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IFS: Public sector faces recruitment chaos if pay cap is not dropped

The public sector will face major recruitment and retention issues if pay restraints, which are pushing wages to historically low levels, are continued by the government, experts have today warned.

Publishing a report making the case for the public sector pay cap to be eased out by the government, the Institute for Fiscal Studies (IFS) said that years of real-term pay cuts had seen wages drop to the level of private sector staff.

The IFS also found that compared to the private sector, pay for almost two-thirds of people in the public sector is actually lowest for highly educated workers.

Despite that, the experts claimed that public sector workers still got a considerably more valuable workplace pension than the private sector on average.

The report concluded that relaxing the hugely unpopular pay cap would be costly. Increasing public sector pay in line with inflation or private sector pay is likely to cost employers around £3bn a year in 2018-19, rising to around £6bn a year by 2019-20.

It also commented on the recent lifting of the cap for police officers by explaining that due to the relative sizes of these workforces, the cost of increasing pay is much smaller than for larger groups like the NHS, schools or the Civil Service.

Jonathan Cribb, a senior research economist at the IFS, and author of the report, commented: “The government is considering lifting the public sector pay cap for at least some workers.

“If it decides to maintain the 1% cap, we should expect increasing difficulties in recruiting, retaining and motivating high-quality public sector staff, reducing the quality and quantity of public services.

“But increasing pay for these workers implies substantial extra costs to public sector employers.

“The Treasury could provide extra funds for this by raising taxes, cutting other spending or borrowing more,” he added. “Asking the NHS, for example, to fund higher pay increases from within existing budgets would be very challenging.”

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