UK civil servants will feel the full force of the squeeze on living standards, after ministers set guidance that will leave them with below-inflation pay awards averaging just 2 per cent next year.
The government published its framework for pay awards in 2022-23 on Thursday, which said departments would be permitted to offer pay awards of 2 per cent on average, with the flexibility to pay an additional 1 per cent if they could demonstrate that it helped to deliver long-term workforce priorities.
With inflation expected to rise by close to 9 per cent by the end of the year, according to the Office for Budget Responsibility’s latest forecasts, this means that about 450,000 civil servants staffing government departments, agencies and other public bodies face a hefty real terms pay cut.
It comes as public sector workers were already faring worse relative to their private sector peers than at any point in the last 30 years, according to Ben Zaranko, senior research economist at the Institute for Fiscal Studies.
Heather Wheeler MP, parliamentary secretary for the Cabinet Office, said in a statement that the guidance would “ensure broad parity with private sector wage settlements” and “fair pay rises for hard-working staff”.
But the PCS civil service union said the offer was “derisory” and fell far short of what staff needed to avoid hardship, as food and fuel bills rocketed and tax rates rose.
There will be some protection for the lowest paid, with the main rate of the statutory minimum wage set to rise by 6.6 per cent from today – equivalent to £ 1,000 a year for a full-time worker.
But independent forecasts suggest that the pay offer is well below the average private sector offer for the coming year. Surveys by XpertHR, a research group, point to a median pay award of 3 per cent for 2022, with the bottom quartile of employers offering up to 2.5 per cent. The OBR forecast nominal earnings would rise by 5.3 per cent in 2022, with household disposable income falling by 2.2 per cent in real terms.
Zaranko said the paltry civil service settlement could set a benchmark for awards in other parts of the public sector that are politically more controversial.
The Department for Education has already set out proposals for teachers’ pay that are generous to those near the start of their careers but imply big real terms pay cuts for more senior staff. However, the government has not yet given guidance for health workers, police or prisons, among others.
Zaranko said real terms pay cuts could compound recruitment difficulties, especially at the more senior levels and for those working in London.
But he added that it was a natural consequence of Chancellor Rishi Sunak’s decision in last week’s Spring Statement to “keep a member on spending and prioritize tax cuts and fiscal tightening”.