Civil servants ‘face two-year pay squeeze’ as Truss abandons spending review plans

Real-terms pay cuts expected as government abandons planned spending review
Civil service officials and departments both face reduced spending power

By Tevye Markson

26 Sep 2022

Civil servants are facing real-term pay cuts over the next two years, after the government reportedly abandoned plans for a spending review before the next election.

During this summer’s Conservative leadership campaign, Liz Truss promised she would hold a spending review if she was elected. However, it is now being reported that the prime minister has put this on hold until after the 2024 general election.

The last review, in autumn 2021, set out government’s spending plans over the following three years (2022-23 to 2024-25).

The claims in The Times come as civil servants begin to vote on whether to go on strike and in the wake of the government’s "mini-budget" on Friday, which included the announcement of £45bn worth of tax cuts.

The lack of a spending review means public sector workers are likely to face real-terms wage regression over the next two years, like the last decade.

Civil servants have lost around a fifth of their pay in real-terms in the last decade, according to unions. They received an average pay rise of 2% this year.

It also means departments' budgets are unlikely to be refreshed despite soaring inflation reducing their spending power.

Responding to the mini-budget on Friday, the Institute for Fiscal Studies said it “seems almost inconceivable that plans made last year, when inflation was expected to peak around 3%, will not need topping up at some point, unless the government is willing to allow a (further) deterioration in the range and quality of public services”.

In his fiscal statement last week, chancellor Kwasi Kwarteng warned that departments may have "difficult decisions" ahead as he suggested he was no longer willing to pay for public services through "high" taxes.

“Growth is not as high as it should be. This has made it harder to pay for public services, requiring taxes to rise,” Kwarteng told MPs in his fiscal statement on Friday.

“So as a government, we will focus on growth – even where that means taking difficult decisions.”

The Treasury’s blue book, published alongside Kwarteng’s fiscal announcement, said the chancellor would “shortly write to each department asking them to set out how they will prioritise growth within their plans”.

Kwarteng, whose announcement on Friday was described by IFS director Paul Johnson as “not just gambling… [but]…betting the house”, has since promised more tax cuts.

Members of the civil service’s biggest union, PCS, began voting today on whether to take strike action over pay, pensions, redundancy terms and job cuts. More than 150,000 civil servants from more than 200 government departments and agencies will be balloted over the next two months.

The civil service is also facing 91,000 job cuts, under plans unveiled under Boris Johnson’s government, while the unions and government are also in dispute over pension and redundancy terms.

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