UK pay freeze on public sector employees will end next year

Tuesday, October 26, 2021

Portrait of Chancellor of the Exchequer Rishi Sunak, taken May 13, 2020.
Image: UK Government.

On Monday, United Kingdom Chancellor of the Exchequer Rishi Sunak revealed in a media briefing that he will confirm in his Budget, scheduled for half-noon Wednesday, an end to the partial pay freeze on 2.6 million public sector employees introduced last November, alongside a 6.6% increase to the National Living Wage.

Sunak used the fall in wages during COVID-19 to justify his "pause" in public sector employees' pay that exempted 2.9 million National Health Service workers and those earning under GBP24 thousand per year, but applied to 2.6 million teachers, police, civil servants and members of the British Armed Forces. While a pay rise is in order from spring next year, the precise details are pending consultation by independent advisers and pay review bodies, according to the i. The Guardian writes some 5.7 million public sector employees could see a pay rise.

In addition, about two million on minimum wage, including some from the above 5.7 million, could benefit from an increase in the national minimum and national living wages. According to the i and The Guardian, the National Living Wage applicable for over-23s will increase by 59p to GBP9.50 an hour from next April, about GBP1000 for a full-time worker, in line with recommendations from independent advisory board the Low Pay Commission. The National Minimum Wage for those aged 21 to 22 will rise 82p to GBP9.18 an hour, and the Apprenticeship Rate will go up 51p to GBP4.81 an hour.

However, according to senior research economist at the Institute for Fiscal Studies Tom Waters: "While this boosts earnings for full-time minimum wage workers by over £1,000 a year, those on universal credit will see their disposable income go up by just £250 because their taxes rise and benefit receipt falls as their earnings increase." Shadow chief secretary to the Treasury and Labour MP Bridget Phillipson said the offer was "underwhelming", and "[m]uch of it will be swallowed up by the government’s tax rises, universal credit cuts and failure to get a grip on energy bills". UK inflation rose 2.9% the year to September, according to the Office of National Statistics.

Phillipson contrasted Sunak's measures with those of a Labour government, according to The Independent: "With a new deal for workers, exploitative practices like zero hours contracts banned, Fire and rehire outlawed, a minimum wage of at least £10 an hour and fair pay agreements, a Labour government will transform work and raise standards."

However, the Daily Mirror says Mr Sunak is considering a rise to GBP10.50 an hour, and the qualifying age for the National Living Wage lowered from 25 to 21 by the next election in 2024. This would match or exceed Labour's pledge of "a decent income that you can raise a family on": an increase of the "minimum wage to at least £10 an hour".

Mr Sunak said during the media briefing that Speaker of the House of Commons Sir Lindsay Hoyle would later call "riding roughshod" over parliamentarians, that it was "[t]he economic impact and uncertainty of the virus" that led to the "difficult decision to pause private pay", which "[a]long with our Plan for Jobs, this action helped us protect livelihoods at the height of the pandemic. And now, with the economy firmly back on track, it’s right that nurses, teachers and all the other public-sector workers who played their part during the pandemic see their wages rise."

Prime Minister Boris Johnson had announced at the Conservative Party conference his intent to create a "high-pay, high-skill economy" after Brexit, but it may take years for salary growth to catch up with mounting financial pressures, according to the i.

According to The Guardian, analysis by the Resolution Foundation indicates those impacted by the freeze earned nearly 8% less than their private sector counterparts. The differential widened to 0.6% for all public sector employees, including those exempt. The Office of National Statistics writes total private sector pay grew 8.3% from June to August 2021, while public sector pay grew only 2.5%.