Chancellor urges restraint on public sector pay
Pensions mean workers in private sector ‘still behind’ Cabinet leaks blamed on differences over Brexit
Philip Hammond has urged caution over any moves to lift the cap on public sector pay, arguing that pension provisions meant public sector employees were still better compensated on average than their private sector counterparts.
While the chancellor refused to comment on a report that he had told cabinet colleagues public sector staff were overpaid, he pointedly did not deny it, arguing it was wrong to say public sector staff had excessively lost out during austerity.
Asked about the “overpaid” comment, relayed to the Sunday Times by an unnamed ministerial colleague, Hammond told BBC1’s Andrew Marr show: “I’m not going to talk about what was or wasn’t said in a cabinet meeting, and it’s easy to quote a phrase out of context. But I’m very happy to talk about the substantive issue.”
Hammond denied a report in the Sun that he supposedly told the cabinet that driving a modern train was so easy “even a woman can do it”, allegedly bringing a rebuke from Theresa May. “I wouldn’t say anything like that,” he said. “I’ve got two daughters in their early 20s, both high achievers,” he said. “I don’t think like that. I wouldn’t make a remark like that.”
Hammond said that while public sector pay had formerly “raced ahead” of private salaries, the gap had closed. But, he added, public sector pensions skewed the picture. “When you take into account the very generous contributions that public sector employers have to pay in for their workers’ very generous pensions, they are still about 10% ahead,” he said.
“And I don’t for a moment deny that there are areas in the public service where recruitment and retention is becoming an issue, that there are areas of the country where public sector wages and private sector wages are getting out of kilter in the other direction. We have to look at these things and we have to discuss them.”
Asked whether this meant he did believe the public sector was overpaid, Hammond said it was a relative question.
“Independent figures show that public sector workers, on average, are paid about 10% more than private sector workers,” he said. “You can’t eat your pension, you can’t feed your kids with your pension contribution, I understand that. I understand all the issues that public sector workers are facing.”
Questioned about whether this meant public workers should expect salary increases to remain within the 1% annual cap, Hammond said the policy had not changed. “We’ve sought to be fair to public sector workers but also fair to taxpayers.” But he did not completely shut the door on easing the pay cap: “We do keep this under constant review, and I think the fact, as is well known, the cabinet has been discussing this issue sends a clear signal that we do understand the concern both of public sector workers and of the wider public.”
Hammond has in recent weeks been seen as an isolated voice in the cabinet, urging consistency on public sector pay. Ministers including Boris Johnson, Michael Gove, Jeremy Hunt and Justine Greening have all suggested the 1% annual ceiling should be lifted, prompting the former Tory chancellor Lord Lamont to urge more cabinet discipline.
Hammond suggested the leaks over his supposed comments were more motivated by differences over Brexit, saying “some of the noise is generated” by ministers who disagreed with his aim of prioritising the economy in leaving the EU.
Damian Green, the first secretary and May’s deputy, said the briefings from cabinet needed to stop. “Now is absolutely not the time for this type of activity,” he told Pienaar’s Politics on BBC Radio 5 Live.
The international trade secretary, Liam Fox, told BBC1’s Sunday Politics that the leaks were a result of too much self-indulgence. “I think my colleagues should be very quiet, stick to their own departmental duties,” he said. “Talk of leadership challenges is completely overblown … The last thing anyone wants is for the Conservative party to turn in on itself.”
The Labour leader, Jeremy Corbyn, said the briefings were sowing confusion. “We’re having varying accounts coming out of every cabinet meeting about who said what to who and at what point in the meeting they said it, and everybody saying nothing actually happened … It’s a very strange meeting where nothing actually happens.”
‘I’ve got two daughters, both high achievers. I wouldn’t make a remark like that’