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The Parliamentary Secretary, Cabinet Office (Alex Burghart)
It is an honour to serve under your chairmanship, Mr Pritchard. I start by congratulating the hon. Member for Cynon Valley (Beth Winter) on securing the debate, as I welcome the opportunity to discuss these issues. I am sure the Chancellor will have heard her remarks. The Government are obviously in the process of preparing for the Budget in the very near future.
At the outset, I want to join all Members in recognising the extraordinary hard work and dedication of the civil service. I cannot accept the remarks made—admittedly, as an aside—by the hon. Members for Aberdeen North (Kirsty Blackman) and for Vauxhall (Florence Eshalomi) about how the Government are in some way scapegoating civil servants. That is absolutely not the case. It was not the case in the urgent question in the House yesterday. Obviously, a lot of people in the Cabinet Office are sad about what has happened over the past few days, but that in no way detracts from our huge respect for our exceptional civil servants, on whom we rely every single day. It is important for me to put that on the record.
As right hon. and hon. Members will undoubtedly be aware, civil service pay is determined by separate processes for delegated grades—typically grade 6 and below—and the senior civil service. For delegated grades, the Cabinet Office publishes the pay remit guidance annually. The guidance is a cost control document setting out the parameters of average awards in a pay remit year for Departments. For the senior civil service, the Senior Salaries Review Body makes independent recommendations to the Government based on evidence provided by the Government and data from recognised trade unions and the labour market.
In the 2021 spending review, the then Chancellor of the Exchequer announced the end of the temporary pay pause in the public sector, including the civil service, starting from the year 2022-23, throughout the duration of the spending review period to 2024-25. The strong recovery in the economy and labour market at that time allowed us to return to a normal pay setting process. Again, right hon. and hon. Members will be aware that new challenges then emerged. We are operating now in a very different economic environment. Higher than expected global energy and goods prices have already led to unavoidable increases in the cost of living in the UK, and the repercussions of Putin’s illegal invasion of Ukraine have added considerably to those pressures.
Last year, the civil service pay remit guidance allowed Departments to make awards of up to 3%, which we absolutely recognise is below inflation. The Government of course recognise the significant strain that cost of living pressures are putting on everyone, including civil servants, and this Government have been helping with energy support and other cost of living payments for the most vulnerable.
Chris Stephens
The Minister mentioned the pay remit guidance. For clarity, can he confirm that the pay remit guidance is one document—that there is only one piece of pay remit guidance? If so, why are there 200 sets of negotiations across Westminster Government Departments?
Alex Burghart
The hon. Gentleman will be glad to hear that I will come to that point very soon.
As everyone will, I hope, appreciate, the Government put fiscal responsibility at the very centre of our policy, and we are taking appropriate steps to manage inflation. Obviously, at the moment, it is not public sector wages that are driving inflation. Many factors are driving inflation. Inflation is besetting our closest friends and competitors around the world; it is an international problem. However, if we were to take the advice of the right hon. Member for Hayes and Harlington (John McDonnell), the hon. Member for Liverpool, West Derby (Ian Byrne) and others, we would find ourselves in trouble.
The Governor of the Bank of England and its chief economist have both said that inflation-matching pay rises in the public sector can spill over into higher pay across the economy, and that would make the fight against inflation even more challenging. That is why halving inflation is the top of the Prime Minister’s five immediate priorities, alongside growing the economy, reducing national debt, getting the NHS backlog down and stopping small boats crossing the channel. Our focus is on pay for 2023-24.
John McDonnell
It is difficult to see how a reasonable settlement below the rate of inflation—for example, the fire brigade settlement of 7%, with backdating and 5% for next year—could in any way offend against the Bank of England Governor’s comments. Have the Government even considered an offer of that sort to the civil service?
Alex Burghart
The right hon. Gentleman is a former shadow Chancellor. He will appreciate that the higher the pay settlement, the slower the rate of decline in inflation is likely to be. [Laughter.] He laughs; I hope he has realised how the numbers work.
John McDonnell
This is unique in economic history in this country. We are arguing that a pay award below the rate of inflation is still inflationary. I have never heard that one before, and I think we should record it for posterity.
Alex Burghart
I know the right hon. Gentleman is new to this House, and I am delighted to be able to tell him that the minutes of this debate will indeed be recorded for posterity. He will understand that the sooner the speed of inflation comes down to a manageable level, the sooner we can return to growth in the economy. The sooner the whole economy benefits, the sooner public services will benefit. He proposed an inflation-matching pay rise, but that would certainly not help bring down inflation, and he knows that. It is very easy to propose things from the Labour Back Benches that sound good, but that are impractical and damaging. The Government have to take fiscally responsible decisions.
The Chancellor of the Duchy of Lancaster and Secretary of State, my right hon. Friend the Member for Hertsmere (Oliver Dowden), said in a recent PACAC evidence session that considerations for the pay settlement this year will, of course, be done in the context of higher inflation, but that
“we have to be cognisant of wider pressures on the public finances, which ultimately can be paid for only by higher taxes, by increased borrowing or by savings elsewhere in the Government…Ministers have to take difficult decisions.”
Geraint Davies
The Minister is making the case for a balanced approach. The Chancellor’s objective is to halve inflation this year, from 10% to 5%, so prices will have risen 15% over two years. Given that, what would be a reasonable and balanced pay award to civil servants over those two years, in the Minister’s view?
Alex Burghart
Those conversations are ongoing, as the hon. Gentleman will be aware. It is not within my remit to speculate on that.
Alex Burghart
I will come back to the hon. Gentleman’s point.
Salaries for junior grades in the civil service remain comparable with private or public sector equivalents. Many civil servants also benefit from defined benefit schemes, where employers contribute around 27% of earnings. In contrast, most private sector employees receive defined contribution pensions, which are dependent on investment performance, and where employer contributions are typically around half those in the public sector.
As I mentioned at the beginning of my speech, pay arrangements for civil servants below the senior civil service are delegated to Departments as separate employers. That has been the case since 1996, and was not a position overturned by the previous Labour Government. The annual pay remit guidance sets out the financial parameters within which civil service Departments can determine pay awards for their staff. Negotiations take place between organisations and trade unions. The Cabinet Office does not negotiate or consult on pay or changes to terms and conditions outside the civil service management code. Ultimately, it is for Departments to decide on their pay awards and how they are structured, in the light of their own budgets and priorities, and to negotiate with their trade unions.
There are many merits to the delegated model, as the last Labour Government recognised. Civil service Departments deal with many different, complex issues. That means it is really important that Departments continue to have the flexibility to tailor their own pay and grading arrangements to enable them to recruit, retain and reward the hard-working civil servants who deliver for them.
Pay remit guidance also allows Departments to seek further flexibility for a pay award above the headline range for pay awards. That has enabled some Departments to make higher awards to their staff in return for productivity and efficiency gains, or to reform terms and conditions of employment, in order to deliver transformational reform. That has been demonstrated in pay deals at His Majesty’s Revenue and Customs and the Ministry of Justice in recent years.
We continue to explore opportunities for greater coherence for reward in future years in support of civil service challenges and priorities, which is where the work of cross-Government professions and functions have a particularly valuable role to play. The Minister for the Cabinet Office met with some of the main civil service unions on 12 January to listen to their representations on pay, as part of an exchange of information to inform pay for 2023-24. That is supported by continuing dialogue at official level.
The Government remain committed to holding discussions about pay for 2023-24. We want to work constructively with the civil service trade unions as the Government consider the pay remit guidance, the delegated grades and the evidence to the Senior Salaries Review Body on senior civil service pay. I am confident that when we announce the 2023-24 civil service pay remit guidance, we will continue to strike the balance between appropriate reward and the need to live within our means as a nation.
Chris Stephens
The Minister has confirmed that there is one pay remit guidance. Do the Government have any plans to cut the numbers of negotiations? There are currently more than 200 across Westminster Government Departments.
Alex Burghart
The hon. Gentleman will have heard me say that we consider there to be many advantages to this model.
The purpose of Westminster Hall debates is for the Minister to come and listen to what colleagues in the House have to say. It was interesting, listening to the hon. Member for Vauxhall, to hear that a lot of the positions from the Labour Back Benches do not necessarily accord with the position of the Labour Front Bench. I wonder whether one of the things that is happening in this Westminster Hall debate is an internal debate within the Labour party being aired in public. There was no position from the Labour Front-Bench spokesperson on collective bargaining, on the pay offer, or on PCS strike actions.
Florence Eshalomi
On this side of the House, we will make sure that we negotiate—sit around the table and address the concerns. It is not for me to say, “This is what we will offer.” It is about sitting down with the unions, outlining the concerns and then coming to a decision.
Alex Burghart
I respect the hon. Lady’s position. However, that is not the position that many of her colleagues have taken here today. It is important that the Labour party comes to an agreed position before the next election. If it does not, we will be sure to remind the public that the Labour party does not have a position on this, whereas the Government do.
Mark Pritchard (in the Chair)
Order. I remind the hon. Lady to address her remarks through the Chair, rather than using “you”. The Minister is responding on behalf of the Government.
Mark Pritchard (in the Chair)
I am neutral. I remind the hon. Member to address her remarks through the Chair. The Minister is here representing the Government rather than as an individual.
John McDonnell
There was a flippant remark from the Minister with regard to meeting PCS members. I just remind him that PCS members in my constituency—two Border Control staff—died during the pandemic because of covid. They sacrificed their lives keeping this country safe.
Alex Burghart
On a point of order, Mr Pritchard. The right hon. Gentleman knows full well that there was no flippant remark about PCS whatsoever. [Interruption.] There was no flippant remark whatsoever. The record will state that all I said was that you had been invited to join the picket line, Mr Pritchard. That is not a flippant remark about PCS.
Alex Burghart
It was not a flippant remark about PCS. The right hon. Gentleman knows that it was not.
Mark Pritchard (in the Chair)
Order. The Minister is entitled to put his point of order—although it is not a point of order. However, it has been put on the record by our excellent Hansard colleagues here. We go back to Beth Winter for the last three minutes of the debate.