Government cannot guarantee public sector pay rise will be above inflation

Pay rise ‘could be anything’, says business minister as chancellor announces freeze will be lifted

Adam Forrest
Tuesday 26 October 2021 08:36
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Minister can't guarantee public sector pay will rise above inflation

The government cannot guarantee that Britain’s public sector workers will get an above-inflation pay rise next year, the business minister has said.

Chancellor Rishi Sunak has announced he is ending the year-long public sector pay freeze ahead of his Budget on Wednesday.

But business minister Paul Scully said the government could not be sure the pay rises would be above predicted inflation of 4 per cent – saying it would depend on the advice of the pay review bodies.

“The chancellor is keen to give people a rise,” he told Sky News on Tuesday. “They [the pay review bodies] will then take that into account as they look to what should be an appropriate rise for the public sector, given the public finances.”

Challenged whether it could effectively amount to a pay cut, Mr Scully conceded: “It could be anything,” adding: “We will see where we are come next April when the review bodies have reported.”

TUC general secretary Frances O’Grady has warned that pay rises had to be above inflation – and called on the chancellor to increase budgets at government departments, warning that pay rises could not come at the cost of funding public services.

“The pay freeze won’t be over unless the chancellor fully funds pay rises above the rising cost of living. Otherwise, he will force departments to choose between pay cuts or service cuts,” said the union boss.

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.

Mr Scully could not guarantee that government departments would get more money at the Budget, but said he did not think cuts would be necessary.

Mr Sunak in November announced pay restraint for police, teachers and other frontline workers between April 2021 and March 2022, with the exception of the NHS and workers earning less than £24,000, following heavy government borrowing during the Covid crisis.

It comes as the government confirms that the national minimum wage is to increase for adults over 23 from £8.91 to £9.50.

But with rising living costs, a national insurance rise on the way, and the universal credit uplift cut, Mr Scully admitted he could guarantee that people on low incomes would be better off next year.

“I can’t make that assumption in terms of inflation and other things,” he told Sky News.

The business minister acknowledged the economy is going through a “difficult time” in terms of cost-of-living pressures – but said a 6.6 per cent increase in the national living wage was part of a “suite of measures” designed to support people on low incomes.

“We know there are pressures. We know this is a difficult time for the economy, for people in the country in terms of the cost of living,” he told BBC Breakfast. “The 6.6 per cent increase is quite a substantial increase ... It is still keeping us on target to end low pay by 2024.”

The Institute of Fiscal Studies said those on universal credit will see their disposable income go up by only £250 a year because their taxes go up and benefit receipt falls as their earnings increase.

Labour’s shadow chief secretary to the Treasury Bridget Phillipson said the Conservative government’s decision last year to freeze pay for frontline workers was “damaging and unsustainable”.

She added: “The government must work to ensure a fair settlement and reflect the vital work of all key workers including many who have been burnt out over the course of the pandemic.”

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