Widening gap as private companies forge ahead Gap with private sector increases the pressure

The pay of private-sector employees is poised to move further ahead of those who are paid out of the public purse.

Wages in industry continue to outstrip inflation and companies could be routinely conceding rises of more than 4 per cent by the end of the year. Increases in the private sector are at their highest level for two years as negotiators enter the busiest period of the pay round.

That could well prove a problem for organisations funded by the state whose budgets have been frozen until 1998. The latest figures show that the gross average earnings of manual workers in the public sector are £253 a week compared with £265 outside. White-collar employees in the public sector earned £351, while those employed elsewhere earned £364.

More specifically, higher executive officers in Whitehall earned £18,346 at the beginning of last year compared with their official "comparators" in private industry, section heads in big companies, who got £21,247. The National Union of Civil and PublicServants argues that the gap has widened since.

Analysis of settlements in the last four months shows private sector increases running at about 3 per cent and edging up, compared with 2 per cent at the same time last year.

The research group Industrial Relations Services calculates that eight out of ten settlements in the three months to December gave higher increases than a year ago.

If City inflation forecasts are correct, and economic growth and company profitability continue to improve, management will come under increasing pressure to grant higher rises. Impending tax increases will add to inflationary pressure.

Rising salaries in the private sector will make it more difficult for the public sector to maintain recruitment and retention without resorting to redundancies or severe cutbacks in services.

In this pay round, negotiations at the privatised utilities will enjoy a much higher profile than usual because of the furore over directors' earnings.

Within the next six to eight weeks, leaders of more than 200,000 employees in the utilities will be submitting claims for "substantial'' rises. Companies will be fortunate to get away with increases of less than 4 per cent.

Sol Mead, of the public service union Unison, said most of these companies were "cash rich" and profitable and could afford to share their good fortune with employees.

Meanwhile, rises elsewhere in industry seem to be firmly ahead of the 2.9 per cent inflation rate and appear likely to remain above a rising Retail Price Index for the rest of the year.

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