Public sector workers to earn 11pc more than private as pay freeze ends

PUBLIC sector workers will earn 11 per cent more than those in the private sector after the Government’s decision to end the pay freeze, the Institute for Fiscal Studies (IFS) has suggested.

The think tank said that Philip Hammond’s decision to lift the one per cent cap on public sector pay rises meant that the pay of nurses and other public sector workers would “stabilise”.

Carl Emmerson, deputy director of the IFS, said that successive pay freezes had brought the differences in wages between private and public sector workers back to pre-recession levels. In 2011-12, public sector wages hit a high of 18 per cent more than the private sector.

Mr Emmerson said: “On average, public sector workers get paid more per hour than private sector workers.

“That’s not surprising – they have on average higher levels of education, so for example you would expect a surgeon to get paid more than the average private sector worker.

“Public sector pay restraint since 2010 has brought this ratio back to precrisis levels – it’s unwound the unin- tended increase in public sector pay relative to private sector pay that occurred during the great recession.”

He said that the Office for Budget Responsibility had now increased its forecast for wage growth in the public sector after the Government abandoned the pay cap. He said: “If they’re right, public sector wages will now be roughly stabilising around the current level. If that money’s spent well, recruitment and retention problems might remain around their current levels.” However he warned that lifting the public sector pay cap would cost an extra £2.8billion in 2020-21.

That includes £900million for NHS workers, £800million for school workers and £1.1 billion for other public sector employees.

The Chancellor said that he was prepared to set aside money for a pay rise for nurses in his Budget, but gave no guarantee to other workers.

Mr Emmerson said: “The question is – will the extra funds come from the Treasury or will the public sector employers have to find them from their existing budgets?”

Paul Johnson, the head of the IFS, said: “While the public pay cap has been lifted, no additional money has yet been allocated and the Treasury is committed to providing extra money only for nurses. Given the spending constraints, other public sector workers should not be holding their breath in anticipation of an inflation-busting, or perhaps even one per cent-busting, pay rise.”

Nurses and other public sector workers have had pay rises limited to one per cent a year since 2010 as the Government attempts to bring the deficit under control.

With inflation taken into account, nurses’ pay has in effect been reduced, and the NHS is worried this is having an effect on recruitment and retention.

Earlier this year, the School Teachers Review body, which advises the Government on pay, warned that the education system was at “substantial” risk because of the public sector pay cap. Mr Hammond told the BBC’S Breakfast: “Last year nurses, on average, received pay rises of 3.3 per cent across the board. Some got more, some got less – of course.

“But, we have removed the old blanket pay cap from the public sector and what we are doing across the board now is looking at individual workforces, looking at recruitment and retention problems, looking at opportunities to improve the way workforces work and the way pay structures work.”