Focus on pay restraint distorts Rishi Sunak’s spending review | Spending review 2020

Focus on pay restraint distorts Rishi Sunak’s spending review | Spending review 2020

The government has embarked on a spending review across Whitehall that the chancellor says must include pay restraint.

Rishi Sunak, in a letter to his cabinet colleagues, spells out his priorities for Whitehall departments and in among the calls for Britain to become a “scientific superpower”, improve public services and tackle crime, is the demand for a clampdown on pay.

According to Sunak, the government will be in a position to justify bearing down on public sector pay from next year after three years of extraordinary generosity.

Public sector earnings growth reached 3.6% in the 2018-19 financial year and 3.7% in 2019-20, according to Treasury figures. That’s two years of inflation-busting increases that will be matched by a third year now that the chancellor has agreed to increases ranging from 2% to 3.1% for 2020-21, backdated to April.

Around a quarter of public sector spending is devoted to staff salaries, so when the chancellor turns his attention to the government’s spiralling debts, it is understandable that pay is an element of any newly drawn budgetary equation.

At least it would be fair for him to focus on pay restraint if he had presented a more comprehensive picture of recent years.

A seven-year freeze on public sector pay in England might have officially come to an end in 2017, but the pay awards since then have come from existing budgets and were paid for by savings elsewhere.

This meant that teachers, soldiers and police officers have generally found themselves working with fewer resources and fewer colleagues each day, making it more difficult to do their job.

The Treasury also focuses on increases in the overall pay bill rather than on pay awards to all staff. This allows officials to include the extra cash devoted to bonuses and promotions and other extras in the pay figures.

With a widening pay gap in the public sector as elsewhere in the jobs market, this focus on total earnings distorts the amount earned by many of those on the lowest pay scales and workers who fall outside the scope of the pay awards.

As Sunak concedes, only 900,000 of the 5 million-plus public sector workforce is included in the latest pay figures.

No wonder Dr David Wrigley, the vice-chairman of the British Medical Association, told the BBC that doctors would feel let down by a pay increase of 2.8% this year and the prospect of next to nothing in subsequent years.

“These are the sort of rises we’d expect to see in normal times, not in a time when many of us have not had a day off in six months and have been putting our lives on the line,” he said.

Sunak, like his predecessors, will demand quick fixes as he seeks more from less, most likely pressuring departments into making false economies that must be rectified in later years.

Which is not to say that the pandemic has nothing to say about the future of public sector services and where savings can be made. For instance, there are many services tentatively entering the digital age that will see the process accelerate over the coming years, freeing up staff to perform other tasks.

However, most of the services on Sunak’s hit list were on George Osborne’s and Philip Hammond’s and have little left in terms of savings to offer the Treasury.

The justice department will need more not less money over the next few years to get through a backlog of court cases. Universities will need extra subsidies to cope with the loss of foreign students and the care system is only going to get bigger as the population ages.

Charting a route out of the pandemic will not be an easy task, and would not be for any chancellor. But Sunak has the extra burden of wanting a smaller government when for the next decade the UK will need the state to be the driving force.

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