Public service pay is again in the spotlight following the publication of the results of the Labour Government's Comprehensive Spending Review (CSR) in early July 1998. The CSR proposes a substantial increase in public expenditure for the next three years in two areas where commitments were made by Labour prior to the 1997 general election: education, which is due to receive an increase of GBP 21 billion; and the National Health Service, where the figure is GBP 19 billion.
Two parts of the UK public sector - education and health - are to receive an increase in public spending, under a government review published in July 1998. However, the extent to which the benefits of this will filter through to employees is not clear.
Public service pay is again in the spotlight following the publication of the results of the Labour Government's Comprehensive Spending Review (CSR) in early July 1998. The CSR proposes a substantial increase in public expenditure for the next three years in two areas where commitments were made by Labour prior to the 1997 general election: education, which is due to receive an increase of GBP 21 billion; and the National Health Service, where the figure is GBP 19 billion.
There were mixed messages about the implications for the pay of public service workers, however. The announcement of the CSR was accompanied by a tightening of the instructions to the Pay Review Bodies, which are responsible for recommending increases in the pay of teachers, nurse and doctors (UK9702104F) - they have to ensure that awards are consistent with the Government's targets for inflation (2.5%) and output and efficiency - which some commentators are interpreting as the continuation of tight limits. Simultaneously, however, government ministers are quoted as recognising that the kind of modernisation programme planned cannot succeed without employee cooperation, which will be reflected in the approach to pay increases.
As in other countries, the relationship between public service and private sector pay is a long-standing issue. Public service pay has been seen as one of the Achilles' heels of past Labour Governments, reflecting the relative strength of trade unions in the sector and their close association with the Labour Party (UK9704125F). In its own terms, the new Labour Government feels it has been very successful. It has managed to maintain the previous Conservative Government's spending limits in the short term, which involved the phasing of the 1998 settlements recommended by the Pay Review Bodies.
Ironically, the Government's tough stance on public service pay is being undermined somewhat by increases in earnings in the private sector, and above all services where there is little or no collective bargaining. Overall, earnings in the year to mid-1998 have been increasing by just 5%, with increases in the private sector around double those in public services. Exhortations, which have also embraced boardroom pay, seem to have had little impact, contributing to the decision of the Bank of England's Monetary Policy Committee to increase interest rates several times recently, seriously hurting manufacturing both directly and indirectly through the strength of the GBP.
The conjuncture of these developments presents special difficulties because of the reported labour shortages among key groups of nurses, doctors and teachers. Traditionally, recruitment and retention have been seen as the main criteria for above-inflation pay increases. Commentators are asking how the Government will be able to deliver its programme of public service modernisation, including the employment of 6,000 more teachers, 7,000 more doctors and 15,000 more nurses, if it does not address the problem of the relatively low pay of the groups involved.
Eurofound recommends citing this publication in the following way.
Eurofound (1998), Public sector receives spending increase, article.
