Think-tank says lifting pay cap would do little to ease 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 Prime Minister Theresa May has come under pressure from some of her Cabinet colleagues to abandon the one per cent 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 publicsector 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 measures 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 over the same period.

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 202122 if the austerity measure was ended from next April.

Chief economist at the foundation Matt Whittaker said: “The shock election result has led politicians from all parties to question whether the public have grown tired of austerity.

“Seven years on from thenChancellor Osborne’s first emergency Budget, it’s no surprise that squeeze fatigue has set in.”