Public sector pay increases at fastest rate for 17 years

SALARIES in the public sector have risen at the fastest pace in 17 years, as real wages across the economy suffered the biggest blow since the financial crisis.

Public sector pay increased by 4.8pc in November to January, figures from the Office for National Statistics (ONS) showed, the highest growth since the three months to February 2006.

It still lags well behind private sector pay growth at 7pc, but the gap is the smallest it has been since January last year, when inflation stood at just 5.5pc before soaring into double figures.

The public sector has been engulfed by strikes, with pay disputes pushing the number of days lost to industrial action to 2.7m since June last year, the highest since 1990 when Margaret Thatcher was in power.

However, inflation is still outpacing wages at 10.1pc, meaning that in real terms pay including bonuses fell by 3.2pc year on year in November to January. It is the largest drop since early 2009 when spending power declined by 4.5pc.

“It still remains among the largest falls in growth since comparable records began in 2001,” the ONS said.

Wages in the public sector declined by 4pc in real terms according to the National Institute of Economic and Social Research (Niesr). It called on Jeremy Hunt to announce pay rises for public sector workers in today’s Budget to avoid continued strikes and a brain drain to the private sector.

Paula Bejarano Carbo, associate economist at Niesr, said: “Ahead of the Chancellor’s spring Budget, it is important to note that public-sector wages need to catch up with private-sector wages as the gap between the two remains wide.

“If this gap cannot be closed, the Government risks incurring further

‘It still remains among the largest falls in growth since comparable records began in 2001’

losses from prolonged industrial action or an outflow of skilled public sector workers.”

The 4.8pc rise in public sector pay in nominal terms is already costing the Treasury about £11bn, according to estimates by Douglas Mcwilliams, founder of the Centre for Economics and Business Research. A third of that the Treasury will regain through taxes, he added.

It comes as the growth in regular pay slowed for the first time since December 2021, in a sign that rising interest rates are starting to hit the labour market.