The latest analysis of pay settlements from IDSPay.co.uk shows that a clear gap has emerged between the levels of pay awards in the public and private sectors. The median pay award for the private sector in the three months to April is 3%, while in the public sector it is zero.
The latest analysis period includes public sector data for the first time this year. April is a key month for public sector pay reviews and the latest figures begin to show the effects of the government policy on public sector pay. The median pay increase for the public sector is zero, with all but one of the pay reviews in this sector being a freeze on basic pay.
Meanwhile the private sector median has risen from 2.5% since the last analysis of the three months to March, driven by a number of higher end deals, particularly in the car industry and the energy companies. The median increase in manufacturing has risen to 3%.
This is the first time in living memory that a government has introduced such a strict incomes policy on public sector pay. This was not done during the incomes policies of the 1970s, nor after the 1980s and 1990s recessions. The nearest to such a policy was the 1.5% limit on public sector increases in 1993, but this was for one year and at a time of much lower inflation than today. Retail Prices Index inflation was 1.3% in April 1993 when the 1.5% limit came into force in the public sector.
The RPI inflation rate for April 2011 was 5.2%. The RPI inflation rate a year ago, in April 2010, was 5.3%. So over the past two years we have seen prices rise by 10.5% at a time when pay rises have almost disappeared from the public sector. And while the government’s two-year pay freeze for the public sector ‘officially’ began in April 2011, there have been no pay rises in local government in either 2010 or 2011.
Concerns about the decline in purchasing power of real incomes will continue to grow, and it is no good the Bank of England saying that inflation is driven by ‘external’ factors such as oil, energy and food prices and that the effects are temporary.
Alastair Hatchett is head of pay and HR Services at Incomes Data Services
