Chancellor Rishi Sunak has confirmed that the freeze on public sector pay will end in tomorrow’s Spending Review, but has not set out details of how much pay could rise, or if it will be funded by the Treasury.
Reports in recent days suggested the chancellor would use the review to end the one-year freeze introduced in response to the fiscal pressures caused by the coronavirus pandemic, and in the Budget speech he said: "I can announce today that public sector workers will see fair and affordable pay rises across the whole Spending Review period as we return to the normal, independent pay-setting process."
The Budget Red Book stated that public sector workers will see pay rises over the next three years as the recovery in the economy and labour market allows a return to a normal pay setting process.
"The government will be seeking recommendations from Pay Review Bodies where applicable. To ensure fairness and the sustainability of the public finances, public sector pay growth over the next three years should retain broad parity with the private sector and continue to be affordable."
“The economic impact and uncertainty of the virus meant we had to take the difficult decision to pause public sector pay,” he said. “Along with our plan for jobs, this action helped us protect livelihoods at the height of the pandemic. And now, with the economy firmly back on track, it’s right that nurses, teachers and all the other public sector workers who played their part during the pandemic see their wages rise.”
Most public sector roles are covered by pay review bodies that make recommendations to ministers on pay settlements. Although senior civil servants are covered by the Senior Salaries Pay Review Body, all other officials are instead covered by a Treasury pay remit guidance issued to departments, which sets the scope of increases. When the government ended the cap on pay increases in 2018, the Treasury guidance to departments led to civil servants having the lowest pay increases across the public sector.
Asked this morning if public sector staff would see a pay increase above inflation, business minister Paul Scullysaid that would be determined by the pay review bodies.
“The chancellor is keen to give people a rise. They will then take that into account as they look to what should be an appropriate rise for the public sector, given the public finances,” he said.
“I can’t pre-empt what they are going to do. We will see where we are come next April when the review bodies have reported.”
It was also confirmed today that the minimum wage rate is set to increase, with the rate for those aged over 23 rising in April to £9.50 an hour from £8.91.
Responding to the announcement, Prospect general secretary Mike Clancy said that ending the cap does not mean public sector workers are definitely going to get a pay rise.
"Ending the pay freeze will mean little if the chancellor does not provide public sector organisations with the finances to actually fund real pay rises. And with CPI running at 3% and RPI at 4.9% public servants will need a substantial award just to avoid falling further behind the rising cost of living.
“Public sector pay is once again lagging significantly behind the private sector and that’s after a decade of pay austerity which has put a huge burden on family budgets. This is creating recruitment and retention problems in some areas with the public sector unable to compete with the pay offered for comparable private sector jobs."
Unison general secretary Christina McAnea said that “unless extra money finds its way to individual government departments, the freeze will continue”.
She added: “Any pay rise less than the rate of inflation is, effectively, a pay cut.
“Ministers must also find the cash to give NHS workers the proper pay award they’ve more than earned. That goes for council, school and other public sector staff who’ve either been offered nothing or substantially less than the cost of living.”
This story was updated to include comments from the 27 October Budget statement