Removing pay cap will cost less, according to research

THE Government is facing increased pressure to scrap the cap on public sector pay after research concluded that changing the controversial policy would be cheaper than previously thought.

The IPPR think tank said a significant amount of any money used to lift the pay cap would be returned to the Treasury almost immediately in the form of higher tax receipts and lower welfare payments.

The cost of increasing public sector pay in line with CPI inflation over the next two years would be £5.8bn.

But this falls to £3.5bn once higher receipts from income tax and National Insurance and lower welfare payments are taken into account, the study found.

Higher spending in the economy would reduce the figure further – to £3.3bn by the end of the 2019/20 financial year, said the report.

The GMB union, which supported the research, said the findings proved that lifting the seven year-long pay cap was affordable.

National officer Rehana Azam said: “The last objection to providing decent pay rises was affordability but this research shows that almost half that cost would be returned to taxpayers and could be reinvested in public services.

“Recruitment and retention problems are impairing public services for everyone as staff are pushed to breaking point. The public sector pay pinch is hurting but it isn’t working.

“It is a moral outrage that in one of the world’s richest economies public sector workers are left homeless, skipping meals and relying on food banks.”