Public sector gets rises despite the pay cap

Conservatives must not get sucked into a spending arms race with the hard Left because they can’t win

Now is the time to hold our nerve. As someone who lost my seat at the general election, you might expect me to join the growing chorus of Conservative MPS and ministers calling for the public sector pay cap to be lifted. It’s an easy win – isn’t it? Actually, no. Lifting the pay cap without due consideration would be a knee-jerk reaction, born of an overwhelming fear that has stalked the Conservatives since June 8 – that Jeremy Corbyn has somehow tapped into an anti-austerity national mood.

The theory goes that if the Government doesn’t react to Labour’s better-than-expected election result it will be swept away the next time the country goes to the polls. Hard-wired into Conservative DNA is the belief that losing power to a hard-left Labour Party, controlled by unapologetic Marxists, would be nothing short of a dereliction of duty – a national disgrace resulting in economic and social disintegration.

Yet short-termism on spending could deliver precisely this defeat: when it comes to a contest on who can spend the most taxpayers’ money, Conservatives simply cannot win against the hard Left. Oneupmanship in public spending is no way to run a government and could be ruinous both for the nation and the economic reputation of the Conservative Party. The public would lose confidence in what has been our central focus over the past seven years: bringing down the deficit and balancing the books. In other words, spending only what the nation can afford.

So we must make, not jettison, the economic argument. And on public sector pay, those advocating an end to the 1 per cent cap overlook the wider evidence.

First, it is clear that public sector workers are still better paid than their equivalents in the private sector – who endured a substantial real fall in earnings following the recession in 2008. Moreover, those in the public sector generally tend to benefit from greater job stability and generous pension entitlements.

Secondly, the 1 per cent rise tells only part of the story. It ignores the structure by which the wages of many public-sector workers rise every year through the system of incremental pay bands. The main pay system for NHS staff, Agenda for Change, comprises nine fixed pay bands within which staff can climb annually; earning more by progressing up the scale until they reach the top of the band. Through this system, 54 per cent of NHS staff in England have actually seen an annual increase of, on average, between 3 and 4 per cent in the past year – in addition to the 1 per cent pay award.

A proper review of how all pay awards and increments work across the public sector would be extremely wise before there is any move towards a change in policy likely to cost many billions. As the IFS has pointed out, Labour’s plans to boost public-sector wages would cost more than £9 billion per year by 2021/22.

This in no way attempts to disparage the hard work and commitment of those who work diligently to deliver the services on which the public rely. However, it is essential that the facts are highlighted and fully understood – especially in an emotive debate about “austerity” in which highly charged rhetoric often masks reality.

There should be no escaping the fact that spending in one area requires trade-offs and reductions elsewhere. If, based on all the evidence, the Government decides public-sector workers should receive a pay rise, the money must at the very least come from somewhere else – not be added to borrowing. In this scenario, my own preference would be not to reduce corporation tax further.

We know the realities of public spending continually elude Mr Corbyn and his comrades; but a Conservative Government must not get sucked into a spending arms race with Marxists that would come back to haunt us.

Sound public finances and economic credibility are essential to our future prosperity – Conservatives know this, and have therefore steered Britain through choppy waters since 2010. Now more than ever we must remain resolute and not allow the siren call for increased public spending to lure us off course. We must hold our nerve.