HM Treasury assertions that public-sector pay rises drive inflation and current “total reward” packages for staff are comparable with those in the private sector are wrong, according to the leaders of two civil service unions.
Prospect general secretary Mike Clancy and FDA counterpart Dave Penman say independent analysis commissioned from Incomes Data Research blows holes in key arguments contained in a 29-page Treasury submission to public-sector pay review bodies, published last month.
In a letter to Cabinet Office minister Jeremy Quin, the leaders say the Treasury paper pays no regard to the impact of inflation on employees, which they describe as a “serious omission” during a cost-of-living crisis. Clancy and Penman also argue that the government’s lack of dialogue with unions over 2022-23 pay is “unsustainable”.
The Treasury document, submitted as part of the recommendations process for 2023-24 pay awards, stresses the importance that rises “do not exacerbate the current inflationary pressures”. It also says the public sector remuneration package “remains competitive, when taking account of pay, pensions and wider benefits including job security”.
The IDS report acknowledges that ministers have picked up the inflationary-fears line as a basis for blocking increases on 2022-23 settlements for public-sector workers at a time when the Consumer Prices Index is running at 10.1%. But it says the suggestion that cost-of-living pay rises for public sector workers are inflationary “falls at each hurdle”.
“In our view, public sector pay rises might only lead to an increase in inflation if they at least matched or were higher than current rates of inflation, and then only if private sector employers followed suit, and then only if these employers then decided to deliberately pass on this aspect of increasing costs directly to consumers in the form of price rises,” IDS says.
“It might seem like a high burden of proof, but the Treasury would need to demonstrate positive responses for this entire sequence in order for its hypothesis to have any real explanatory power.”
The 37-page IDS report says there is also “no evidence” that private sector wage rises are fuelling inflation, and suggests that pay rises tend to trail price inflation – and not the other way around.
IDS adds that HM Treasury’s claim that public-sector remuneration packages remain “competitive” with private-sector offers is “not necessarily borne out by studies which attempt to control for the differences between the two sectors”.
“One of the difficulties with the Treasury report, as highlighted by its choice of figures to illustrate the differential between average earnings in the public and private sectors, is that it tends to cherry-pick statistics to support its view, rather than examining the broad overall picture presented by all the relevant data,” IDS says. “It is also inconsistent in some key places.”
In their letter to Cabinet Office minister Quin, Clancy and Penman say recent analysis by the Institute for Government shows civil servants’ median salaries at each grade have reduced in real terms by between 12% and 23% since 2010.
They argue that ministers could look to the private sector for approaches to improving pay for departmental staff.
“Awarding pay rises worth 5% or more has become commonplace in 2022 and IDR have observed that other pay approaches such as one-off payments, additional or interim pay rises, and consolidated flat-rate amounts have grown in popularity across the economy,” they say.
Unlike teachers and health-service staff, the vast majority of civil servants are not covered by a pay review body. Only members of the Senior Civil Service – of which there were around 7,200 as of March last year – are covered. The remaining 470,000-plus departmental staff are subject to the pay remit guidance handed down to departments by the Cabinet Office and Treasury.
Nevertheless, the government overrode the Senior Salaries Review Body’s proposals for SCS members to get a 3% rise in 2022-23, imposing a 2% uplift instead. Remit guidance for rank-and-file civil servants was 2-3%.
In their letter, Clancy and Penman tell Quin that current civil service pay structures need “fundamental reform”.
“For over a decade the government has continued with a policy of restraining the annual uplift to pay while freezing pay progression and this has had a devastating impact,” they say.
“We want to see a pay structure that rewards talent, knowledge and experience so that the civil service can recruit and retain skilled workers that can deliver our vital public services.”
They also suggest that at a time when talks about pay with other unions representing public-sector workers appear in the offing, civil servants remain in the cold.
“Government have been approaching public sector groups for pay discussions,” they say. “The absence of such an approach for your own staff is unsustainable and we are seeking an urgent meeting accordingly.”
A Cabinet Office source told Civil Service World that the department is in “ongoing discussions” with civil service unions and that it would respond to the joint Prospect-FDA letter “in due course”.
This story was updated at 18:10 on 28 February 2023 to include a Cabinet Office response