Public sector pay hikes reflect years of austerity rather than COVID-19 effort

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The latest increases announced by the government only remedy the fact that for years, pay has been falling in real terms.

If your memory stretches back far enough you might recall the rows over public sector pay in the final years of the New Labour era.

Back then, back before the financial crisis or indeed the coalition government, the main bone of contention was actually that public sector pay was rising far faster than private sector pay.

Then came austerity and nearly a decade of public sector pay freezes and, in the last fiscal year, state workers saw their pay (adjusted for the type of job they do) drop beneath private sector pay for the first time in at least a quarter of a century.

                              Public sector pay hikes reflect years of austerity rather than COVID-19 effort

It’s worth remembering all of this amid the latest development in public sector pay: it has yo-yoed from one extreme to another.

And that may be about to happen all over again.

After all, right now private sector pay is contracting at the fastest rate since the financial crisis while public sector pay continues to rise.

And today the government confirmed more pay rises for doctors, dentists, the police and many other public sector workers.

It’s worth pointing out a few things.

First off the pay increases were determined not by government but by public sector pay bodies – and are more a reflection of the low pay in previous years than the hard work done during the pandemic.

                              Public sector pay hikes reflect years of austerity rather than COVID-19 effort

Second, those increases do not cover all public sector workers, in large part because many sectors negotiate at different points: nurses for instance had a three-year pay deal agreed in 2018, so are not covered by this and questions will remain about whether they can get a more generous settlement by the time their pay deal comes to an end.

Third, departments have been asked to find this money themselves; it does not constitute an increase in their departmental budgets.

There will be more talks over that particular issue in the run up to the spending review later this year.

Still, none of this will stop the pendulum of public debate swinging.

For the most part the pay increases will only remedy the fact that for many years public sector workers saw their pay frozen (indeed, falling in real terms).

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Yet the fact that these pay increases come as millions in the private sector face job insecurity or losses and pay cuts means they are likely to be controversial.

There will be many in the public sector who argue, rightly, that these increases, welcome as they are, are not enough to redress many years of austerity.

There will be many in the private sector who argue that they will open a divide – in pay levels, job security and pensions provision – between state workers and the rest.

And the truth is both sides have a point.

You can see where we may be heading in the coming years.


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