'Equal misery' in pay round

MINISTERS are preparing a policy of 'equality of misery' on public sector pay as a key part of the squeeze on government expenditure.

Hundreds of thousands of public sector workers, including civil servants, nurses, teachers and hospital workers, are likely to be held to a ceiling of 2 per cent. But the policy emerging from the Cabinet committee on public expenditure, EDX, will allow some flexibility for performance-related pay.

Officials close to the Prime Minister insist it would not be a 'pay norm'. But ministers said privately that there has to be equal treatment if the pay squeeze is to be made acceptable to the public. 'We have got to have equality of misery,' said one minister.

A 2 per cent pay norm would challenge the authority of the pay review bodies, which are about to begin annual reviews for public sector groups.

Ministers, who were considering suspending the bodies, are expected to tell them to carry on their work this autumn, but will urge them to concentrate on apportioning differentials within the

2 per cent ceiling. One ministerial source said: 'Two per cent on the teachers' bill adds up to a lot of money.'

Final decisions on the pay round will be taken by the Cabinet in time for

the Chancellor's Autumn Statement on

12 November. But the uncertainty is likely to annoy the pay review bodies. Brian Mawhinney, Minister of State for Health, will be restricted to giving broad policy objectives on pay when he gives evidence to the Doctors and Dentists Review Body this week.

The need for restraint on public sector pay was intensified by the Prime Minister's decision to protect capital projects after a switch of policy towards economic growth and jobs.

There are strong rumours from EDX that the Public Sector Borrowing Requirement is heading towards pounds 40bn next year - pounds 12bn more than forecast - because of the fall in tax receipts. Some ministers are arguing in favour of extending value-added tax.