'Stark' drop in real-terms civil service pay at all grades since 2010, analysis reveals

Value of senior civil servants' wages down by nearly a quarter but pay squeeze is not achieving expected savings, IfG warns
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By Tevye Markson

31 Jan 2023

Real-terms pay has dropped "starkly" at all civil service grades since 2010, with senior civil service wages dropping by nearly a quarter in that time, a new analysis has found.

This cut in spending power at all levels of the civil service is fuelling record levels of exits and putting off top talent – all while failing to achieve significant savings, the Institute for Government has warned in its annual Whitehall Monitor report.

Salaries have fallen by between 12% and 23% in real terms at each grade since 2010, according to the think tank's analysis of Office for National Statistics figures. The drop is greater at the higher levels, with senior civil servants seeing the biggest real-terms cut (22.9%), followed by Grade 6/7 (19.7%), SEO/HEO (17.2%), EO (16.4%) and finally administrative officers/assistants (11.7%).

Pay rises are often weighted towards lower earners – particularly given that at the lowest end of the scale, some civil servants' wages must be increased in line with annual changes to the national minimum wage.

A significant chunk of this decline is due to the huge rise in inflation in 2022, the IfG said. But it added that real-terms civil service earnings have also declined “starkly” this year compared to the private sector and that pay rises were “ungenerous” in comparison with other parts of the public sector.

The IfG said this pay erosion “has consequences for the civil service’s ability to attract and retain talented officials and affects the morale of civil servants” in today's report.

Members of the PCS union are in the midst of a wave of strikes over low pay, as well as concerns over conditions. Up to 100,000 civil servants are expected to take part in a one-day strike on 1 February, while Prospect opened a separate strike ballot last week. 

Ahead of this week’s strikes, Cabinet Office minister Oliver Dowden ruled out revisiting the government’s 2022-23 pay offer but said next year’s award would take inflation into account.

Civil service pay restraint ‘not having expected savings impact’

The IfG's analysis found that between 2010 and 2019, real-terms pay at each grade fell by between 6% and 14%, before a small increase at most levels in 2020 and little change in 2021. However, the figures nosedived at all grades in 2022 as inflation reached a high of 11.1%, eliminating all signs of a recovery in pay levels.

But the pay squeeze has nevertheless failed to deliver the savings the government has hoped for amid tightening budgets due to inflation, the IfG said.

The increased seniority of the civil service in recent years means that despite the drastic changes at each grade, the overall median salary in the civil service has fallen by a much smaller 3% in real terms.

“It is likely that at least some of this is a genuine change in its composition. But it is also likely that some civil servants are being promoted to boost their salaries, to stop them from leaving the civil service and to manage morale, rather than because their skill-set and responsibilities demand it,” the report said.

The think tank said this has “distorted the management structure of some departments and meant that civil service pay restraint has not led to the overall savings that the government might have expected”.

Low pay ‘fuelling departures’

Worsening civil service pay will “have a serious impact on the living standards of some employees”, the IfG said, pointing to PCS a survey that found officials are being forced to use food banks and skip meals.

“This is a problem for departments as employers with responsibility to support employees’ wellbeing,” the think tank said.

“But it is a particular problem for the civil service because concern over pay during the cost-of-living crisis could fuel officials’ intention to leave the service in search of better-paid equivalent positions in the wider public or private sector, at a time when turnover is already at record highs.”

"Concern over pay during the cost-of-living crisis could fuel officials’ intention to leave the service in search of better-paid positions in the public or private sector, at a time when turnover is at record highs"

Between March 2021 and March 2022, some 13.6% of civil servants either moved between departments or left government entirely. Some 44,000 staff left during this period.

The think tank said some of this turnover “stems from declining staff satisfaction – pay in particular” and suggested this was a sign of “systemic problems within the management of the civil service”.

The report warned that high turnover "damages productivity, undermines subject knowledge and expertise, disrupts projects and increases the resources required for recruitment and training”.

SCS pay ‘not attractive enough’ to top talent

Pay restraint is "already having an effect on the civil service’s ability to recruit and retain top talent”, said Rhys Clyne, the report’s lead author.

The senior civil service has faced the biggest real-terms wage cut of any grade since 2010, and the government this year rejected the Senior Salaries Review Body’s recommendation of a 3% across-the-board pay rise.

The IfG said the 2% increase it awarded instead is “ungenerous even compared with other public sector workers, where most pay review bodies awarded 4-5% annual increases, and it is much lower than average pay increases in the private sector of over 6%”.

The think tank said this senior pay restraint “has led to a decrease in the attractiveness of working as a civil servant, particularly for specialist roles”. 

While lower grades officials can rise up the ranks to increase their earnings, there are fewer roles available in the most senior ranks of the civil service, the IfG said. This means senior civil servants unsatisfied with pay are more likely to leave altogether.

The think tank said the three years it took the government to recruit a chief digital officer, from 2019 to 2022, is emblematic of the recruitment issues this has caused, the report said. Civil service chief operating officer Alex Chisholm told MPs in November that external candidates for the job were earning “multiples" of what the civil service could pay.

While civil service salaries are unlikely to ever compete directly with the private sector, especially at the top levels, the size of the pay gap is a problem, the think tank said.

“Ministers need to be aware that continuing to hold down civil service pay in an attempt to save on administration budgets will worsen existing difficulties with the external recruitment and retention of the best talent – particularly of people with in-demand skills who could command much higher salaries outside the civil service,” the report said.

“This runs contrary to their stated aim to make the civil service more ‘porous’ and ‘encourage entrants with specific, high demand skills’, and will have a negative impact on the efficiency and effectiveness of government.”

A government spokesperson said: "Public sector pay awards need to strike a careful balance between recognising the vital importance of public sector workers, while delivering value for taxpayers, not increasing the country’s debt further and being careful not to drive even higher prices in the future." 

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