Public sector pay increases are to be targeted at those who need them most, the chancellor has confirmed.
Delivering his Spending Review this afternoon, Rishi Sunak said pay increases will be applied for one million frontline staff in the NHS next year, as well as low income staff in the wider public sector, although just how much they will rise by is yet to be confirmed.
Some 2.1 million public sector workers on annual salaries of £24,000 or less will be guaranteed a pay rise of at least £250, he said.
However, many other employees will see their pay frozen. Sunak said the pandemic had had “deepened the disparity between public and private sector wages”, as public sector wages had risen by nearly 4% in the six months to September, while private sector pay had fallen by 1%.
As a result he “cannot justify a significant, across-the-board pay increase for all public sector workers”, noting that sectors such as hospitality and retail have been hit hard by the pandemic.
Labour’s shadow chancellor Anneliese Dodds criticised the decision to freeze pay for most public sector staff, particularly as the nation had been clapping for the NHS and other key workers earlier this year.
He had “taken a sledgehammer to consumer confidence” by freezing many of their wages, she said.
The TUC said it was a “kick in the teeth” for public sector workers.
After a decade of standstill pay, yet another pay freeze is a kick in the teeth for the key workers in the public sector who kept the country going in this crisis. #SpendingReview
— Trades Union Congress (@The_TUC) November 25, 2020
The Treasury’s Spending Review document, which was published shortly after Sunak’s speech, said: “In 2020, published data shows the median salary in the public sector was £1,770 higher than in the private sector, and the public sector has benefitted from several years of pay rises above inflation.
“In 2019 public sector remuneration including pensions was approximately 7 per cent higher than in the private sector, rising from 5 per cent in 2017, even after accounting for differences in employee and job characteristics.
Public service pensions are generous, with most enjoying Defined Benefit schemes where employer contributions are around 20 per cent of earnings – around double the typical contribution rate in the private sector.”
It adds that the public sector pay bill represents around a quarter of total government expenditure.
“Pausing headline pay awards next year for some workforces will allow the government to protect public sector jobs and investment in public services to respond to spending pressures from Covid-19. It will also
avoid further expansion of the gap between public and private sector reward,” the document says.
The NHS Pay Review Body and Doctor and Dentist’s Review Body will report as usual next spring, and the government will take their recommendations for pay increases into account, it adds.