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Chancellor Rishi Sunak is preparing to announce a new restriction on public sector wages in next week’s government spending review in response to the economic impact of the coronavirus pandemic.
Government sources said an announcement on the wage restriction would be part of Wednesday’s mini-budget, part of plans to launch a Whitehall savings campaign to address record levels of government borrowing incurred during the crisis.
The new round of belt-tightening for civil servants, many of whom were at the forefront of the government’s response to the pandemic, will likely be in stark contrast to Boris Johnson’s generous four-year deal for the military.
The prime minister told the Commons on Thursday that he wanted the UK to be Europe’s top naval power, and said the budget increase would help equip the Defense Ministry with swarms of drones and “directed energy weapons.”
At the same time, Johnson also repeatedly refused to confirm whether the government would fulfill its stated commitment to keep foreign aid spending for the world’s poorest people at 0.7% of national income.
The leaders of nearly 200 charities have written to the prime minister, urging him to ditch a plan to lower the target to 0.5%.
With the prime minister committed to spending on key areas like defense and green tech, Sunak has been reviewing the budget for potential savings.
In an argument reminiscent of the austerity-era wage freezes imposed by conservatives after the 2008 financial crisis, Sunak is expected to argue that public sector earnings should align with those of the private sector, where wages have fallen. seen under heavy pressure due to the British economy battling through the deepest recession in history.
It is understood that NHS staff, including doctors and nurses, will be exempted from the renewed period of restriction to avoid provoking an angry public reaction as a result of the front-line role played by healthcare workers during the pandemic.
However, unions warned that a new pay freeze elsewhere would still be a kick in the teeth for staff after Boris Johnson promised to end austerity before the 2019 elections, and while millions of key workers continue to hold to the country in the health emergency.
Frances O’Grady, general secretary of the TUC, said: “Freezing your salary is not a way to reward key workers for their service. Unions will fight for the proper wage increase they have earned. The workers must not bear the weight of the crisis ”.
Dave Prentis, Unison’s secretary general, said that key public sector workers remain at the center of the fight against Covid. “The government must do the right thing next week and announce the salary increase that the staff has more than earned. Anything less runs the risk of destroying morale when the whole country has them, ”he said.
The imminent launch of the Chancellor’s savings campaign comes as government spending skyrockets in response to the pandemic, with more than £ 40 billion spent to subsidize the wages of up to 9.6 million workers through the plan. license. An extension to the wage subsidy plan until the end of March is expected to cost billions of pounds more, on top of the more than 210 billion pounds spent on the government’s emergency response to Covid since the pandemic began.
Official figures to be released alongside the spending review by the Office of Budget Responsibility, the government’s economic forecaster, are expected to show an increase in borrowing to more than £ 400bn this year as the fallout economic crisis are felt.
With spending to cushion the economic blow and tax revenues falling off a cliff as closure restrictions froze business activity, this would represent a budget deficit more than double that incurred due to the 2008 financial crisis.
The government spends more than £ 200 billion a year to employ more than 5.4 million people in jobs across the public sector, with the majority working in education and health.
Sources said the Treasury was expected to highlight official figures showing that public sector workers benefited from a 7% “gross wage premium” over their private sector counterparts last year.
Sunak is believed to consider the Office for National Statistics analysis important because it highlights that the average public sector worker earns more than in the private sector even after considering personal characteristics, job type and skills.
However, research from the Institute for Fiscal Studies showed that public sector pay is 1.5% lower than in 2010 after inflation, and is among the lowest levels relative to private sector earnings in decades. He said this had likely exacerbated difficulties in hiring workers and retaining existing employees.
The basis for a three-year wage freeze on public sector wages that could be considered by Sunak is outlined in a report released by the Center for Political Studies, a right-wing think tank, in a report on Friday.
In defense of public sector wage restraint, the CPS said that up to £ 23 billion could be saved by freezing workers’ wages for three years. An option to allow wages to grow by just 1% per year, similar to the policy implemented by George Osborne as part of his austerity-era cuts to Whitehall budgets, would save more than £ 11bn, he said.
Robert Colvile, director of the CPS, was one of the main authors of the conservative manifesto of 2019. The CPS has also recently asked the government to abandon an overt commitment to increase the minimum wage and remove the triple lock on pensions, which could also feature in the spending review.
Employee representatives warned that the wage freeze would have a detrimental impact on the government’s plans to hire thousands of employees for key functions in the public sector after an exodus during the last decade of austerity if new restrictions are grassroots. wide.
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Kevin Courtney, Deputy National Secretary for the National Union for Education, said the government had committed to increasing starting salaries for teachers to over £ 30,000 a year by 2022. “We would be very concerned if there was a change in this position. It would be completely unreasonable. They were doing it because of problems with the hiring of teachers, and those problems will come back in force after the pandemic, ”he said.
Rehana Azam, national secretary of the GMB union, said plans to impose wage restrictions to balance the books would come as millions of pounds were paid to companies with close ties to government ministers.
“Billions are being wasted, flowing from the Treasury into the pockets of your friends. Some people are benefiting from the pandemic while our workers are working through it.
“It is dangerous territory for the chancellor if he imposes salary restrictions as a way to offset the cost of the pandemic. We haven’t gotten over it, we’re still at it. Do you really want to do this when people’s morale is so low? When people have lost loved ones and people they have worked with, is now the time to kick them even more? I don’t think it will go well. “
