Public Sector Pay Policy

Chris Stephens Excerpts

Tuesday 5th June 2018 Westminster Hall

[Chris Stephens (Glasgow South West) (SNP)]

I beg to move,

That this House has considered public sector pay policy.

It is a pleasure to serve under your chairmanship, Mr Owen. I refer to my entry in the Register of Members’ Financial Interests and my position as chair of the Public and Commercial Services union parliamentary group.

I shall focus entirely on the pay of civil servants. A few months ago the Government declared—to great fanfare—that the public sector pay cap had been lifted, but is that really the case? On 2 May I asked the Prime Minister:

“Can the Prime Minister confirm that every UK Government Department has budgeted for a derisory 1% pay rise for all its civil servants? Is it fair that workers who collect tax, and who try to make a broken social security system and a broken immigration system work, are getting a real-terms pay cut and are still subjected to a public sector pay cap?”

The Prime Minster responded:

“As the hon. Gentleman knows, we have been very clear that the blanket 1% cap that has taken place over recent years on public sector pay is not an approach that we are taking in the future. Obviously, Departments are funded at a certain level, and it is for Departments then to come forward with their proposals in relation to pay within their Department.”—[Official Report, 2 May 2018; Vol. 640, c. 312.]

In other words, yes. UK Departments have budgeted for only 1%, and it is therefore reasonable to assume that the 1% public sector pay cap still exists and applies to our civil servants. Perhaps the Minister will confirm that the public sector pay cap is in reality still in force.

As the Minister knows, on 19 January 2018 the PCS pay claim was submitted to his colleague the Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office. However, the Chancellor of the Exchequer’s spring statement gave no indication that the Government’s position had changed significantly. To date, all further indications have been that the Treasury’s remit guidance, imminent this month, will in effect retain the 1% pay cap for civil servants.

Following the submission of the PCS claim, meetings have taken place with the Minister and Cabinet Office officials, who stated that, in their view, where no pay cap is in place, there is no additional funding for pay, so any increases would need to come from existing departmental budgets.

[Mr Jim Cunningham (Coventry South) (Lab)]

I thank the hon. Gentleman for giving way and for keeping the 1% pay cap issue alive. Not only have public sector workers had to put up with the cap for several years, which in fact has meant a pay cut, but there have been job losses, including in the probation services. The Government are using the oldest argument under the sun: Departments must find the money. But it is the Treasury that should find the money, rather than cutting departmental funding further.

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[Chris Stephens]

I agree with the hon. Gentleman. I was a trade union rep in local government before I arrived in this place, and when the public sector pay cap was first put in place, I remember that the argument used to sell it to public sector workers was that the freeze would protect jobs. As he has said, however, we have instead seen job losses in the Departments and elsewhere in the public sector.

I have a copy of the letter that the Minister wrote to PCS reiterating the position that he had stated in the meeting. However, independent research undertaken by the Centre for Labour and Social Studies on behalf of the PCS came to the following conclusions:

“Any increases in public sector pay would have to come out of Resource Departmental Expenditure Limits”,

which are Departments’ current budgets. It continued:

“departments as a whole will continue to suffer real term cuts to their RDELs up to 2020. In the departments of interest covered by our analysis, only the Ministry of Defence will see an increase…This falls way short of what is needed for a 5% nominal pay rise in each year, and also fails to accommodate annual pay rises of 1%”.

In particular, it said:

“Given current projections of departmental expenditure limits, we conclude that any pay rise for public sector workers across…departments would have to come from cuts to jobs or to public services.”

Delegated pay talks are a key part of the problem on pay in this area. There are—this is staggering—in excess of 200 sets of pay negotiations throughout the civil service and its related bodies. The trade unions require proper talks on pay claims, including exploration of the scope for a more coherent approach to pay throughout the civil service and its related bodies. As I understand it, tentative talks on coherence have been under way for years, but progress has been slow. PCS has had a meeting with the Minister, who I believe agreed to reflect on the points made to him and has responded by leaving the door open to such discussions. However, there is frustration that no further progress seems to have been made.

I hope the Minister can today update the House on the Government’s approach to delegated pay, providing for more coherence for the pay structure for civil servants.

[Dan Carden (Liverpool, Walton) (Lab)]

Does the hon. Gentleman agree that when pay bargaining is delegated to Departments that are being cut by the Treasury, the whole process is an absolute sham? There is no possibility of getting rid of the 1% pay cap because the Departments have themselves been cut.

[Chris Stephens]

I agree with the hon. Gentleman. He makes a valid point. One difficulty arising from having 200 sets of pay negotiations is to do with the Equal Pay Act 1970. How does it operate for civil service pay with so many pay schemes across the board? The Government should reflect on that.

[Mike Hill (Hartlepool) (Lab)]

On equal pay, does the hon. Gentleman agree that we should be celebrating the 150th anniversary of the TUC and taking heed of its recent finding that the gulf between the earnings of younger and older people has increased by 50% in the last 20 years, especially in the private sector but also in the public sector?

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[Chris Stephens]

I thank the hon. Gentleman for that, and as a proud trade unionist myself I look forward to signing the early-day motion that celebrates 150 years of the Trades Union Congress. The point he makes is absolutely right: there is a growing pay gap between the older and younger generations. In addition, there is a real challenge on the gender pay gap.

[Rachael Maskell (York Central) (Lab/Co-op)]

The hon. Gentleman is making an excellent speech. I want to draw attention to another inequality in having a 1% pay cap. The lowest earners who get 1% see only a little increase in their pay, compared with the top of the civil service, where they see a massive increase. Surely that inequality must be addressed.

[Chris Stephens]

I agree with the hon. Lady. As someone involved in the trade union movement, I was particularly of the view that we should look at flat-rate claims as well as percentage claims, so that the low-paid got a bigger pay increase. I will touch on some of the issues around low pay for civil servants later.

I hope that the Minister will agree, however, that having more than 200 different sets of pay negotiations for civil servants in UK Departments is frankly nonsense. Towards the end of May, PCS received correspondence from the Cabinet Office seeking a meeting to discuss the pay claim. In May, the PCS annual delegate conference, which I attended to give the PCS parliamentary group report, discussed the issue of pay.

There are different approaches in these islands, such as those of the NHS and the Scottish Government. Funded pay rises have been made available in those two bodies. In the NHS, an agreement for public sector workers has been reached with unions: a funded increase that will see staff offered long overdue pay rises of between 6.5% and 29% over the next three years. Additional funding of £4.2 billion for that has been agreed by the Treasury, meaning that the increase to the NHS pay bill will not come from within existing budgets.

Policy on public sector pay is devolved in Scotland. In the Scottish Government sector, the PCS is moving towards agreed settlements with the employer across all bargaining areas, which include: those earning under £36,5000 receiving 3% plus progression, or 3% plus 1% non-consolidated for those on the maximum pay rate; progression payments of 2.5% plus an additional top-up to the maximum for those five years in the grade; maternity pay increased to 27 weeks of full pay; paternity pay increased to four weeks of full pay; occupational sick pay extended to include all staff on entry; no compulsory redundancy guarantees being extended; and assurances on equality impact assessments.

The Scottish Government have been flooded with applications from civil servants who are employed by UK Government Departments and see a vacancy for the Scottish Government. In Scotland, people who happen to work for a UK Government Department will see many of their colleagues leave to get a better pay rise by working for the Scottish Government. I hope that as part of the competition in many areas between Scotland and England, the UK Government will increase their pay rises to match those of the Scottish Government.

Civil servants deliver cradle-to-grave services daily, from driving test examinations to collecting tax, running our prisons, supporting our armed services, administering our justice system, staffing our borders, renewing our passports, looking after our museums and galleries, supporting the unemployed into work and maintaining our transport system. The civil service is the engine room of the country. Brexit is a key challenge faced by the country. Clearly, it is essential that the civil service is robust and resourced effectively to face that challenge.

The trade union undertook a consultative ballot of members towards the end of last year. The mandate was clear: members in the civil service are against a continuation of the 1% cap and are willing to take industrial action to demand that. In a 49% turnout, 99% of PCS members voted to reject the pay cap and 80% supported industrial action if required. That campaign will continue apace in 2018 in workplaces and in PCS branches and groups.

[Lilian Greenwood (Nottingham South) (Lab)]

The hon. Gentleman is making a powerful case on behalf of public servants. Does he agree that one of the issues is that public servants increasingly feel undervalued? It is very hard for people to give their best at work, particularly when we need them to do the important jobs that he describes, if they feel they are not valued by their employer. That is almost inevitable, given the pay restraint they have suffered over many years.

[Chris Stephens]

I agree with that entirely. I will list the views of civil servants on the public sector pay cap a little later. The hon. Lady is absolutely correct that public sector workers across the board feel undervalued because the 1% pay cap has been in place for so many years.

[Mary Glindon (North Tyneside) (Lab)]

I am intervening as a member of the associate and retired members branch of PCS and as part of the parliamentary group. Further to what the hon. Gentleman said in response to the last intervention, does he think it is ludicrous that there will be civil servants and public sector workers in receipt of universal credit who will be under scrutiny by the Department for Work and Pensions to increase their income to comply with UC rules?

[Chris Stephens]

I agree with that entirely. The vice-chair of the PCS parliamentary group makes an excellent point. A recent survey at the Department for Work and Pensions showed that more than 70% of its staff have experienced financial difficulty in the last 12 months.

With the introduction of universal credit, the point has been made that civil servants who will be in receipt of universal credit due to low pay or being a part-time worker will be under scrutiny by their own Department to increase their income to comply with those rules. That is important, because 18 months ago I secured an Adjournment debate on low pay in the Department for Work and Pensions, which pushed the Department to act. At that time, incredibly, 40% of civil servants employed in the Department for Work and Pensions were in receipt of tax credits. I hope the Minister will look at that.

[Alex Norris (Nottingham North) (Lab/Co-op)]

I am grateful to the hon. Gentleman for making a powerful case on behalf of public servants. Does he share my frustration that we hear the Government talk in reverent terms about the need to tackle poverty, but almost in the next breath they talk about the need for continued pay restraint? There is no understanding of the connection between those two things.

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[Chris Stephens]

It is an entirely false economy. According to research by the Scottish Trades Union Congress, 70p in every pound of public sector money ends up in the private sector economy. It would follow that pay restraint in the public sector harms not only public sector workers and their wages, but spending power in the private sector economy. I hope the Government will look at that.

Will the Minister publish the percentage of employees in each UK Government Department who are in receipt of tax credits? I am sure I am not the only Member of this House who will want to know how low civil servants’ pay is across the country. If we had an indication of the percentage of civil servants in each Department who are in receipt of tax credits, we would find out exactly how low pay is in the public sector.

Hon. Members have mentioned the views of public sector workers. I want to list just some of the comments received by the PCS union from across these isles. Fiona works in the Department for Work and Pensions, and this is how she felt:

“The government is seeking to divide us into deserving and undeserving. Our colleagues in universities are seen as deserving, but those who work for government are not. It’s atrocious. If the government expects us to go into the civil service, they can damn well pay us for it.”

Neil, in the Office for Students, said:

“We need to get back to where we were. The cost of living is not waiting for us to catch up.”

Tracey, at HM Revenue and Customs, said:

“We are not getting paid enough to keep up with increases in the cost of living. People are doing the same job as colleagues but they are being paid less because there have been no incremental pay rises.”

Wilfred, who works for the Ministry of Justice, said:

“Civil servants are overworked and do the most important jobs for society. In the MoJ we work for judges and deserve respect for the jobs we do. Our skills should be reflected in our remuneration.”

Nicole, who works for the Department for Work and Pensions, said:

“The question should be ‘Why don’t I deserve a pay rise?’ We deserve a better quality of life. DWP is still one of the lowest paid government departments. The fact that we are office workers doesn’t make it less important that we can't afford to live.”

Richard, who works for the Marine Management Organisation, said:

“I’m now earning less money than I was 17 years ago. Prices have gone up but wages have not kept up.”

Susy, who works for Ofgem, said:

“We work hard to achieve results, otherwise what’s keeping us going? There has to be more than job development - we are not shown respect.”

Gordon, who works for the Department for Work and Pensions, said:

“Since the pay cap was imposed my standard of living has fallen every single year. We are falling behind the private sector and people are leaving the department because of low pay.”

Scott, who works in DES Student Loans, said:

“We provide a vital service to students. The cost of living is not in line with our wages. We want a fair day’s pay a fair day’s work.”

Those are the real concerns of civil servants who work across the UK Government Departments.

There are other concerns, too. Some Departments have been reshaping their services, resulting in office closures and staff moving to other locations. Will the Minister confirm that not all those Departments compensate civil servants for office moves? Does he appreciate that some civil servants experience a double whammy of a 1% pay rise and an office move that causes additional travelling costs?

As the Member of Parliament with a higher percentage of public sector employment among those in work than in other constituencies in these isles, I have campaigned vigorously for the public sector pay cap to end. I listed many reasons for that earlier, such as the fact that 70p in every pound goes into the private sector economy. Increasing pay for civil servants will boost the whole economy and increase spending power. We cannot go on with a system where the Government advocate pay restraint but then spend money propping up low pay in the public sector via the benefits system.

[Julia Lopez (Hornchurch and Upminster) (Con)]

Is the hon. Gentleman aware of how much private sector employees get in his constituency? There is a risk in certain parts of the country, where the public sector is so dominant, that the relative spending power of public sector workers will make it difficult for private enterprises to flourish, because they cannot attract the correct employees to their business.

[Chris Stephens]

I take the opposite view. In areas of high public sector employment, public employees’ spending power keeps the private sector economy alive. They keep jobs going in the private sector with the money they spend, so I am afraid I do not agree with the hon. Lady’s analysis.

It is an honour and privilege to speak on behalf of millions of people employed in the civil service on these islands. I look forward to the Minister responding positively to the issues raised today.

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[Luke Graham]

Thank you, Mr Owen. I always welcome a lively debate.

To be clear, that pay rise will not come from the devolved Administration that imposed the tax; it will come from the UK Government, who will have to cough up to bridge the gap. It was not me who said that Scotland has the highest rate of tax for armed forces personnel; it was Lieutenant General Nugee at a hearing of the Public Accounts Committee just yesterday. That is fact. It is clear that it will be left to Her Majesty’s Treasury to try to bridge the gap and ensure that people are not disadvantaged.

Scotland was already the most taxed part of the United Kingdom, and nurses, teachers and other public sector staff have been forced to pay, at least in part, for the pay rises they have been given. Money that they have been given through pay rises has been taken away through more tax. That is happening at a time when Scotland badly needs to attract more public sector workers to deal with the horrendous staffing shortages that have developed in the NHS and schools in the past 10 years. The UK Government and the devolved Administration should do as much as possible about that.

Let me make one more point about tax, which is a topic that generates lively conversation across the Chamber and will—and should—continue to be debated during this Parliament. The tax increases in Scotland, which were meant to be a progressive move, deliver only 38p more per week for those on the lowest incomes. That is not progressive; it is pathetic. It shows the contrast between the UK Administration and the SNP Administration in Edinburgh: the SNP does not have a grip on our public services in this day and age, and plenty of people in Scotland are being disadvantaged as a result. The UK Government have shown that it is possible, through a strong economy, to give public sector workers a sustainable pay rise without them having to pay for it through increased taxes.

[Chris Stephens]

Can I bring the hon. Gentleman back to reality? Each and every UK Government Department has budgeted for a civil service pay rise of 1%. The Scottish Government have taken a different approach. Does he not acknowledge that in reality the public sector pay cap is still in place for employees who work for the UK Government?

[Luke Graham]

I will not speak for the Minister, who I am sure will cover this, but the pay rises of 6.5%-plus in the NHS are being fully funded. I am sure that as recommendations from other pay review bodies come through, they will be funded, too.

[Chris Stephens]

rose—

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[Grahame Morris (Easington) (Lab)]

Thank you for your courtesy, Mr Owen. It is a pleasure to serve under your chairmanship. I thank my good friend the hon. Member for Glasgow South West (Chris Stephens) for securing this timely and important debate and for setting out with such clarity the arguments on public sector pay and properly funding the Departments. He did a fantastic job.

During the Whit recess I visited my local HMRC tax office in Peterlee. I thank Linda Hughes, the full-time officer, and the Public and Commercial Services Union local branch reps and local management for facilitating my instructive visit. Valuable work is done at the office in Peterlee, but it is threatened with closure. Almost 500 workers will be relocated, some temporarily to the Washington office, and some will face a considerable additional commute to Newcastle, where jobs are to be centralised, if they want to maintain their employment.

The purpose of my visit was to listen to the concerns of PCS members—the employees—but I saw in the office on the PCS noticeboard a sample of the figures for workers who had lost income because of Government pay restraint. On average, they had lost about £3,000 a year directly as a result of the imposition of the civil service pay cap. Perhaps if the Minister were to visit my constituency and meet some of the workers, he might understand the value of public sector workers and consider paying them properly.

Since the economic crash in 2008, public sector workers have been subject to unjustifiable pay constraint policies designed to make them pay for a financial crisis not of their making. A Government Back Bencher said earlier that that had made a substantial contribution to deficit reduction, but surely if we properly funded Departments—HMRC in particular—we could have achieved that deficit reduction through many other avenues, not least closing tax loopholes and making individuals and corporations who are avoiding their taxes pay their fair share.

[Chris Stephens]

Does the hon. Gentleman share my frustration that there are 4,000-plus employees chasing DWP social security fraud, estimated at £1.2 billion, and in HMRC’s wealth unit there are fewer than 500 employees chasing tax avoidance of £70 billion?

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[Oliver Dowden]

The problem was that the last Labour Government did not fix the roof while the sun was shining. We entered this situation as the least well prepared of any G7 country, so that when we faced those challenges, instead of having a robust fiscal situation, we were already borrowing.

[Chris Stephens]

I want to deter the Minister away from this Tory buzzword bingo, so will he explain to us what that has to do with public sector pay?

[Oliver Dowden]

Forgive me; I thought I made that very clear at the beginning. When we inherited such an enormous deficit, we had to constrain public expenditure. Given that public sector pay accounts for a quarter of public expenditure, public sector pay had to play its part. That is why we initially introduced a freeze, followed by a 1% cap from 2013 to 2017.

Those were difficult decisions, and I genuinely pay tribute to all our civil servants who had to live within that constrained pay deal. However, it is worth making a few points in relation to that. The first is that the median civil service salary has increased by 15% since 2010, which is actually the same as in the private sector. Indeed, it is greater than other parts of the public sector.

Many hon. Members also raised the gender pay gap, which is important. Clearly, more progress needs to be made, but again it is worth looking at the figures. The pay gap for full-time employee civil servant salaries is 7.2% for the mean salary and 11% for the median. That compares with 13% and 15.4% in 2008, so we are making progress, but I do not deny that we need to progress further.

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[Oliver Dowden]

The hon. Gentleman talks about the Treasury paying for it. The Treasury does not have any money of its own. It gets money only in three ways: it taxes people, borrows or cuts spending elsewhere. We need to be honest about where the money will come from to pay for any rise.

I will come on to it in a moment, but briefly, we set this out in the spending review; we budgeted for a 1% pay rise across the board. We have now removed the requirement for a 1% rise. That creates two further opportunities. The first is that there will be flexibility, if further efficiencies can be found, to further increase pay, above 1%. In addition, if there is a significant change in working practices that can justify a significant pay rise, a full business case can be made, and that will allow the funding of a larger pay rise.

[Chris Stephens]

The Minister now appears to be suggesting to the House—I just want to double-check that what I heard him say was what he said—that each Department has budgeted for 1%. If that is the case, surely those of us who are arguing that the public sector pay cap has not ended or been lifted are correct. Is that the case, Minister?

[Oliver Dowden]

The cap has been removed; it is no longer the requirement that public sector pay rises be limited to 1%. The situation in the spending review was clear: there was a budget for a 1% rise. If Departments wish to go further than that, they need to find efficiency savings. My right hon. Friend the Chancellor of the Exchequer was perfectly clear about that in the autumn Budget.

My final point in relation to the overall terms and conditions for civil servants is about the amount of pension contribution that is made. This point was made by my hon. Friend the Member for Ochil and South Perthshire (Luke Graham). If we look at the figures, we see that for a civil servant on the median salary of £25,900, the Government provide £5,400 in pension contributions. That is the equivalent of an extra 23% on their basic pay and it is something that is not available to most people working in the private sector.

Difficult sacrifices have been made, but as a result we are finally starting to live within our means. Rather than borrowing £1 for every £4 we spend, we are borrowing £1 for every £10. That means that we are still living beyond our means, but it gives us some scope to remove the blanket ban, although that does not mean that we can suddenly fund huge increases in public sector pay. My right hon. Friend the Chief Secretary to the Treasury made it clear in September that the across-the-board 1% cap would be lifted. That means that the Government are no longer pursuing a one-size-fits-all policy for public servants.

In 2016, the Government set out five priority areas in the “Civil Service Workforce Plan”. Those areas are expected to have the greatest impact on readying the civil service workforce to respond to the challenges that the United Kingdom will face now and in the years to come. One priority is a commitment to develop cost-effective and flexible reward structures that enable the civil service to attract, retain and develop the very best talent within the pay systems in place.

In practice, there are two elements to civil service pay. I am sure that many hon. Members will be familiar with this, but I will set it out briefly. The pay of senior civil servants, who make up 1% of the civil service, is subject to an independent pay review body process, which is conducted by the Senior Salaries Review Body. Its 2018 recommendations are expected later this month, and we will respond to them in due course.

The second and by far the larger group, and the group to which most hon. Members were referring, is the rest of the civil service. Its pay and grading arrangements have been delegated to Departments and agencies since 1996. The effect of that, which hon. Members touched on, is that each Department makes decisions. As has been alluded to by the hon. Member for Glasgow South West, I continue to discuss this with the PCS, but the flexibility that it gives us is that it enables each Department to determine its own pay levels so that it can meet the needs of its own Department.

The 2018-19 pay remit guidance, which will set out the overall parameters for any future pay deal, will be published shortly. It will provide the range of average awards available to Departments, but it is for each Department to decide how to structure its pay award, and those decisions will be made in the light of their own priorities and affordability and must be discussed and negotiated with their trade unions.

[Chris Stephens]

rose—

[Oliver Dowden]

I am conscious of time, but I will give way briefly to the hon. Gentleman.

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[Chris Stephens]

The Minister has been generous. Could he just answer this one question? He and the PCS have had some discussion about addressing the 200 sets of pay negotiations. Is it his intention to continue that discussion to look at whether that is actually an adequate way of funding civil service pay?

[Oliver Dowden]

The hon. Gentleman makes an important point. As he says, I have both discussed and corresponded with the representatives of the PCS on this. I will continue that discussion; I remain open-minded on it, but the point I am making is that one has to balance against that the flexibility that allows each Department to tailor to its own needs. I agree that there is an issue about 200-plus sets of negotiations, but hon. Members will understand that there was a reason for that in the first place.

I should move towards a conclusion in order to give the hon. Member for Glasgow South West an opportunity to respond. I genuinely am confident that as we approach the 2018-19 pay remit guidance, we will continue to strike the clear balance between an appropriate reward for hard-working civil servants and the need to live within our means as a nation, so that we do not continue to borrow more and load up more debt that will burden our children and grandchildren.

[Chris Stephens]

I thank everyone who has contributed to the debate. It has been a good-natured but serious debate, an excellent debate, on behalf of the civil servants who work right across these islands. We should commend them for the work that they do across all Departments.

The purpose of these debates is to test the Government and to test policy, and I think that what we have discovered again this afternoon is that each and every Department has budgeted for 1% pay rises. That suggests that the public sector pay cap has not ended. I hope that the Minister will commit to negotiating to see the end of the public sector pay cap. Civil servants were not responsible for the economic crash 10 years ago and should not be suffering for it. I hope that the Minister will address low pay in every single Department, because that is of very real concern to many Members of this House.

Question put and agreed to.

Resolved,

That this House has considered public sector pay policy.