Simon Haskel on why it’s time for the government to stop being dishonest with the public, hiding behind the public sector pay review bodies
In 2015, the then Chancellor announced that public sector workforces would be getting a pay award of 1% a year for the next four years. In the recent debate on the Queens Speech the government voted down a Labour amendment to end this cap.
Some heat was generated when in spite of that vote, anxious departmental Ministers concerned about recruitment and retention in the related public sector pressed for higher pay rises. More heat was then generated because of the obvious split in the Cabinet, with the current Chancellor taking a firmer, more rigid view.
The Conservative Home blog has added to the heat by telling us that such unruly behaviour is manoeuvring for the Tory party leadership. And tweet after tweet creates yet even more heat by referring to finding £1bn on a magic money tree in Belfast.
So perhaps it’s time to throw a bit more light onto the subject?
To do this, we need to know that there are eight pay review bodies, mainly covering the vocational parts of the public sector, that recommend levels of pay. Originally created to avoid protracted disputes, these take evidence and send in recommendations to the government. Last year, the Chief Secretary to the Treasury told them that he expected a cap of 1%.
The letters to the review bodies setting out their work for 2018/19 will be going out soon. What will these say? To review pay by looking at the evidence or not to bother because the cap remains?
Even when public services are contracted out to the private sector, it probably costs the taxpayer more than they think. It is estimated that nearly one million low paid private sector workers actually work in outsourced jobs, delivering social care, school and hospital services.
Many of the contracts to supply such services were won on the basis of low pay and so it’s not surprise that most of those million workers rely on tax credits to make ends meet. The taxpayer pays in the end but from another pocket – something that may suit the politics of ‘public bad/private good’ but doesn’t provide value for money.
One reason why the Conservatives have capped public service pay is because productivity, on average, is static. In both the public and private sectors. Yet Ministers have an industrial strategy partly designed to deal with this. Can we not review that strategy before the white paper comes out with particular reference to raising productivity in the public sector as a means of removing the pay cap? That would be a much more constructive approach.
It is within this narrative of greater productivity and improved public services that one can speak of, perhaps inevitable, tax rises. Council tax could be extended beyond band H. Heavier taxes on activities which damage the environment. VAT charges on financial services.
Some compare pay in the public and private sectors. Yes, it is complicated. A recent paper from the NIESR shows that taking into account pensions and other benefits, pay restraint has meant public sector workers have lost 12% since 2010 while those in the private sector have lost 2%.
No surprise then that this week we saw a report from the education review panel, drawing attention to serious staff shortages. We have similar warnings in health, care and council services but the Treasury’s official position is the 1% cap holds. Hiding behind the pay review bodies is dishonest and the government should be prepared to take action. Otherwise, taxpayers will continue to lose twice over, paying more money while getting increasingly inferior public services.
Lord Simon Haskel is a backbench Labour Peer in the House of Lords. He tweets @simon_haskel
Published 12th July 2017