Public sector pay rise could be taken out of funding for education and prisons, think tank suggests

·6-min read
Chancellor Rishi Sunak - Toby Melville/Reuters
Chancellor Rishi Sunak - Toby Melville/Reuters

The public sector pay rises could be taken out of funding for education and prisons, a think tank has suggested.

Millions of workers are in line for a Budget pay rise as the Chancellor announced the UK's economy is "firmly back on track" after the coronavirus pandemic.

Rishi Sunak has confirmed he will scrap the year-long public sector pay freeze in his fiscal statement on Wednesday, paving the way for a possible wage increase next year for those such as teachers, nurses, police and armed forces personnel.

But Torsten Bell, chief executive of the Resolution Foundation suggested that this could be redistributed funds from within the individual budgets.

He said: "I think so far what we've learned is what you might call the blindingly obvious bit of this policy - which is we're not going to continue a public sector pay freeze.

"As we emerge out of the pandemic and when inflation is high, and when some people are having trouble hiring workers, and that was totally inevitable - there was no way that was going to be continuing into next year so that's what the chancellor confirmed last night.

"What we don't know is what's actually going to happen to public sector pay. A freeze is one thing, there can then be anywhere between zero and 1,000,000% pay rises over the coming years.

So we don't know what that means. What we do know is that yes this will need to be funded out of the departmental budgets that the chancellor has already set."

Asked on the BBC's Radio 4 Today programme if we would see cuts in those budgets in other areas of that spending in order to fund the pay rises, he said: "What you're saying is that you're choosing to spend some of the increases you would see in some departments or public sector pay.

"Well the important thing to understand about what's going on with the public spending figures in this spending review is two things.

"One, you've got large capital spending, but you've got tight current spending on areas outside of the NHS - and for those departments, think about local government think about prisons, they will struggle because they won't be seeing big spending rises and we'll be increasing pay."

Paul Scully, small business minister, was asked directly if money would have to be found in the schools' budget to fund the extra money for teachers.

He responded: "It's not for me to speculate on that, but we'll see what the Chancellor has to say."

'Right' that frontline workers 'see their wages rise'

According to the latest available data from the Office for National Statistics, there were 5.68 million public sector workers registered June.

The Chancellor last November "paused" public sector pay increases for 2021/22, with the exception of the NHS and those earning less than £24,000, after heavy borrowing during the Covid-19 crisis.

But Mr Sunak on Monday said that, with the economy bouncing back following the lifting of virus restrictions, it was "right" that frontline workers would "see their wages rise".

The Government also announced it will increase the minimum wage for around two million workers, with those aged 23 and over to see their pay increase from £8.91 an hour to £9.50 as of April 1.

The 59p hourly boost to the so-called "national living wage" will mean a full-time worker on the lowest pay will receive a rise of more than £1,000 per year, according to the Government, in an inflation-busting 6.6% hike.

But critics questioned how much better off workers will be considering the Chancellor has already hiked National Insurance and cut Universal Credit as inflation rises, with the consumer price inflation rate currently standing at 3.1%.

Mr Sunak increased National Insurance Contributions for workers by 1.25% to help pay for the NHS and social care, while he ended the £20-a-week Universal Credit coronavirus uplift earlier this month.

In a statement announcing his decision to scrap the public sector pay freeze, Mr Sunak said: "The economic impact and uncertainty of the virus meant we had to take the difficult decision to pause public sector pay.

"Along with our Plan for Jobs, this action helped us protect livelihoods at the height of the pandemic.

"And now, with the economy firmly back on track, it's right that nurses, teachers and all the other public sector workers who played their part during the pandemic see their wages rise."

Pay for most frontline workforces, including nurses, police officers, prison officers and teachers, is set through independent pay review bodies which make recommendations to ministers.

Large areas of the public sector are devolved - for example the School Teachers' Review Body only covers England, while the NHS Pay Review Body makes recommendations for England, Wales and Northern Ireland - and decisions on pay are for the ministers responsible in Holyrood, the Senedd and Stormont.

If extra funding is made available to increase pay set in England by the UK Government, it could result in more cash going to the devolved administrations under the Barnett formula so they could choose to boost salaries there.

Officials said the Government would be requesting "full recommendations" from the respective sector pay bodies, with awards to be announced next year.

Unison union general secretary Christina McAnea said the pay freeze would continue "in all but name" unless Whitehall departments were given extra money by Mr Sunak to fund the wage increases.

Meanwhile, the Treasury is also understood to have all but confirmed to MPs that fuel duty is likely to remain frozen in the Budget after reports had suggested the Chancellor was looking to recoup pandemic borrowing by hiking taxes at the pumps.

But as concerns over a cost of living crunch grow and record petrol prices were witnessed on Sunday, backbench Conservatives have been told fuel duty is likely to remain stagnant.

It comes after MPs from the Northern Research Group wrote to the Chancellor to warn him that increasing the duty would be a "mistake".

"Motorists cannot continue to be the cash cow we rely on to pay the price of economic hardship or the pandemic," the group, which is led by former northern powerhouse minister Jake Berry, said.

The announcement on public sector pay and the minimum wage rise came despite a rebuke from Commons Speaker Sir Lindsay Hoyle about the number of details being briefed in advance of the Budget.

Sir Lindsay suggested ministers should resign due to the amount of announcements being previewed in the press before Mr Sunak has addressed Parliament.

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