Don't expect big pay rises, Sunak warns civil servants as he kicks off Spending Review

Tough choices ahead, warns chancellor as he reveals what departments need to submit to the Treasury for CSR2020
The announcement followed Sunak's Summer Statement earlier this month. Photo: WIktor Szymanowicz/NurPhoto/PA Images

By Richard Johnstone

22 Jul 2020

Chancellor Rishi Sunak has set out the government’s priorities for the forthcoming Comprehensive Spending Review and warned public-sector pay settlements will be constrained in the years ahead.

Sunak has outlined six priorities for the review, which will report later this year and will set departmental revenue budgets from 2021-22 to 2023-24 and capital budgets to 2024-25.

They include “improving the management and delivery of our commitments”, with the government looking to “ensure that all departments have the appropriate structures and processes in place to deliver their outcomes and commitments on time and within budget”. This is accompanied by a pledge to improve outcomes in public services, including increased funding for the NHS and “taking steps to cut crime and ensure every young person receives a superb education”.

Other priorities include strengthening the UK’s economic recovery from Covid-19; funding policies to fulfil the government’s pledge to "level up opportunity" by investing in infrastructure, innovation and people; and making the UK a scientific superpower, including the development of technologies to the government’s ambition to reach net-zero carbon emissions by 2050.

There is also a commitment to strengthen the UK’s place in the world as the Brexit transition period ends.

But in a letter setting out the start of the review to ministers, Sunak said the government would need to keep public sector pay restrained in the CSR period.

“In particular, it will be vital that public sector pay awards made during the review take into account the wider economic context,” he said.

“In May 2020, public sector pay was up by 3.7% on the year before, compared to a fall of 1.2% in the private sector. Furthermore, this financial year’s public sector pay awards will be significantly more than the average in the private sector, where the OBR’s central scenario assumes a fall in average earnings.

"Therefore, for reasons of fairness, we must exercise restraint in future public sector pay awards, ensuring that across this year and the CSR period, public sector pay levels retain parity with the private sector. Departments’ pay modelling should reflect this fairness.”

Submission details

The Treasury set out details of the information departments would need to submit during the CSR process. They must start by providing information by 24 September to establish “an agreed set of facts to support ministerial decision making”.

They must also provide a workforce strategy for the CSR period, including a headcount by each secre

They must also provide a workforce strategy for the CSR period, including a review of headcount by each secretary of state "setting out how they plan to reduce corporate overheads" in their department and the organisations that report to it.

All departments will be expected to make "significant reductions" to their comms teams, Sunak said, in line with a drive to reduce the number of communication officials in government.

Departments have been told they “must comply with requests for data and evidence" throughout the CSR process.

They will have to submit evidence on delivery of the government’s priorities, using Infrastructure and Project Authority tools to assess the deliverability of their own proposals before submitting them to the Treasury. “High-value bids with complex delivery challenges will be referred to the IPA and other functional experts as necessary for expert advice and scrutiny,” the chancellor wrote.

Each department must also carry out a  prioritisation exercise, setting out “areas for reprioritisation" based on their relevance to the government's priorities, as well as their performance, effectiveness and value for money.

It is expected that the review will assess policy plans using the Public Value Framework, which uses a series of questions to determine whether projects and programmes achieve value for money.

In the Budget, the Treasury said it would “establish a new approach to link departments’ spending proposals to the outcomes they intend to achieve as part of a new Public Value Framework”.

The framework is intended to be both a diagnostic tool, in determining how successfully projects and programmes achieve value for money, and to inform policy design. The tool uses questions relating to five core "pillars": pursuing goals; managing inputs; engaging citizens and users; and developing system capacity.

Capital moves

Elsewhere, Sunak told departments to set out their plans to better manage the government estate, including proposals to relocate offices and arm's-length bodies outside London.

And he said departments would be expected to work with the Treasury., No.10 and the IPA on what the prime minister, Boris Johnson, has called Project Speed – an initiative to boost infrastructure spending quickly in response to the Covid pandemic – “to build better, greener and faster". This will include plans to innovate and promote modern methods of construction across infrastructure and public-sector buildings, he said.

No spending envelope set

Due to what the Treasury said was the “unprecedented uncertainty” of the economic impact of the coronavirus outbreak, the chancellor did not confirm the spending envelopes he set out in the March Budget.

The March statement said total resource spending across government would rise from £360.6bn in 2020-21 to £417.6bn in 2024-25, an estimated 2.8% annual average real-terms increase. Capital budgets were set to increase from £88.5bn to £112.8bn, an average 6.9% increase.

However, yesterday the Treasury said that the chancellor “did not fix a set spending envelope” for the review, but would increase both capital and resource departmental spending in real terms across the CSR period.

But Sunak warned there would need to be tough choices in other areas of spending.

He said the review was part of the second phase of the government’s coronavirus response “to protect, create and support jobs".

He added: “The Comprehensive Spending Review is our opportunity to deliver on the third phase of our recovery plan – where we will honour the commitments made in the March Budget to rebuild, level up and invest in people and places spreading opportunities more evenly across the nation.”

The date for the conclusion of the review will be confirmed in due course. Representations to the CSR can be submitted here.

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