£9bn-a-year cost of axed pay cap

LABOUR’S plan to end the cap on public sector pay rises would cost taxpayers £9billion a year, an independent economic think-tank warned yesterday.

Jeremy Corbyn has pledged to hand responsibility for public sector wage levels to independent pay review bodies if his party wins the general election.

But analysis of the main parties’ plans by the Institute for Fiscal Studies (IFS) found it would cost an extra £9.2billion a year to pay for the higher costs of employment.

The Liberal Democrats’ plans to increase public sector pay in line with inflation would cost an additional £5.3billion a year, the research found.

Experts have already warned of a massive black hole in Labour spending plans. They have claimed it would raise the tax burden to the highest level since the 1940s.

An increase in public sector pay would boost the earnings of more than five million public sector workers, including 1.6million who work for the NHS. It would also affect the 1.5million people who work in education in the public sector.

But the report cautioned that raising public sector pay involves ‘large increases in costs for government departments’.

Report author Jonathan Cribb, senior research economist at the IFS, said: ‘Labour’s plans would require significant extra for government departments to pay for the higher wage costs, unless departments make cuts elsewhere.

‘The Liberal Democrats’ plans imply public pay increases larger than under the Conservatives and smaller than Labour.’

The report also warned that if salaries continue to fall in comparison with private sector pay then the public sector will ‘struggle to recruit and retain the workers it needs to deliver public services’.

Tory plans for a 1 per cent cap on public sector pay rises over the next two years could exacerbate recruitment problems, it found. The IFS has previously said the cap could cause the difference between public and private wages to fall to a level not seen in the last 20 years.