21 July 2006
Public sector trade unions this week attacked Chancellor Gordon Brown's proposed four-year pay freeze for 6 million staff, claiming that many people could face real-term cuts until 2011.
The unions reacted with dismay to Brown's latest pay restraints, announced alongside new Whitehall savings targets on July 13.
In a letter to the chairs of the public sector pay review bodies, Brown called for the extension of pay restraint during the period of the next Comprehensive Spending Review – 2008/09 to 2010/11 and into the next Parliament.
His letter warns that, with rising oil and energy prices and goods inflation, 'it is important to remain vigilant to the risk of higher pay settlements feeding through into higher inflation'. The chancellor urged PRBs to 'continue to base their pay settlements on the inflation target of 2%'.
However, on July 18 the Office for National Statistics revealed that the Retail Price Index increased by 2.5% last month, while the Consumer Price Index, which includes mortgage payments, rose by 3.3%.
The Public and Commercial Services civil service union warned that inflation above the government's 2% pay target would leave many public servants with real-terms wage cuts.
'Pay deals at several major departments, such as the Department for Work and Pensions, end shortly. If the Treasury insists on annual rises capped at 2% in future, new deals could leave staff short-changed as the cost of living increases,' a spokesman told Public Finance.
The PCS said Brown's aim was also at odds with Prime Minister Tony Blair's commitment to improve 'convergence' across civil service pay, and would do little to reduce the civil service's 25% gender pay gap. It would leave public sector pay rises lagging behind those in the private sector, where increases have reached 4%.
Meanwhile, all Whitehall departments face tight settlements in next summer's CSR, Brown has warned.
An interim report on expenditure in advance of the CSR, Value for money in the 2007 CSR, reveals that departments must make annual administration savings of 2.5% over the period. Achieving that would save around £20bn on top of the existing 2.5% annual 'Gershon' savings (£21.5bn) targeted by 2008.
Shadow chancellor George Osborne said Brown's review did not go far enough – and threatened to break up the 'inefficient' Treasury if the Conservatives win the next election. He said: 'The micromanagement and empire building would stop. It would do less, but do it better.'
PFjul2006
