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IFS: Tory public sector pay cap plan will ‘seriously exacerbate’ recruitment issues

The Conservative Party’s plan to only increase public sector pay by 1% for the next two years is at risk of “seriously exacerbating” existing recruitment problems, economists have said.

In analysis published today, the Institute for Fiscal Studies (IFS) looked at what each of the main political parties were planning to do with public sector pay and what the implication of these decisions would be.

It found that the Conservatives will press on with plans to increase pay on average by 1% each year, up to and including 2019-20 – which is the same rate that pay has increased by since 2011-12.

The two other large political parties have announced better deals for public sector workers, as Labour will delegate public sector pay setting to Pay Review Bodies and the Liberal Democrats will increase pay in line with inflation.

It was found that a Labour government would need to provide £9.2bn per year to fund the higher costs of employing public sector workers, while the Lib Dems’ plan would require an extra £5.3bn a year.

In March, the IFS had stated that the gap between private and public sector pay had now fallen back to “pre-crisis level”.

Because of this, the institute warned that public sector wages would need to go up to ensure that skilled workers were enticed to work in the public sphere, rather than moving to private sector jobs.

Jonathan Cribb, senior research economist at the IFS and the author of the report, said: “Recruitment and retention problems are beginning to emerge in the public sector following successive years of public pay restraint.

“The Conservatives’ plan of 1% increases for the next two years risks exacerbating recruitment problems – and ultimately reducing the quality of public services – as public pay growth would fall markedly behind growth in private sector pay.”

Cribb added that Labour’s plans to return to the recommendations of Pay Review Bodies would boost public sector pay, but require significant extra resources from government departments to pay for the higher wage costs – unless savings were found elsewhere.

“The Liberal Democrats’ plans imply public pay increases larger than the under the Conservatives and smaller than under Labour,” he concluded.

The Tory pay rise freeze has been at the heart of much debate recently, with the Royal College of Nursing threatening to go on the first strike of its 100-year history if the policy isn’t scrapped in the next Parliament.

Last week, the GMB union also branded the pay squeeze “cruel and unnecessary”, arguing that it would cost the UK economy around £16bn in lost wages by 2020.

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