Monday 9 May 2011

Public Sector pay freeze until 2015: A tought message for the Coalition

The front page of the Telegraph says it all today. A good study into public sector pay has shown that despite the recession public sector pay just keeps on going as compared to private sector pay. Indeed, as private sector pay contracts the public sector has kept on motoring.

Even if you ignore the arguments for a smaller state that does less, there are clear drivers in terms of UK fiscal needs to impose a blanket ban on public sector pay rises for at least the length of this parliament. The report says 2018 to make up the balance, but it you add in the effects on inflation into no pay rises then 2015 should meet the target.

The target being EQUAL wages for average public and private sector employment in similar jobs.  This follows a good suggestion from the Policy Exchange paper that this is the right route to take. Of course, the Union bosses are not so happy about such proposals.

The query is whether the Lib Dems are going to be able to cope with these kinds of logical, but tough choices going forward. After their election defeats they may think they need to badly shore up the left wing of their party.

It is worrying for the Government that it is left in this position, most commentators seem to think the Coalition Government will continue of just fine - but if the Government is stymied from taking serious but necessary action then there is little point in it lasting.


Sackerson said...

"The target being EQUAL wages for average public and private sector employment in similar jobs."

Had that for nurses and teachers in 1974, via the Houghton award. Destroyed by inflation within 2 years.

Dick the Prick said...

Nice to have it confirmed. They mention northern discrepancy and I can thoroughly confirm its blatent manifestation.

Old BE said...

I know people in the public sector who are stinging because their pay is only going up by just above inflation! I keep having to point out that the private sector has been cutting wage costs by freezing pay and sacking people. There is a very widely held view in the public sector that public money simply appears at no cost and therefore any attempt at reducing the total amount spent is unnecessary thuggery.

Miss S-J said...

My public sector colleagues {same job, just wholly public, no private } got a +1.9% this year in a 6% over 3 years deal.

For me in the private sector -18% or get lost.

PJH said...

Hang on - is this the same public sector that bleats and threatens to go on strike about having to contribute more to their 'pension funds' and retire later because their enhanced end pension is to make up for their 'below standard' pay and brings them into line with the private sector and they shouldn't have to pay twice for it?

Enquiring minds etc..

rwendland said...

The Policy Exchange document fails to mention the words "banking workers" anywhere in its report.

The fact that the failed bank employees were re-categorised "public sector employees" between 2008 and 2009 has resulted in large part of this increase Policy Exchange reports. The fact that Policy Exchange did not mention this cause at all strongly shows that this is a political attack document, not a fair and balanced comparison.

In fact a lot of the public sector high end skew is caused by the enormous salaries of doctors, of which the NHS has many. (I wonder if GPs are classified public or private sector?) I suspect if the doctors and bankers were excluded, other public sector workers probably come out lower paid. Be interesting if someone has a link to a report comparing at this level of detail.

Old BE said...

I would be quite happy for GPs and bankers to be privatised. Apparently most people are against it, though.

CityUnslicker said...

Rewndland - not sure about that the report specifically takes out the very highest earners in both sectors.
despite bank workers beingre-classifed I don't see how a few hundred highly paid bankers at rbs (the only bank consolidated) has too much of an impact on nearly 6 million public sector workers overall anyway.

JohnMac said...

Big fan of your blog. Sadly, I'm a spelling pedant; I'm uncloaking merely to say 'tough' not tought ;). I now return you to your more insightful commenters!

rwendland said...

CU - 270k odd banking employees switched into public sector would be significant I think. It's about 7% of 2009 Full Time public sector employees, or about 4.9% of Part+Full time - but as most bank employees seem full-time the first is probably closer to it.

Amazingly the ASHE survey does not seem to break out the retail banking sector into a sub-group. Assuming salaries are "FINANCIAL AND INSURANCE ACTIVITIES" average, for full-time that is £33,640 median or £55,983 mean: If you compare that to the 2010 public sector full-time median and mean, it creates a 1.2% median, and 5.2% mean, increase in public sector pay. When Policy Exchange are charting annual increases over a number of years, that's a significant unusual factor that should have been reported in the text.

NB Policy Exchange seem to be comparing the salaries of all Part+Full Time employees, rather than just Full Time employees. When there is a significantly different part-time share in employment between the public and private sectors, that throws in another factor that makes fair comparison difficult. They should have just compared Full-Time salaries.

NB2 In 2008 the transfer to public sector was "235,600 employees of the Lloyds Banking Group, the Royal Bank of Scotland Group and HBOS plc". 2007 had some more I think, Northern Rock probably.

Anonymous said...

Private sector. just been made redundant and the job I was doing moved overseas to a lower cost region.

Steven_L said...

There's no such thing as a pay freeze in the public sector.

They might freeze the NJC pay scales where they are but like the private sector, you can always negotiate.

You just negotiate to move up to the next scale and it locks in 3 to 4 years of automatic pay rises.

What's really needed is deregulation of both sectors.

Anonymous said...

Does not the public sector also include our beloved members of parliament and house of lords, their pay AND expenses should be capped in the same way as the lowest paid council worker or more important a worker on contract via an agency or firm, none of the salaries held but EXPENSES nudge, nudge, wink wink know what I mean, expenses should become allowances which would be taxed.

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