Future of Public Sector Pay

A great deal has been written and said about the first budget of a conservative majority government in 17 years. Much focus has rightly been placed on the “enhanced” minimum wage, spun as a national “living wage”, bought in whilst simultaneously abolishing the tax credits that make work pay for low earners. Whilst this is indeed a genius piece of political manoeuvring, designed to outflank the Labour party on her minimum wage manifesto pledge, at the same time as distracting from a welfare cut that makes 13 million working families worse off.

 It has however also distracted much discussion and analysis of another grim detail contained within the budget.- The announcement that there will be four more years of no more than 1% pay awards in the public sector. This will most likely mean four more years of real term pay cuts, at a time the economy is supposedly recovering.  On average most public sector workers have now already seen the value of their pay packet fall by 16% in real terms, since 2010.

The arguments made by the government over the course of the last parliament were about a need for public sector pay restraint, in a time of “austerity”, a necessary evil the Tories argued “to balance the books”. A period of pain to be suffered to get the economy kick started. During these years the argument was about economics, the pace of cuts, the degree with which Keynesian versus free market arguments were subscribed to.

Any illusion that the government were just acting with financial prudence, has now well and truly been exposed as pure spin. Why would a government who fundamentally believes in the free market, want to continue to artificially push down wages, (in one area of the economy) below the level to which the market dictates.

The answer I suspect is somewhat Machiavellian, a long game by a chancellor, who now thinks he has a shot as PM in 2020, and just needs the opportunity, the excuse to reshape the country forever, to push back the size of the state to before the post war consensus years.

It goes like this- the Tories true aspersions for finishing the project Thatcher started, can never be realised as public opinion currently stands, it is just too unpalatable for Britain’s electorate. If only public opinion could somehow be softened? Well perhaps the Government thinks it can, not overnight but over the course of this parliament, and perhaps the start of the next. The plan is this, a war of attrition. As wages plummet, recruitment and retention becomes even worse, Nurses choosing to work in private heathcare, social workers re-training, teachers going to work abroad etc. Already strained vital public services will begin to become unviable, “large, failing and inefficient”- the press will launch scathing attacks- ambulance waiting times, growing class sizes, social services failures. The public will grow tired of defending services they view as cumbersome and poor.

 Now In will ride the government “a knight in shining armour” – the solution, they will say -hand more and more over to the “efficient” private sector. They will claim their hand is forced, they have had to intervene, public money is being squandered on desperately inadequate services.

Of course much of the apparatus is already there,- the Health and Social Care Act, the Academies Act, what is not yet however, is the public will to allow the pace or degree of change this Government wants. Should they succeed, and Labour fail to gain power in 2020 and full plan comes to fruition, one can only speculate on the nature (and size) of the future state. Much of course depends on how much the Tories are able to get away with, and it is a risky strategy, which depends on if Labour is able, and the press willing to park public sector failures firmly on the door of the government.

by Frank Jackson