Removing pay cap ‘tinkering with austerity’

LIFTING the public sector pay cap would only amount to “tinkering” with austerity, a new report has claimed.

A study by the Resolution Foundation insisted that austerity cannot be ended without significant tax rises or higher levels of debt.

While Theresa May has come under pressure to abandon the 1% wage rise ceiling for workers in the public sector, twice as many people, 11.5 million, are hit by the freeze on working age benefits, the report points out. The foundation’s investigation states that the public sector workforce faces two “austerity crunches” in the form of shrinking pay packets and a reduced headcount.

By 2020, average wages are set to drop back to 2005 levels, while the number of central and local government workers is due to fall below five million for the first time this century, according to the study. The cost of ending austerity would be high, the report calculates, as allowing public sector wages to rise in line with private firms from next year would cost £9.7bn by 2021-22. And letting the workforce increase in line with the general population would cost £11.5bn.

Despite the greater number of people affected, unfreezing working age benefits would be less expensive than lifting the pay cap, as it would cost the Treasury £3.6bn by 2021-22 if the austerity measure was ended from next April.