OBR projected CPI inflation to be 4.3% for 2022-23, which would “equate to a hit for the average public sector worker of £1,800” with no compensation.

A further real-terms pay cut “would be catastrophic”

Prospect general secretary Clancy said it was unacceptable for the government to continue squeezing public sector workers financially and warned that any failure to deliver a cost-of-living increase in pay would be “catastrophic” for hard-working officials.

“As the wheels come off the chancellor’s Spring Statement, these figures from the IFS show that it is public sector workers who will be paying the price for his lack of ambition,” he said.

“Civil service workers have already lost around a fifth of their pay in real-terms since 2010 – a further real terms cut would be catastrophic to their standard of living in the face of crippling inflation and energy prices.

“The chancellor had the opportunity both to address the cost of living for everyone, and to ameliorate the impact of inflation on departmental budgets – he chose not to.

“Everyone is facing a really tough outlook but it seems that once again it is public sector workers and the poorest UK households who have been singled out for the worst treatment.”

The Cabinet Office is due to publish its pay remit guidance for the civil service on Thursday next week.

Earlier this week PCS, the civil service’s biggest union, said a ballot of members this week found more than 80% supported industrial action if the government does not deliver the 10% pay rise it is seeking.

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