Millions face public sector pay freeze

Millions of public sector workers are expected to face a pay freeze next year to repair the costs of the coronavirus pandemic. Rishi Sunak is expected to announce in next week’s comprehensive spending review that there must be pay restraint across the public sector. The freeze on wages is likely to apply to police officers, teachers, soldiers and civil servants. However, NHS doctors and nurses are likely to be exempted from the cap.

MILLIONS of public sector workers are expected to face a pay freeze next year as Rishi Sunak tries to cut the spiralling costs of the coronavirus pandemic.

The Chancellor is understood to be preparing to announce in next week’s comprehensive spending review that there must be pay restraint across the public sector. He is expected to argue that a freeze on wages, likely to apply to police, teachers, soldiers and civil servants, is only fair given the significant hit to workers in the private sector.

However, NHS doctors and nurses are likely to be exempted from the cap, which is expected to sit at or below inflation, in recognition of their crucial role in the response to the crisis. The Centre for Policy Studies think tank has estimated that a three-year freeze could save the Exchequer up to £23 billion.

While the exact cap has not been confirmed, Mr Sunak is likely to return to the policy of David Cameron’s administration, which saw pay increases capped at 1 per cent.

It comes after Downing Street also refused to rule out a temporary cut to the foreign aid budget, in a move that could raise another £5 billion.

While Boris Johnson has insisted that he will not return to the programme of austerity introduced in the wake of the 2008 financial crisis, the Office for Budget Responsibility, the independent forecaster, is likely to say that Britain faces the biggest hit to the public finances since the Second World War.

It is expected to warn that the economy will shrink by close to 11 per cent in 2020, with the Government spending more than £200 billion responding to the crisis.

The deficit i s now expected to approach £400 billion, with a number of think tanks and economists suggesting that tax rises of £40 billion a year will be needed.

The potential pay freeze comes just t hre e months after Mr S unak announced an inflation-busting pay rise for 900,000 teachers, doctors and police officers. However, with ministers refusing to countenance major tax hikes in the short-term, he warned that “tough choices” lay ahead and suggested that public sector pay rises in future years would need to be more modest “for reasons of fairness”.

In a letter sent to ministers at the time, he wrote: “Given the impact Covid-19 has had, there will need to be tough choices in other areas of spending at the review.

“It will be vital that public sector pay awards made during the review take into account the wider economic context.

“In May 2020, public sector pay was up by 3.7 per cent on the year before, compared to a fall of 1.2 per cent in the private sector. Furthermore, this financial year’s public sector pay awards will be significantly more than the average in the private sector, where the OBR’S central scenario assumes a fall in average earnings.

“Therefore, for reasons of fairness, we must exercise restraint in future public sector pay awards, ensuring that across this year and the CSR period, public sector pay levels retain parity with the private sector. Departments’ pay modelling should reflect this fairness.”

Over the last decade, pay growth in t he public s e ctor has remained restrained.

Despite above-inflation pay awards in recent years, average earnings in the public sector in the first quarter of 2020 were 1.5 per cent lower in real terms than 10 years previously.