Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of whether current public sector pay determination processes, particularly through the independent pay review bodies, sufficiently take account of productivity metrics.

Answered by Lord Livermore - Financial Secretary (HM Treasury)

The Government is firmly committed to improving public sector productivity and efficiency, as set out in its plans for a more productive and agile state at the Spending Review. At Budget 2024 the Government set a 2% productivity, efficiencies, and savings target for government Departments. The Office for Value for Money and its Chair have worked closely with all departments to agree bespoke and stretching efficiency targets, supported by robust delivery plans. Altogether, the Government will deliver technical efficiencies worth nearly £14 billion a year by 2028–29.

The Pay Review Body (PRB) process is used to set the pay for many public sector workforces. This process is independent from Government and PRBs will consider a range of evidence when forming recommendations on pay. This can include productivity factors, amongst other considerations such as the need to recruit, retain and motivate suitably qualified people.

Pay awards will need to be funded within departmental settlements set out at Spending Review 2025. If the PRBs recommend pay increases above the level departments have budgeted for, departments will need to carefully consider the justification for these awards and determine whether these additional costs can be borne either through offsetting savings or through further productivity gains.

Question to the HM Treasury:

To ask His Majesty's Government whether any formal mechanism exists to directly link public sector pay settlements to measurable improvements in productivity at either departmental or workforce level.

Answered by Lord Livermore - Financial Secretary (HM Treasury)

The Government is firmly committed to improving public sector productivity and efficiency, as set out in its plans for a more productive and agile state at the Spending Review. At Budget 2024 the Government set a 2% productivity, efficiencies, and savings target for government Departments. The Office for Value for Money and its Chair have worked closely with all departments to agree bespoke and stretching efficiency targets, supported by robust delivery plans. Altogether, the Government will deliver technical efficiencies worth nearly £14 billion a year by 2028–29.

The Pay Review Body (PRB) process is used to set the pay for many public sector workforces. This process is independent from Government and PRBs will consider a range of evidence when forming recommendations on pay. This can include productivity factors, amongst other considerations such as the need to recruit, retain and motivate suitably qualified people.

Pay awards will need to be funded within departmental settlements set out at Spending Review 2025. If the PRBs recommend pay increases above the level departments have budgeted for, departments will need to carefully consider the justification for these awards and determine whether these additional costs can be borne either through offsetting savings or through further productivity gains.