The Treasury has been accused of continuing a decade of civil service pay restraint after saying the independent bodies that make recommendations on public-sector pay should to take account of government’s 2% inflation target, despite official predictions that inflation could hit 5% next spring.
In economic evidence submitted to the pay review process this week, the Treasury stressed that while inflation was set to "temporarily peak at its highest rate in over a decade", pay-review bodies should "also have regard of the government’s objective for price stability".
It noted that the Bank of England expects consumer price inflation to fall from the second half of next year after the April 2022 peak. The Bank’s Monetary Policy Committee is mandated by government to use interest rates and other financial mechanisms to keep CPI near 2%.
The FDA union said the evidence showed public servants could expect further pay constraints.
“It’s abundantly clear that the pay pause isn’t over and the government’s new found objective of ‘price stability’ is yet another barrier to public sector pay,” FDA assistant general secretary Lucille Thirlby told CSW.
“These issues date back long before the Covid-19 pandemic – the civil service has seen an entire decade of pay restraint and freezes and is screaming out for investment," she said.
“If the prime minister truly wants to build a ‘high-skill, high-wage’ economy, it’s high time he gets his own house in order and provides his civil servants with the pay rise they so desperately deserve,” she added, referencing comments made by the prime minister at Conservative Party conference last year.
In his October Spending Review, chancellor Rishi Sunak said he would end the public sector pay freeze from next April. He said public sector workers would see "fair and affordable pay rises across the whole Spending Review period" as the government returned to the "normal, independent pay-setting process".
Unions were sceptical that civil servants would see a material increase in wages as a result. “With inflation running at 3.1%, with some forecasts predicting 5% by early 2022, any lifting of pay below that level, is akin to real terms cut,” said Mark Serwotka, general secretary of the PCS union, said at the time.
This week's evidence used similar language to Sunak's Budget speech. “The pay review bodies have been, or will be, remitted in full for pay round 2022-23,” it said, adding that the recent Spending Review “set out that, to ensure fairness and the sustainability of the public finances, public sector earnings growth over the next three years should retain broad parity with the private sector and continue to be affordable”.
The Treasury also said public sector pay remains competitive when pensions and job security are considered, with Covid-19 emphasising the importance of the latter.
“The announcement and introduction of the temporary pause to pay awards in the public sector has not resulted in recruitment and retention concerns across the majority of workforces,” it said.
There are some acute issues within specific roles, though many of these cite factors other than pay as the key driver.”
It added that in April 2021, the median public sector salary was £3,500 higher than the private sector equivalent, adding that the public sector premium was highest at lower grades.
In November, paymaster general Michael Ellis told parliament that civil servants could expect to see pay rises reflecting those in the private sector over the next three years.