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Cap on public sector pay rises could hit recruitment and retainment - IFS

Capping public sector pay increases at 1% for four years from 2016-17 could make it “harder to recruit and retain” quality workers, the Institute for Fiscal Studies (IFS) has warned. 

Following the Summer Budget, the IFS stated that the promised budget balance, which has been shifted back to 2019-20 instead of 2018-19, in part reflects a “gentler than planned path for spending cuts, including welfare spending cuts”. 

But the IFS said for most public services the good news “largely ends there”, with the cap on public sector pay rises potentially reducing the attractiveness of working in the public sector, which could make it harder to recruit and retain quality workers. 

Paul Johnson, director of the IFS, stated: “The additional protection offered to defence spending and the pushing of some of the cuts into 2019-20 means that we still think that the peak to trough cut in real terms spending on the remaining unprotected departments will be close to a third. We expect cuts to unprotected departments between 2015-16 and 2019-20 of around £19bn to be announced in the Spending Review in the autumn.” 

He added that an important part of the chancellor’s chosen route to achieving these cuts is to hold public sector pay down for a further four years, raising it by just 1% a year from 2016-17

“If private sector pay rises as expected we think this will take public sector pay levels well below their long term average relative to pay in the private sector and indeed well below anything seen since we can readily make comparisons back to the early 1990s,” he said. 

“Up to now public sector pay restraint has merely served to match changes in the private sector. We are entering a new and much tougher phase.” 

Chancellor George Osborne said that overall levels of pay in the public sector are now, on average, comparable to those in the private sector. However, public sector workers continue to benefit from a significant premium once employer pension contributions are taken into account, he said. 

It was also noted that as part of the forthcoming Spending Review, the government will continue to examine pay reforms and “modernise” the terms and conditions of public sector workers. This will include a renewed focus on “reforming progression pay”, and considering legislation where necessary to achieve the government’s objectives. 

Mark Serwotka, Public and Commercial Services Union general secretary, said: “Osborne hypocritically talks about cutting tax credits to increase wages while the last government cut living standards for civil servants by up to 20% and he now plans four more years of pay caps. 

“It is sickening to see Tory MPs braying and cheering while the chancellor rewards the wealthy and punishes the poor.” 

Tell us what you think – have your say below, or email us directly at


Peter   13/07/2015 at 13:57

Why is it that MPs, paid for from the public purse, are able to exempt themselves from the 1% pay rise cap? Is there any other group of Public Sector employees similarly exempted?

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