Prospect writes to Paymaster General in response to Treasury’s evidence to Pay Review Bodies

24 February 2023

Today, Prospect General Secretary Mike Clancy and Dave Penman from the FDA have written to Jeremy Quin MP, Minister for the Cabinet Office and Paymaster General, in response to the Treasury’s evidence to the Pay Review Bodies. You can read the letter in full below.

Dear Minister, 

Civil Service pay 

We write following our meeting on 12 January when you asked us to provide a response to the Treasury’s evidence to the Pay Review Bodies. Following our meeting we commissioned Income Data Research to provide us with an independent economic analysis of the Treasury’s evidence and we are submitting their report along with this letter. We will also submit their independent analysis to the Senior Salaries Review Body (SSRB). 

We have summarised some of the key points from their independent economic analysis below. The report strongly rebuts the assertions in the Treasury’s evidence to Pay Review Bodies that pay awards in the public sector are inflationary and the total reward package is competitive with the private sector. Moreover, the report gives some valuable insight into some of the creative and innovative pay approaches in the private sector.  

This independent analysis sets out that it is vital that you urgently address the falling value of Civil Service pay, not only to relieve pressures on workers during this cost-of-living crisis, but to ensure that the Civil Service can recruit and retain the right numbers of staff. The report makes the fundamental point that an investment in staff is an investment in the public services they deliver. 

Summary of Income Data Research Report: 

  • Inflation cannot be caused directly by public sector wage rises and there is no evidence that this can occur indirectly. Wage rises follow inflation rather than the other way round. 
  • The Treasury paper does not detail the impact of inflation on employees, which is a serious omission given that the remit of the Pay Review Bodies is to have regard for morale. It is a necessity that employers have due concern that their pay structures are fair and fit-for-purpose, especially during a cost-of-living crisis. 
  • The impact of inflation on pay in real terms which, added to the earlier effects of austerity and government pay restraint, has been significant. For example, recent analysis by the Institute for Government shows that civil servants’ median salaries at each grade have reduced in real terms by between 12% and 23% since 2010.
  • Private sector employers are adopting a variety of remuneration responses. Awarding pay rises worth 5% or more has become commonplace in 2022 and IDR have observed that other pay approaches such as one-off payments, additional or interim pay rises, and consolidated flat-rate amounts have grown in popularity across the economy. 
  • The Treasury claims that ‘the public sector remuneration package remains competitive’, but this is not borne out by studies or by the fact that public sector employers are experiencing recruitment and retention issues.
  • The Treasury states: ‘there is a direct trade-off between recruiting more staff, investing in public services, and giving higher pay rises.’ This is incorrect. Public services are delivered by people so a pay rise represents investment in public services and public sector employers must have pay levels that allow them to recruit and retain enough staff to deliver public services. Such alleged ‘trade-offs’ are false economies in labour market terms.  

As we said to you in our meeting on 12 January and in our letter on 19 January, the remit process for the Civil Service is dysfunctional and broken. Not only does it prevent individual employers developing a strategic approach to their pay and reward, it also prevents any sort of strategic approach at the centre and is actively hindering other workforce strategies you want to progress for the whole Civil Service.

We are clear that Civil Service pay structures are in need of fundamental reform. For over a decade the government has continued with a policy of restraining the annual uplift to pay while freezing pay progression and this has had a devastating impact. We want to see a pay structure that rewards talent, knowledge and experience so that the Civil Service can recruit and retain skilled workers that can deliver our vital public services.

We are currently engaging with your officials on the remit process for 2023/24 and would welcome the opportunity to meet with you again to discuss our evidence from Income Data Research and to discuss meaningfully the future of Civil Service pay and reward.

Whilst we invite your response to our independent analysis of the Treasury’s report, the most pressing issue is immediate engagement on the pay issues before us now. This is in the context of the last week, when government have been approaching public sector groups for pay discussions. The absence of such an approach for your own staff is unsustainable and we are seeking an urgent meeting accordingly. 

Given the interest in these matters we will be publishing our letter and the report. 

Yours sincerely, 

Mike Clancy, General Secretary, Prospect Union

Dave Penman, General Secretary, FDA

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