Treasury allows pay review body for senior civil servants to bust 1% pay cap

FDA warned that any 2018-19 pay increase ‘must be fully funded to have meaningful impact’ as Boris Johnson calls for staff cuts

Liz Truss has outlined a more flexible approach to pay policy in letters to pay review bodies. Credit: David Mirzoeff/PA

By Tamsin Rutter

02 Oct 2017

The Treasury has given the green light to the Senior Salaries Review Board to recommend a pay rise for senior civil servants of more than 1% in 2018-19, amid fears that without proper funding the policy will lead to job losses.

In government guidance to six of the eight pay review bodies across the public sector, the chief secretary to the Treasury Liz Truss said that despite the continued need for pay discipline across the public sector, “more flexibility may be required”, particularly in areas of skill shortage.

But the FDA, the trade union for senior civil servants, expressed concern over comments made by foreign secretary Boris Johnson that pay rises should be funded by staff cuts, saying that making the civil service any smaller is “simply unsustainable”.


Setting out “the Treasury’s overarching approach” ahead of the 2018-19 pay round, Truss wrote that while public debt was still too high – at nearly 90% of GDP – the government recognised the need for more flexibility over pay.

“There will still be a need for pay discipline over the coming years, to ensure the affordability of the public services and the sustainability of public sector employment,” she said, in the letter dated 21 September and published on 29 September.

“However, the government recognises that in some parts of the public sector, particularly in areas of skill shortage, more flexibility may be required to deliver world class public services including in return for improvements in public sector productivity.”

Public pay increases have been capped at 1% since 2012 following a two-year pay freeze. A recent report by the Institute for Fiscal Studies found that continued pay restraint was particularly likely to lead to recruitment and retention problems for organisations with largely London-based, highly educated staff, such as the Senior Civil Service.

Rob O’Neill, FDA assistant general secretary, told Civil Service World that he welcomed the letter’s “reassuring tone”, as well as the government’s “belated recognition” of the need for greater flexibility on pay.

“Ms Truss is right to draw focus to areas facing skills shortages, as our latest pay survey found that 68% of our members are aware of recruitment and retention difficulties within their departments and 30% are considering leaving the civil service ‘as soon as possible’,” he said.

“However, we are concerned by comments made over the weekend by the foreign secretary suggesting that pay rises should be funded by cutting the number of public sector staff.

“The civil service has already delivered billions in savings over the last seven years and is currently at its smallest size since before the second world war, meaning further cuts to staff numbers are simply unsustainable.”

O’Neill also said that while he welcomed the greater freedom for pay review bodies, any pay policy that involves lifting the cap “must be fully funded to have any meaningful impact”.

He added: “Britain needs a strong civil service to meet the challenges of Brexit and beyond, and that means more money must be made available to attract the skills our country needs and ensure our civil servants are paid their true value.”

Prospect, a trade union that has more than 30,000 members working for government departments, agencies and non-departmental public bodies, also pointed out that the Treasury is yet to stump up any cash to cover a pay rise.

It was confirmed last month that the 2% pay boost for police officers in 2017-18 – half of which is a one-off bonus – and the 1.7% rise for prison officers will have to be funded from within existing budgets.

Garry Graham, Prospect’s deputy general secretary, said the new guidance demonstrated “ignorance at the heart of government policy”.

He added: "The prime minister has said she recognises the sacrifices made by public servants in the last seven years – but the government refuses to make even the limited commitment to help protect public sector workers against inflation for the coming year and stop declining living standards.

"In tandem, where there is limited movement, there is no new money – so organisations facing recruitment and retention problems will have to make headcount reductions to address the issue.”

Around 2.5 million workers are covered by a pay review body – they make up 45% of public sector staff and amass a collective annual pay bill of £100bn.

However, Graham added the majority of sector employees not covered by the bodies would be "deeply worried that they might be left behind from the limited movement that might be shown to those who are”.

The majority of civil servants are not covered by a pay review body, and their pay is set directly by Treasury. CSW has asked the Cabinet Office to confirm whether the more flexible approach to pay set out by the Treasury will also apply to civil service pay guidance for 2018-19, and is awaiting a response.

In her letter, Truss also confirmed that public sector workers will receive their 2018-19 pay awards later than usual, given chancellor Philip Hammond’s decision last year to move the Budget from springtime to the autumn. 

This will delay the process by which departments hand over written evidence to pay review bodies, and thereby delay the reports those bodies put together for the government, Truss said.

She added: “I recognise that this is far from ideal as our hard-working public servants are entitled to receive their awards promptly. 

“However, on balance given the importance of the process and the change in timing that has already occurred, I feel it is important we work to a later timeline rather than condensing the process.”

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