Ending pay cap ‘would cost taxpayer £6bn’
PUBLIC SERVICES will struggle to recruit and retain the staff they need unless ministers ease the restraint on pay, a leading economic think tank has warned.
A report by the Institute for Fiscal Studies (IFS) found average public sector earnings had fallen by four per cent in real terms since 2009-10 under the coalition and Conservative governments.
While private sector pay was hit even harder in the immediate aftermath of the financial crash of 2008, the gap between public and private had since returned to pre-crisis levels.
Continuing pay restraint for public sector workers would, therefore, take their pay to “historically low levels” compared to their private sector counterparts, the report said.
The report comes after ministers last week signalled the existing pay cap was effectively ended with above-one per cent rises for police and prison officers.
However the IFS cautioned that increasing public sector pay across the board in line with either prices or private sector earnings would be expensive.
It calculated the move would add £6bn-a-year to the cost of employing the 5.1 million public sector workers by 2019-20.
Such an increase would have to be funded by cutting spending in other areas, raising taxes or increasing borrowing.
Jonathan Cribb, the report’s author, said: “If the Government decides to maintain the one per cent cap, we should expect increasing difficulties in recruiting, retaining and motivating high quality public sector staff, reducing the quality and quantity of public services.
“But increasing pay for these workers implies substantial extra costs to public sector employers. The Treasury could provide extra funds for this by raising taxes, cutting other spending or borrowing more.”