More than a million public sector workers could be set to face a real-terms wage cut after Rishi Sunak unveiled his comprehensive spending review.
The chancellor said public sector pay would be frozen as the UK emerges from the Covid-19 crisis – but claimed there would be an exception for NHS workers and for the 2.1m earning less than £24,000 a year.
It later emerged, however, that even some of those could in fact see their pay shrink in real terms, as the rise for lower-paid workers may be “fixed” at a £250 cash rise.
The chancellor was taken to task by senior Labour MP Yvette Cooper who pointed out even the promised pay increase for some may not keep pace with the 2% inflation the Bank of England was forecasting for the UK.
“We know families are struggling right now [...] so can he guarantee the 2.1m public sector workers he referred to will not see a real terms cut next year?” she asked.
Sunak refused to guarantee wage rises for those on the lowest wages would be pegged to inflation, saying only they would get “at least” £250 extra.
“It would depend on the exact salary that they make,” he said, “but it is a fixed increase of £250.”
It is believed the pay freeze will directly affect 1.3m out of 5.5m public sector workers.
But in the private sector, Sunak said he would increase the national living wage by 2.2% to £8.91 an hour and extend it to anyone over 23, in line with the recommendations of the Low Pay Commission.
The chancellor made the announcement amid a backdrop of appalling economic figures, showing the biggest fall in output in more than 300 years (11.3%) due to the coronavirus crisis.
The government will also spend £280bn to get the UK through the pandemic while Whitehall department spending will increase in real terms by 3.8% next year, he said.
But in the context of the downturn Sunak said he “cannot justify a significant, across-the-board pay increase for all public sector workers” when private sector wages were falling.
He said that in the six months to September, private sector wages fell by nearly 1% compared to the previous year, while over the same period public sector wages rose by nearly 4%.
He claimed that “unlike workers in the private sector, who have lost jobs, been furloughed, seen wages cut, and hours reduced – the public sector has not”.
Sunak said he was responding with a three-point plan:
- Giving a pay rise to more than a million nurses, doctors and others working in the NHS in line with pay review body recommendations.
- Freezing all other public sector pay for a year.
- But ensuring the 2.1m public sector workers paid below £24,000 get a pay rise of at least £250.
He told the Commons: “In such a difficult context for the private sector – especially for people working in sectors like retail, hospitality, or leisure, I cannot justify a significant, across-the-board pay increase for all public sector workers.
“Instead, we are targeting our resources at those who need it most.
“To protect public sector jobs at this time of crisis, and ensure fairness between the private and public sectors.”
Responding to the spending review statement, shadow chancellor Anneliese Dodds told the Commons: “Earlier this year the chancellor stood on his doorstep and clapped for key workers.
“Today his government institutes a pay freeze for many of them. This takes a sledgehammer to consumer confidence.”
Paul Johnson, director of the independent Institute for Fiscal Studies think tank, tweeted: “True that public sector wages have done better than private sector this year. But they had been doing [even] worse for a decade.”
The Trade Unions Congress said the announcement was a “kick in the teeth” for workers who “kept the country going” during the pandemic.