Civil service braces for new pay woe in Spending Review

Downing Street briefs that prime minister opposes planned £3k rise for MPs in light of mooted public-sector freeze
Chancellor Rishi Sunak PA

By Jim Dunton

24 Nov 2020

Public sector workers face a tense 24-hour wait to find out exactly how harsh chancellor Rishi Sunak’s proposals for public sector pay restraint will be when the government’s one-year Spending Review is revealed tomorrow.

The Treasury began briefing ahead of the weekend that the introduction of a 1% pay cap for public servants was one option on the cards to cope with the huge economic pressures the response to Covid-19 has placed on the nation’s finances. The move would come after a decade of below-inflation pay growth for many civil servants.

The civil service's biggest union force,  PCS,  argues that thousands of departmental staff have undergone a 20% real-terms pay cut since 2010 and is currently calling for a 10% rise for all public sector workers to make up for it.

Sunak has said nothing to challenge his department’s briefings on public-sector pay since they began on Thursday night, while No.10 said yesterday that prime minister Boris Johnson opposed the £3,300 pay raise – equivalent to a 4% increase – recommended for MPs by the Independent Parliamentary Standards Authority. It would take the base salary for a member of parliament to £85,232 from April next year.

Sunak insisted on Sunday that he was not poised to announce a return to austerity in an interview with Sky News’ Sophy Ridge. But he made clear that he was referring to public services rather than the pay of staff delivering them.

“I can’t comment on future pay policy in advance of the Spending Review,” he said.

"But what I would say is that when we launched the Spending Review, I did say to departments that when we think about public pay settlements, I think it would be entirely reasonable to think about those in the context of the wider economic climate.”

In an interview with Andrew Marr on the BBC the same day, Sunak conceded the government would be borrowing "an enormous sum this year” to support the response to coronavirus and attempt to shore up the nation’s economy.

He said that adjusting the nation’s finances to pay back the increased debt levels – would be a longer-term task. Last week, Treasury perm sec Sir Tom Scholar warned members of parliament’s Public Accounts Committee that figures from the Office for Budget Responsibility that  are due to be published tomorrow were likely to show public-sector net borrowing at around £370bn for the year: around 19% of GDP.

One aspect of the Spending Review Sunak did feel comfortable discussing with Marr was £3bn in additional funding earmarked for the NHS.

“That will mean that we can do a million more treatments, more scans, more elective surgery,” the chancellor said.

“We’ve also made more money available for more diagnostic equipment to replace some of the older ones. That illustrates one of the other impacts of tackling coronavirus – all of these things that were meant to happen that couldn’t, sadly, happen.”

Sunak also told Marr that he did not believe that any failure of the UK and EU to agree a trade deal to take effect when the EU transition period ends on 31 December would  be as big an issue for the nation’s economy as dealing with coronavirus.

“It would be preferable to have a deal because it would ease things in the short term,” Sunak said.

“But I think the most important thing in terms of impact on the economy next year is not going to be because of that, it’s going to be because of coronavirus. The scale of economic shock that we’re experiencing because of that is really the dominant thing. That’s why all my attention is focused on trying to protect as many jobs as possible.”

New pay hit for lowest paid

The latest overnight briefings on the spending review include the suggestion that the government will scale back a planned 5.6% rise in the national living wage that had been due to come into effect from April in favour of a 2.0% uplift.

That move would impact civil servants at the lowest end of the pay scale who often get a proportionately higher annual pay rise than departmental mechanisms would otherwise allow for, simply because of employers’ obligations to meet minimum pay requirements.

Shadow chancellor Anneliese Dodds MP said it was “astonishing” that the government could clap for the nation’s key workers one day and then U-turn on a promised pay rise for the lowest paid the next.

“It’s another irresponsible choice by a chancellor who’s choking off any chance of recovery by hitting workers in their pockets,” she said.

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