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Ending public sector pay cap to cost £10bn a year, experts find

Ending the public sector pay cap will cost the government almost £10bn a year by 2021-22, an influential economic think-tank has revealed.

Research published by the Resolution Foundation looked into what the cost and effects of ending austerity measures like the 1% cap would be.

It found that the price tag of the much-maligned policy was £9.7bn a year to 2021-22. It also stated that ‘ending’ austerity overall would cost in excess of £30bn through reversing cuts to tax credits, increasing pace of public spending in line with economic growth and cancelling benefit freezes, among other significant changes.

In recent weeks, a number of organisations from the public sector have called for the cap to be lifted to end what has been years of real-terms pay cuts for workers.

At the end of June, unions including Unison and the PCS put their backing behind a Labour amendment to end the cap, which was rejected in the Commons by a slim margin of 14 votes.

And experts at the Institute for Fiscal Studies (IFS) warned last month that recruiting issues in the public sector would be seriously exacerbated with the continuation of the cap.

“Britain is seven years into a prolonged period of fiscal consolidation, in which constraints on public spending have been the central feature and are set to continue for some years to come,” said Matthew Whittaker, chief economist at the Foundation.

“Following the general election there has been a significant debate about the extent to which the result – and the failure of the Conservative party to secure a majority – reflected a rejection of this continued ‘austerity’ and whether the government should now change course.”

Whittaker added that the debate has largely focused on the desirability of easing specific spending constraints, without engaging with broader questions of prioritisation, price tags or practicalities of trade-offs with tax increases or additional borrowing.

“In this note we look at what ‘ending’ austerity might actually mean and the trade-offs for anyone wanting to make it a reality,” he concluded.

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Keiran   17/07/2017 at 12:02

Over the next two years, Tesco are increasing their pay by 10%. MP's also given the equivalent pay rise - I think 12% actually. Nurse, Fire & Rescue, social services, environmental health, trading standards, Police Constable's and the like all 1%. Labour are knocking at the door of Number 10 with an eviction notice...

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