Public sector 1% pay cap "has not hit civil service recruitment quality"

Review warns that continuing restraint will reduce public sector wage differential to lowest level in 20 years.

By Richard Johnstone

13 Mar 2017

Public sector pay restraint has not yet led to a decline in the quality of recruits to the civil service, the Institute for Fiscal Studies has found, but the government must keep the impact of the policy under review.

In a report examining the impact of two-year pay freeze from 2010 and subsequent 1% limit on increases to 2019/20 on public sector recruitment, the IFS highlighted that the pay differential between the public and private sectors would fall to its lowest level for at least 20 years by the end of the decade.

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The review highlighted the historic pay premium in the public sector, which was often due to differences in the characteristics of public and private sector workers, fell from a high of 6% in 2010/11 to 3.6% by 2015/16.

The peak was achieved due to freezes in private sector wages during the recession, accompanied by steady growth in public sector wages during this period. Subsequent public sector pay restraint – initially through a pay freeze and then a 1% cap on increases that has been in place since 2012 – saw the gap fell back to a level similar to before the financial crisis.

The IFS report, undertaken for the Office for Manpower Economics, examined whether this decline had lowered the level of educational attainment of graduate recruits to public sector occupations.

Using education as an indirect proxy for staff quality, the IFS concluded there had so far been little change in the education attainment of those entering the civil service.

“The average educational achievement of new graduate civil servants remains around the median of all higher education leavers over time,” the think-tank stated. There has also been little change in the relative educational achievement of those entering other parts of the public sector, including teachers, the NHS and police officers.

However Luke Sibieta, an author of the report and a programme director at the IFS, highlighted that public sector pay is set to decline more rapidly relative to that in the private sector between 2015 and 2020.

This made it “hard to believe this won’t affect the willingness of highly qualified individuals to choose these occupations” and ministers must continue to monitor the impact of the 1% annual cap, he stated.

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