Civil service pay freeze must not lead to another ‘lost decade’ for public service pay

Prospect union, a trade union representing thousands of civil servants, has warned that the pay freeze confirmed in today’s Civil Service Pay Remit Guidance must not lead to another ‘lost decade’ for public service pay.

The union has called the pay freeze, which will mean a real terms pay cut for civil servants, “economically illiterate” warning that it will remove demand form the economy at a critical time in the recovery.

Prospect deputy general secretary Garry Graham said:

“Civil servants have worked tirelessly supporting the country through the pandemic- with many at the frontline of the pandemic response, keeping the public safe and rolling out the vaccination programme.

“Singling out these public servants for pay cuts is not only scant reward for this hard work, it is economically illiterate, sucking demand from the economy and ignoring the fact that pay increases remain buoyant in parts of the economy where demand remains high- particularly in areas requiring specialist and professional skills.

“The Cabinet Office has been unable to confirm or deny whether the proposed “pause” will endure beyond this year. We will be working with our members across the sector, other unions, and the TUC to challenge the policy and avoid the repetition of another decade of lost pay growth for public servants.”

Prospect research shows:

• Between 2010-11 and 2019-20, the cash value of civil service pay awards in line with central remit guidance had amounted to a real terms cut against RPI of around 18 per cent.[1] The modest above inflation increase of 2020-21 (2.5% against RPI of 1.5%) didn’t even reverse the real terms cut of the previous year – let alone the previous ten.
• ONS and OBR data shows that from 2020-11 to 2019-20, median civil service earnings fell by 4.2% relative to average earnings across the economy.[2] These measures are affected by workforce composition and so are likely to understate the gap between comparable roles. Analysis of data from the Incomes Data Research database suggests that over the same period civil service pay awards fell 1.8% behind the public sector weighted average, and 20.3% behind the private sector weighted average.[3]
• Since the Chancellor announced the pay “pause” in November the OBR has increased its forecast for RPI in 2021-22 from 1.4% to 2.6%.[4]This increases the real terms cut to the median civil service salary (£28,180 in 2020) resulting from the “pause” from around £400 to around £700.
• The government’s own submission to the Pay Review Bodies quotes XpertHR data showing that “private sector median settlements” were at “2% in the three months to October”.[5] According to Incomes Data Research, at the end of 2020 the median pay increases for the private sector were running at 2%, with interquartile ranges at between 0.5% and 2.8%.[6]
• The latest official estimates and forecasts from the Office of Budget Responsibility are that over 2021-22, when the “pause” will apply, average earnings across the economy will rise 2.4%.

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[1] This assumes pay increases in line with official remit policy, including 1.5% in 2019-19, 2% in 2019-20 and 2.5% in 2020-21

[2] Prospect analysis of data from https://www.gov.uk/government/collections/civil-service-statistics; https://obr.uk/efo/economic-and-fiscal-outlook-november-2020/

[3] Prospect analysis of data from IDR pay benchmarker

[4] https://obr.uk/efo/economic-and-fiscal-outlook-march-2021/

[5]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/954610/Economic_Evidence_to_the_PRBs_FINAL.pdf

[6] https://www.incomesdataresearch.co.uk/resources/viewpoint/chancellor-runs-risks-with-rationale-for-public-sector-pay-freeze