Philip Hammond’s continued squeeze on Whitehall departments means that the government could not fund a 1% pay rise for public sector workers without cutting jobs or public services, according to a new analysis.
Trade unions have argued that all public sector workers, including nurses, teachers, refuse collectors and civil servants, deserve a fully funded 5% increase – after years of suffering from pay restraint.
But a report by the Centre for Labour and Social Studies (Class) thinktank, on behalf of the PCS union, said current projections of departmental spending would prevent even minimal increases in people’s wages.
It said the figures cast doubt on the government’s claim to have lifted the public sector pay cap, arguing that in practice it would remain in place unless ministers overhauled spending policy.
Dr Faiza Shaheen, director of Class, accused the chancellor of “attempting to hoodwink the public into believing the public sector pay cap is over while knowing full well that it isn’t”.
She claimed that “empty words on the pay cap” were an insult to five million public sector workers, some of whom were using food banks.
“Our analysis shows what Philip Hammond knows: lifting the public sector pay cap either means further job losses or cutting public services, an impossible and unfair choice.”
Pay restraint has been a reality in the public sector since 2010, when the Conservative-Liberal Democrat coalition froze wages completely. In 2013, a 1% limit was put in its place.
However, after the issue was seen to have been critical in the Tories losing their majority in 2017, Theresa May and Hammond came under intense political pressure to act and promised to lift the cap.
Police received a 1% pay increase with a 1% bonus, with prison officers getting 1.7%.
However, Hammond did not announce any further increases in the budget, instead waiting for the advice of independent pay review bodies.
Campaigners said the Class research showed how unlikely it was that the government would choose to fund increases, warning that a 1% rise would be well below inflation, and amount to a real-terms pay cut.
The study found that the Department for Work and Pensions would need to see its day-to-day spending rise by 15.9% to accommodate the change; HMRC would need to be 14% bigger; the Ministry of Justice 11%; and the Department for Transport, 18.5%.
As such, Hammond could only fund pay increases by lifting overall spending or cutting back in other areas such as job numbers or public services on offer, it concluded.
The shadow chancellor, John McDonnell, is expected to attack Hammond over the issue at an event in parliament on Tuesday, which will be attended by the Unite general secretary, Len McCluskey. McDonnell called on ministers to stop “playing one group of workers off against another”.
A Treasury spokesman insisted that the cap had been lifted and that ministers were ready to consider the recommendations made about future pay awards.
“The government is committed to the delivery of world class public services, and ensuring that public sector workers are fairly paid for the vitally important work that they do,” he said.
The government argues that pay awards should differ to reflect the various circumstances around recruitment and retention levels, and that it would be wrong to pre-empt the advice of the pay review bodies.
