UK: Public sector pay cap lifted for police and prison officers

In September 2017, the UK government announced its lifting of the 1% public sector pay cap for police and prison officers, and for staff of the National Health Service. It also signalled that the pay cap would be lifted for all public sector workers from 2018, but the opposition Labour Party and unions called the increases ‘derisory’.

Background

Public sector workers’ pay was frozen in 2010 (with the exception of those earning less than £21,000 (€24,000 as at 26 January 2018) per year) as part of the newly elected coalition’s austerity agenda. Since 2013, pay rises have been capped at 1%, below the rate of inflation; the cap was due to last until 2020.

However, on 12 September 2017, following months of pressure, the government announced that the cap was to be lifted for police and prison officers. Prison officers received an average 1.7% rise, while police received a 1% rise, plus a 1% bonus for the year. The government also signalled that the pay cap would be lifted for all public sector workers in the 2018–2019 pay deals. The opposition party and unions reacted angrily to the announcement, calling the increases ‘derisory’, and accusing the government of ‘cherry-picking’ certain groups for wage increases. Following these developments, the Chancellor announced on 22 November that the pay cap would be lifted for some National Health Service (NHS) staff, although the precise increase was not specified.

Impact of the cap

Several studies have been published on the impact of the cap on the incomes of various public sector workers, as well as on the recruitment and retention of staff. In October 2017, the GMB union obtained Treasury figures under the Freedom of Information Act, which demonstrated that public sector workers’ pay had fallen below that of their private sector counterparts for the first time since the 2008 financial crash, with public sector workers receiving hourly earnings of 0.6% less than private sector workers in similar jobs. By comparison, public sector workers had earned 3.1% more than their private sector counterparts in 2005, rising to 5.8% in 2010.

Moreover, figures released by the opposition Labour Party, based on official data, shows how teachers’ earnings have been eroded, as annual increases in pay have fallen below the rate of inflation. According to the figures, teachers are more than £5,000 (€5,700) a year worse off, on average in real terms, than in 2010. Teaching unions said the marked decline in salaries was one of many factors causing a deepening recruitment crisis. Other Labour research also suggests frontline police officers are now £6,000 (€6,850) a year worse off in real terms than in 2010. Moreover, the  Trades Union Congress (TUC) estimates the cap has meant that some workers have lost £4,000 (€4,570)  in real terms from their salary since 2010, while the Public and Commercial Services union (PCS) has calculated that civil servants’ pay has fallen by between £2,000 (€2,280) and £3,500 (€4,000) in real terms between 2010 and 2016. In the NHS, the pay squeeze has contributed to a growing recruitment and retention crisis, with the number of nurses falling and the number of vacancies doubling in the last three years. In the face of such staffing problems, NHS trusts have increasingly had to rely on agencies to fill shortages: the agency staffing bill reached £3.6 billion (€4.1 billion) in 2015–2016, double the level of four years before.

Growing pressure to ‘scrap the cap’

Pressure on the government – much weakened after losing its Parliamentary majority in the June 2017 election – from trade unions and the Labour Party, had been mounting in the weeks before the announcement. Resistance had been growing since the firefighters’ pay deal in July 2017, which had offered a 2% increase that year, and 3% in 2018 with potential further increases in 2019 and 2020. Although pay for firefighters is set through a joint national council, rather than directly by government, it is the Treasury that foots the bill; thus, the pay offer was seen as a first step towards the cap being lifted.

In the build-up to the September announcement, the growing pressure on government culminated in a day of pointed criticisms, strike calls and demonstrations around Parliament on 6 September, including a protest outside Westminster by thousands of nurses against a 14% real-terms cut in wages over the past seven years (this followed a poll of 50,000 members of the Royal College of Nursing over pay, where 80% confirmed they were prepared to go on strike if the cap was not lifted).

Later that week, at the annual TUC Congress, four affiliate unions tabled motions calling for nationally coordinated action, and the PCS also announced that its civil service members were to be balloted on strike action over their pay. The General Secretary of the largest union, Unite, warned that coordinated action from workers across the public sector was ‘very likely and very much on the cards’. The Labour opposition also announced on 10 September that it was preparing to force a vote on the pay cap in parliament on 13 September.

The government chose not to contest the motion; this would have risked an embarrassing defeat as the government’s allies in the Democratic Unionist Party (DUP) had indicated that they would vote with the opposition. By 12 September, the government announced that the pay cap would be lifted for prison officers who will receive an average 1.7% rise and police who will get a 1% rise plus a 1% bonus for the year. The government also gave a wider commitment to ‘flexibility’ for all public sector workers from 2018.

Reactions

The leader of the opposition party said that the Labour Party completely rejected the government’s ‘attempt to divide and rule, to play one sector off against another’, promising that a Labour government would end the public sector pay cap.

Representatives of police and prison officers said the pay rises were not enough in the face of inflation (2.8% in November 2017). The General Secretary of the Prison Officers Association said that the offered increase would amount to a real-terms pay cut. It rejected the rise and said it and the PCS were planning to ballot members to see if they would support a strike. Steve White, the then Chair of the Police Federation of England and Wales, said many of his members would be ‘angry and deflated’ at their pay award, following a requested 2.8% rise in basic pay. Mr White said, ‘Officers have been taking home about 15% less than they were seven years ago.’ Moreover, the police and prison officers’ pay rises will be financed by their departments, prompting a warning that, for the police, this could threaten services because of the extra strain on resources.

Other unions reacted with anger. The TUC called the below-inflation pay offers ‘pathetic’, with its General Secretary, Frances O'Grady, stating, ‘If ministers think a derisory rise like this will deal with the staffing crisis in our public services, they are sorely mistaken.’ The GMB union denounced the offers as ‘paltry…nothing but smoke and mirror politics that insults our public sector workers’. The Prospect union, which represents scientists, engineers, managers and other specialists in over 300 private and public sector organisations, said that ‘cherry-picking which public servants deserve a pay rise’ was ‘a betrayal of the expertise and dedication public servants make for the good of the country.’

On 15 September, 14 unions delivered a joint letter to the Chancellor, Philip Hammond, asking him to give a pay rise of almost 4% to around a million NHS workers, plus a one-off payment of £800 (€913) to compensate for the money they lost out on during the austerity era. They asked for the funds to be made available in the November budget (announced on 22 November), for a pay rise in line with the retail price index (RPI) level of inflation – 3.9%, nearly a percentage point higher than the Consumer Price Index (CPI) of 3.1% (figures published for November 2017). Unions usually submit evidence to a pay review body, but they said the government has undermined its role and ‘severely restricted’ its ability to make recommendations.

Commentary

The government’s weakened position following the June 2017 election has certainly contributed to its softening position. Moreover, disasters such as the Grenfell Tower fire of 14 June 2017 and the recent spate of terrorist attacks have served to highlight the dedication of frontline public service workers, making it difficult for the government to continue to legitimise the pay restriction. However, the Chancellor did not lift the cap entirely in his Budget speech on 22 November, instead announcing an end to the 1% pay cap for nurses, midwives and paramedics. Extra funding for this is to be provided, but on condition that any deal increases productivity within the NHS and is ‘justified on recruitment and retention grounds’. No actual pay rise was detailed; this will be determined by the relevant pay review body. Thus, it remains to be seen whether these NHS workers will receive a real-terms pay rise, or whether the increase will be below both inflation and private sector earnings.

However, the pledge of extra funding for NHS workers does contrast with the pay rises awarded to police and prison officers, which are to be funded out of existing budgets and as such, do not entail increased government expenditure in the short-term. On the question of ‘affordability’, up until the election, the government continued to legitimise the cap through reference to the need to reduce public spending and the budget deficit.

However, in September 2017, the deficit fell to its lowest level in the last 10 years, with an 11% drop from the previous year, despite recent Brexit turmoil and a sharp slowdown in GDP growth.

Moreover, new research by the Institute of Public Policy Research (IPPR) has calculated the fiscal and economic impacts of lifting the cap (PDF) for the final two years of the pay squeeze up to 2019–2020 and, on this basis, says that the government can afford to lift the cap across the sector. The researchers modelled two further illustrative scenarios for public sector pay increases up to 2019–2020, compared with a baseline scenario of pay rises continuing to be capped at 1% per year. The first scenario increases pay in line with the CPI; the second ‘catch-up’ scenario increases public sector pay in line with private sector earnings, plus an additional percentage point of growth. The researchers found that the headline cost of increasing public sector pay in line with CPI is £5.8 billion (€6.6 billion) in 2019–2020 while the cost of the ‘catch-up’ scenario is £12.7 billion (€14.5 billion). However, a significant portion of these costs would be returned to the Treasury almost immediately in the form of higher taxes and lower spending on means-tested benefits. After taking these receipts and savings into account, the immediate net cost of increasing public sector pay in line with CPI falls to £3.55 billion (€4.05 billion), while the cost of the ‘catch-up’ scenario is £7.75 billion (€8.85 billion).