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Groundbreaking Report Shows Lifting Public Sector Pay Cap Would Cost 43 per Cent Less than Previously Thought

Wednesday, November 15, 2017

New IPPR paper strengthens case for budget boost says union.

GMB, the union for public sector workers, has welcomed new research that shows ending the Government’s policy of real-terms public sector pay cuts will be much cheaper than previously thought. [1]

The IPPR think tank’s research, supported by GMB, shows if public sector pay was raised by inflation then 43 per cent of the cost would be reclaimed by the Treasury through taxation, lower welfare payments and higher GDP growth.

The research also shows that inflation-matching pay rises would boost GDP by £800 million in 2019/20.

In total, 43 per cent of the overall cost would also be saved if public sector pay was raised by private sector rates plus one per cent to make up for years of real terms pay cuts.

Public sector wages were frozen for two years after 2010/11 which was then replaced by a one per cent cap that was due to extend to the end of 2019/20.

Pay for local government workers and school support staff are amongst the worst hit after their pay was frozen for an additional year from 2009/10.

Although Ministers have said they would adopt a more flexible approach for next year’s pay settlements, no new funding has been committed.

Previous GMB research found that:

- The Treasury’s own internal analysis shows that average public sector pay has fallen behind private sector rates [2]

- The average public sector worker has cumulatively lost £9,000 and will lose a further £4,000 by the end of 2019/20 if the cap is not lifted [3]

- 2.4 million children in 1.3 million families are affected by the pay cap across the UK [4]

- The annual cost to the public sector of hiring agency and temporary workers has risen by £2.5 billion since the pay cap was introduced [4]

Rehana Azam, GMB National Secretary for Public Services, said:

“This important report proves that lifting the Government’s pay policy is affordable and would provide a much-needed economic boost just when the country needs it most.

“The last objection to providing decent pay rises was affordability but this research shows that almost half that cost would be returned to taxpayers and could be reinvested in public services.

“Recruitment and retention problems are impairing public services for everyone as staff are pushed to breaking point – the public sector pay pinch is hurting but it isn’t working.

“It is a moral outrage that in one of the world’s richest economies public sector workers are left homeless, skipping meals and relying on food banks.

“Unfunded pay rises that still fall below inflation just won’t cut it. GMB stands ready to use all options at our disposal to ensure public sector workers get the real pay rises they need and deserve.

“The Chancellor must announce a fully-funded, above-inflation pay rise for every public sector worker in next week’s Budget.”

ENDS

Contact: GMB press office on 07958 156846 or at press.office@gmb.org.uk 

Notes for editors

[1] The new IPPR report Uncapped potential will be available at https://www.ippr.org/research/publications/lifting-the-cap from 00.01 Wednesday 15th November.

Advanced embargoed copies are available from the IPPR press office (Sofie Jenkinson, 07981023031, s.jenkinson@ippr.org)

[2] The Observer, Austerity puts public workers’ wages below private sector, 21 October 2017: https://www.theguardian.com/society/2017/oct/21/austerity-public-sector-pay-private

[3] GMB pay calculator - www.paypinch.org

[4] GMB, Public Sector Pay and the Forgotten Three Million, September 2017 (Figure 9, page 21 ‘Dependent children affected by the public sector pay cap’; and page 4): “Newly released Whole of Government Accounts reveal that the annual cost to the public sector of employing consultants and temporary workers rose by £2.5 billion between 2012/13 and 2015/16.” https://static1.squarespace.com/static/58b828f44402436b74624b8a/t/59b6af5d2278e7557ed6c1c1/1505144781989/PAY+PINCH+REPORT+2+-+FINAL+SPREADS.pdf

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