Government urged to ‘pause for reflection’ before scrapping pay cap

Institute for Government report says universal pay hike could exacerbate Tories’ political woes amid £10bn spending hole

PCS members protest over pay outside HM Treasury earlier this year Credit: PA

By Jim.Dunton

19 Oct 2017

Ministers should not make a final decision on scrapping the 1% cap on public sector pay rises unless they are clear on what such a move was designed to achieve, according to a report from the Institute for Government.

The think-tank’s latest Performance Tracker report, published in conjunction with the Chartered Institute of Public Finance and Accountancy, paints a picture of government “being forced into poor and reactionary spending decisions” that a badly-thought-out approach to pay could worsen.

The review found that ministers are struggling to stick to 2015 Spending Review targets and are on course to fork out £10bn more than planned to run services over the next five years, without fixing any of the underlying problems those services face.


The report authors argued that the recently announced cap-busting awards of 2% for police officers and 1.7% for prison officer, which are to be met from within existing budgets, will “therefore involve money being squeezed from elsewhere”. 

“Before taking further action on the pay cap then, the government must clarify what the trade-offs will be and what problem they are trying to solve is,” the report says.

“If recruitment or retention is the problem, then pay increases may be a good solution. However, if workload rather than pay is driving the problem, then paying existing staff at the expense of hiring more staff is likely to exacerbate the issue. 

“The introduction of pay increases for all high-profile workforces – at the expense of other interventions – may lead to greater political problems further down the line.”

The Performance Tracker report brings together 100 datasets across nine key public services, and identifies the emergence of “large potential spending gaps” in most, with policing, prisons and adult social care at the top of the danger list.

It accepts that chancellor Philip Hammond has “little scope for manoeuvre” in next month’s Budget because of weak economic forecasts and the challenge of Brexit.

The report concludes that Hammond will have “no choice but to spend more” on services such as prison and hospitals, while “tough and increasingly urgent policy decisions” will be required on schools and adult social care.

Lead author Emily Andrews said the government’s failure to deal with with building pressure was creating an “ imperative to act” in prisons, hospitals, schools and adult social care. 

“This is a poor state of affairs,” she said.  “No government should end up in such a situation, unless beset by a natural disaster or similar unpredictable emergency. 

“If the chancellor and government cannot break out of this reactive cycle they must accept that budgets will rise or services will deteriorate.”

According to the report, current spending on adult social care is 5% lower than it was in 2009-10, despite the pressures of the ageing population.

Spending on schools is 6% higher, but more teachers are leaving the profession and there are recruitment gaps in some key subjects.

The report said hospital spending and staff numbers had continued to rise, but so had demand  – as evidenced by growing queues for services.

On prisons, the report said spending had fallen by 22% between 2009-10 and 2016-17, and one-quarter fewer prison officers were employed.

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