Public Sector Pay Cap

Lord Tunnicliffe Excerpts

Thursday 13th July 2017 Lords Chamber

[Lord Tunnicliffe (Lab)]

I thank my noble friend Lord Haskel for tabling this debate and the powerful manner in which he summed up the issue before us today.

The Government’s argument seems to rest on two main pillars: first, that responsibility for public sector pay rests with the review bodies, and secondly, that the cap represents a so-called balance between fairness and affordability.

Let us take the review bodies first. Can we please start by dropping the pretence that they are independent? They are not. The Government set the parameters of their scope, therefore limiting their scope to make recommendations. As the NHS review body outlined back in 2011, when the cap was first introduced:

“Any constraints placed upon our role limit our ability to assess the full range of evidence on pay and related matters and potentially undermine the parties’ confidence in an independent Review Body process”.


It went on to say:

“During the period of the pay freeze our role is limited”.


This year, the NHS review body said not only that the,

“current public sector pay policy is coming under stress”,

but that:

“There are widespread concerns about recruitment, retention and motivation that are shared by employers and staff side alike”.


Only this Monday, the teachers’ review body concluded that:

“The number of qualified teachers leaving the profession for reasons other than retirement has continued to rise, and teacher retention rates have deteriorated, including for those with two to five years’ service. The number of schools reporting teacher vacancies and temporarily-filled posts has also increased markedly over the last five years”.


It said that this,

“creates a real risk that schools will not be able to recruit and retain a workforce of high quality teachers to support pupil achievement”.

Last week, during the debate on an Urgent Question in the other place, the Chief Secretary to the Treasury claimed that she respected the “pay review body process”. How can the Government respect the review process while ignoring such concerns?

The second argument the Government fall back on is the need for balance between what is supposedly affordable and fair. But what does this balance look like in practice? As the Resolution Foundation has shown, the Government’s version of balance will mean that some of the poorest people in our society will have 5% less annual income over the next four years while the wealthiest are untouched. How is this fair or balanced?

Apparently, though, this is not all about pay—not when the Government have increased the personal allowance and introduced the so-called national living wage. That argument does not hold up either because, as the latest report from the Joseph Rowntree Foundation shows:

“Pay increases in themselves do little to improve net incomes because they trigger reductions in working benefits, and the income level at which these reductions start has also not risen with inflation”.


Because of inflation, household income for families has fallen 2% in just a single year. Review bodies are not independent and the Government’s policy is not balanced by any definition of the word.

The public sector is the beating heart of our country. It connects each and every one of us to our friends, family and communities. It entrenches in us a sense of worth and value. Those who sustain this effort work tirelessly to maintain the services that are integral to our country. They deserve to stop being taken for granted.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I pay tribute to the noble Lord, Lord Haskel, for securing this debate, and to noble Lords who have taken part in it. In a spirit of trying to shed more light than heat on this issue, I thought it would be useful if, rather than leading off with my set text, I went straight into trying to respond to some of the key questions that have been raised.

A number of noble Lords questioned our commitment to the public services, saying that we were very happy to pay tribute to the workers when crises arose but questioning whether we were backing that up with resource. It will not surprise noble Lords to hear me say that we pay tribute to our public services, particularly given the horrific events that we have seen in recent months. Their performance has been utterly outstanding, as has that of the Armed Forces. How do we respond to that? We respond to the Armed Forces through signing up to the 2% pledge in NATO for defence expenditure, thereby investing in the Armed Forces. We speak up for our nurses and health workers in England, where we have responsibility, through an £8 billion increase in real terms in expenditure on the health service. We have protected expenditure on schools and protected front-line policing. As a result, we have seen that crime is falling, more patients are being treated than ever before and more pupils are being taught in good or outstanding schools.

The noble Lord, Lord Monks, and the noble Baronesses, Lady Blackstone and Lady Dean, spoke about nurses and the issues around nursing. It is absolutely right that the public sector review bodies should take into account the recruitment factors here. It is worth noting that they said:

“We do not see significant short-term nationwide recruitment and retention issues that are linked to pay”.


We have seen an increase of 13,000 in the number of nurses but there are also 52,000 nurses in training. That should be welcomed. The noble Lord, Lord Tunnicliffe, will probably not be surprised that I return to the following point. One needs to make comparisons when one talks about average pay in the public sector. The average pay might be set by a pay review body at 1% in terms of an increase but actual pay settlements in terms of pay progression have averaged between 3% and 4% in the health service. The comparison was made with other European countries. The OECD looked at the purchasing-power parity of the average salary of nurses and found that where, in the index, the UK was measured—

[Lord Tunnicliffe]

Would the noble Lord be willing to share with us by letter the source data for those statements?

[Lord Bates]

I can give that information. It was from the NHS Pay Review Body’s report of March 2017. It said:

“We do not see significant short-term nationwide recruitment and retention issues that are linked to pay”.


Returning to my key point about UK nurses, where the UK is measured at 100 in the OECD index, France, which was cited, is at 84.2. Therefore, I think that average salaries bear some comparison.

I want to turn in particular to the point made by the noble Lord, Lord Sawyer, about the importance of public opinion here—a view that I recognise. The Government are seeking to balance the opinion of public sector workers with that of taxpayers, who contribute to the maintenance of our public services. Frequent mention has been made of comparisons with real wages in 2010—the noble Baroness, Lady Blackstone, referred to that. Of course, 2010 is a particular point at which to make the comparison. The noble Lord, Lord Haskel, will recognise that if you make the comparison with the situation at the beginning of the great financial crisis of 2008-09, you get a different result, because at that point there was a significant reduction in private sector pay, which has recovered recently.

In response to a point made by the noble Lord, Lord Sawyer, taxpayers’ confidence is maintained by looking at reductions in the deficit. I know that that may be greeted by groans in some quarters of the House, although perhaps I am wrong about that, but we should bear in mind that the interest that we pay on the debt—£50 billion—is equivalent to the entire pay bill for the NHS. Therefore, it is simply not true to say that macroeconomic and fiscal responsibility does not have a bearing on the public finances. However, it is true to say that at present we have record levels of employment—we have never seen them at such a high level—and that in itself leads to pressure on recruitment in the professions.

It is also true that, because we are seeking to manage the economy well, interest rates are at historically low levels, and that reduces the cost of living. The noble Lord, Lord Monks, and the noble Baroness, Lady Kramer, referred to the fact that inflation has increased to 2.9%, which is outside the target. We believe that that is associated with short-term exchange rate issues relating to last year’s decision to exit the European Union and that over time the rate will return to being within the 2% target that we want to achieve.

The noble Lord, Lord Monks, quoted the Prime Minister at the party conference and referred to equity between public service employees’ salaries and the taxpayer—a point I mentioned in response to the noble Lord, Lord Sawyer. On 4 July—that is, last week—he said, “It’s all coming out of the same pot. Therefore, you have to, as a government, have a view on how much you are prepared to spend on pay and how much you are going to spend on the day-to-day running costs of the services you provide”. That is a very fair observation and we would go with that.

The noble Lord, Lord Haskel, referred to productivity, which I recognise is important. Between 2010 and 2016, total public service productivity is estimated to have increased by 3%, with growth of around 0.5% per year. This represents a longer, sustained period of growth in public service productivity since the start of the series in 1997. We have also invested £13 billion to improve productivity, supporting Charlie Mayfield’s work, to which the noble Lord referred.

I am very grateful to the noble Lord, Lord Adonis, for having given me notice of the points he raised, and I want to make sure that they are covered. He asked a number of questions about pay. I think that the House will have been in some shock as he quoted the numbers relating to public sector pay for vice-chancellors and the specific example of the University of Bath. The answers may not surprise him but I put them on the record. Universities are independent and autonomous institutions, and are responsible for setting the pay for their staff. As such, government does not have pay controls in place for senior university staff. The Government have no current plans to intervene in universities’ remuneration. Vice-chancellor pay is decided by official university remuneration committees, which include expert representatives from outside the sector. We expect these committees to examine robustly the evidence for pay increases for all relevant staff. As I said, I know that those answers—

Business: Exports

Lord Tunnicliffe Excerpts

Thursday 6th July 2017 Lords Chamber

[Lord Bates]

My noble friend will be aware, of course, that the export finance levels were doubled by the Chancellor in the Autumn Statement last year. That will be a significant increase. Some 279 companies had access to export finance and more than 70% of those were small and medium-sized enterprises—precisely the sorts of organisations that we need to encourage to do more.

[Lord Tunnicliffe (Lab)]

My Lords, ONS figures show that Britain is currently the worst performing major economy in the world right now, so upskilling our workforce is vital. However, the LGA has recently stated that skills and employment funding is confusing, fragmented, untargeted and ineffective in its current form, where it is run by eight different government departments or agencies. How do the Government intend to better co-ordinate their haphazard approach to skills?

[Lord Bates]

I simply do not recognise this pessimistic view about the UK. We are the fifth largest economy in the world, according to IMF rankings; we were the fastest growing among the major economies last year; and this year we will be the second fastest growing among the major economies. Our exports are on the rise, our employment is at record levels and the United Kingdom is a fantastic place to do business. We produce some fantastic products that will be in demand—increasing demand, in my view—around the world.

Public Sector Pay Cap

Lord Tunnicliffe Excerpts

Wednesday 5th July 2017 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for repeating that Answer, although I regret its tone and what it shows about the Government’s attitude towards public sector workers. This is clearly an extensive and complex issue and I am therefore delighted that my noble friend Lord Haskel has managed to secure a debate on this very matter next Thursday, when we will have an opportunity to go into it in more detail.

The specific question that I put to the Minister today relates to the terms of reference of pay review bodies. Can the Minister tell the House whether those bodies are required to have regard for government policy with its 1% cap? If the answer is yes, surely the publication of such reports is little more than a publicity stunt.

[Lord Bates]

The answer to the question is yes, but it is not a publicity stunt. These are serious matters that are considered very carefully, as has been the case on many occasions for a long time. Public sector pay is set out in the Budget and that advice is contained in recommendations that are sent to the independent pay review bodies. They make their recommendations and then the Government respond, normally by way of Written Ministerial Statement, as we have done already. The situation in which we find ourselves is one of significant debt. It is worth remembering that the interest that we pay on our debt would cover the NHS pay bill in its entirety each year. These are not therefore inconsiderable matters; we ought to bear them in mind and, at the same time, try to strike the balance between fairness to those public sector workers who do so much in our society and country and having regard for the taxpayers who are paying their salaries.

Women and Girls: Employment Skills in the Developing World

Lord Tunnicliffe Excerpts

Thursday 26th January 2017 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I too start by thanking the noble Lord, Lord Loomba, for securing today’s debate and I pay tribute to his tireless commitment to these issues. Women in countries across the globe still face, and fight against, endemic social and economic discrimination and gender-based violence. It is a personal tragedy for every woman and girl who is undervalued, not safe in her home or at work and not allowed to realise her potential. It is a shared tragedy for the communities and economies which miss out on such a vast array of their own talent. We are proud of the record of successive UK Governments in tackling global violence against women and girls, and leading the push for an explicit commitment to gender equality in the post-2015 framework. Your Lordships’ House is all too aware, after last weekend’s women’s march, that this is no year in which to be complacent about women’s rights.

The fifth sustainable development goal reads:

“Achieve gender equality and empower all women and girls”.


Goal 8, to promote inclusive growth,

“and decent work for all”,

is vital to achieving opportunity and personal security. Recent news has not all been encouraging. According to the World Economic Forum, gender equality in the economy moved backwards last year, to 2008 levels. The Oxfam report highlights levels of wealth inequality which have had a hugely detrimental effect on women. We must be careful not to give the impression that women are not already working. Women and girls shoulder the burden of the majority of household and care work, taking on three times more unpaid work than men. The millions in paid work tend to be employed in sectors with low pay and poor working conditions.

We know that the barriers to economic advancement are multiple: violence, infrastructure, access to education and training, access to capital—I could go on. The Minister will be aware that the UN High-level Panel on Women’s Economic Empowerment has identified seven key drivers for economic empowerment, including positive role models, legal protection, a redistribution of unpaid work and changing business practices. Is the Minister able to update the House on what the Government are doing to consider each of these drivers and to build on the work the UK is already doing?

Access to education and training is clearly vital. The UK has led on work to get more girls into primary and secondary school. Will the Minister say what work is being done to replicate any successful policies from these schemes to improve access specifically to technical and vocational education as a means of moving into employment?

The theme of the sustainable development goals is “no one left behind”. I pay tribute again to the excellent work of the noble Lord, Lord Loomba, in raising the plight of widows. What work is the Minister’s department doing to look at rural women and older women and what can be done to remove the specific barriers to training and employment that affect these groups? I have a particular interest in this subject because of my wife’s involvement with Sreepur Village in Bangladesh. It was formed by a movement led by a former British Airways stewardess, Pat Kerr, some 28 years ago, and has taken in homeless and destitute women and their children. Many are single mothers who have extreme problems in such societies. For three years, the women receive training and their children receive schooling before they settle back into the community. There they are able to utilise their skills and gifted equipment, such as sewing machines, to support themselves and their children. This is an outstanding example of how investment in women has a powerful wealth multiplier effect. Whether we men like it or not, investing in women often has much higher rewards than investing in the general community.

Former Secretary-General of the United Nations Ban Ki-moon said,

“Gender equality remains the greatest human rights challenge of our time”.


I welcome today’s debate as an opportunity for noble Lords to keep building momentum and awareness, and I look forward to the Minister’s reply.