The public sector has been warned it should brace itself for “another bout of austerity”.
In an analysis of Rishi Sunak’s spending review, the Institute for Fiscal Studies (IFS) sharply criticised the chancellor for his decision to freeze some public sector pay as being driven by “politics not by economics”.
More than one million nurses, doctors and others working in the NHS will get a pay rise as a result of Sunak’s announcements on Wednesday.
Some 2.1 million public sector employees earning below the median wage of £24,000 will also receive at least £250 extra.
But an estimated 1.3 million public sector workers will see their pay frozen.
This move will negatively impact on firefighters, teachers, the armed forces, police, civil servants, council and government agency staff.
It will mean a real terms cuts in their wages next year.
Sunak said he “cannot justify a significant, across-the-board” pay increase for all public sector workers given the difficulties faced in the private sector amid the coronavirus pandemic.
But the IFS said on Thursday this would probably save only between £1 and £2 billion next year.
“The chancellor has perhaps picked a big fight over not very much money,” IFS director Paul Johnson said.
“And as ever in the public sector the decisions look driven by politics not by economics or the need to spend money either equitably or efficiently.”
He added: “Two teachers working half time on £20,000 each will each get a £250 pay rise.
“A full-time teacher doing the same job for £40,000 will get nothing. This is no way either to spend public money or to treat public sector workers.”
Johnson also said some areas of the public sector would have a “tougher time” than expected especially after next year.
“Once you account for the government’s various commitments on health, defence and so on, things look extremely tight for everything that remains,” he said.
“This may not quite be a return to austerity, but for some public services it may not feel much different.
And he added: “Some of those areas could well be facing another bout of austerity if the chancellor does in fact stick to his spending plans.″
Labour’s shadow chancellor Anneliese Dodds condemned the pay freeze for public sector workers and claimed the spending review “takes a sledgehammer to consumer confidence”.
Trades Union Congress general secretary Frances O’Grady said: “For all the government’s talk of levelling up, this spending review will level down Britain, hitting key workers’ pay and breaking the government’s promises to the lowest paid.”