Pay cap lifting will benefit public sector recruitment

New research by the Institute for Fiscal Studies (IFS) has warned that the struggle to recruit and retain staff in public services will continue, unless the pay cap is lifted.

The average weekly public sector pay has fallen by four per cent in real terms since the Conservatives formed a coalition government in 2009/10, with the gap between public and private sector pay returning to pre-financial crisis levels.

The report claims that continuing with the controversial pay cap on public sector workers would not only take their pay to ‘historically low levels’, but also make recruitment in the sector very difficult.

The IFS did caution, however, that increasing public sector pay across the board in line with either prices or private sector earnings would add £6 billion-a-year to the cost of employing the 5.1 million public sector workers by 2019-20. This would most likely be funded by an increase in taxes or borrowing, or by cutting spending further in other areas.

The government currently spends £181 billion per year employing 5.1 million public sector workers.

Jonathan Cribb, senior research economist at the IFS, said: “The government is considering lifting the public sector pay cap for at least some workers. If it decides to maintain the one per cent 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. Asking the NHS, for example, to fund higher pay increases from within existing budgets would be very challenging.”