Public-sector pay rises to be based on performance
BLANKET public-sector pay rises will come to an end with future wage increases based on people’s performance and where they live, the Treasury has told ministers ahead of the Budget.
Philip Hammond, the Chancellor, wants greater “flexibility” over public-sector pay and is looking to take a more “targeted” approach after the abolition of the 1 per cent cap earlier this year.
The new approach follows a series of Cabinet clashes with ministers including Sajid Javid, the Home Secretary, and Gavin Williamson, the Defence Secretary, pushing for more money.
Ministers have been further emboldened in their demands since Theresa May pledged at the Conservative party conference to end austerity.
But Liz Truss, Chief Secretary to the Treasury, warned Cabinet last week that in future, pay rises would be focused on retention, performance and productivity.
She pointed out that outside London and the South East, public-sector pay was far more “competitive” with the private sector. Previous studies have suggested that public-sector workers earn 11 per cent more than those in the private sector.
Ms Truss also suggested that pay should be tied to performance and that any rises should be accompanied by reforms that aim to make the public sector more
efficient. She highlighted efficiencies being driven through in the NHS.
In her most pointed comments, Ms Truss emphasised that independent pay review bodies that make recommendations do so in an “advisory” capacity.
Her comments come after several ministers used the findings of these bodies as justification for their demands for more money.
Earlier this year the Government lifted the 1 per cent pay cap, which had limited annual pay rises for six years, for millions of public sector workers. Teachers benefited from a 3.5 per cent pay rise, military personnel 2.9 per cent and police 2 per cent.
However, Mr Javid told Mrs May that she made the “wrong decision”, highlighting the fact that the rise fell short of the 3 per cent recommendation.
Mr Williamson also wrote to the Prime Minister to criticise the settlement for members of the Armed Forces.
Meanwhile, tensions are mounting ahead of the Budget. According to reports, Mr Hammond last week dismissed calls for more funding for the police during a meeting with Mr Javid.
Mr Hammond has been clear with colleagues that they should not expect funding increases in the wake of the Prime Minister’s decision to inject extra money into the NHS.
He is considering postponing income tax cuts and pensions tax relief to find more funds.
There are also mounting concerns that Mrs May’s pledge to end austerity could backfire leaving the Chancellor to present a “very challenging” Budget.
The Institute for Fiscal Studies warned that taxes will have to rise to the highest level since the end of the Second World War to meet the £19billion cost of the Prime Minister’s pledge.
It is claimed that Mr Hammond would have to raise income tax, national insurance and VAT by 1p to pay for the promise.