Civil Service Pay

Chris Stephens Excerpts

Tuesday 7th March 2023 Westminster Hall

[Beth Winter]

I thank the hon. Member for her contribution, and I will come on to recruitment and retention later.

There have been pay freezes and pay caps over the last 13 years. The situation has worsened in the past 12 months because of high rates of inflation and the lower allowance in the civil service compared with other public sector settlements. Civil servants had a paltry 2% pay rise imposed on them in the past year, which is more than 10% below the retail price index at its peak and almost 10% below the consumer prices index.

Civil servants, teachers and nurses have all suffered under the Conservatives’ low-pay agenda, and have all received a completely unacceptable and avoidable real-terms pay cut. The extent of the Conservative Government’s low-pay agenda is laid bare by the high number of civil service staff in receipt of the minimum wage. It is an absolute travesty that over a quarter of DWP staff are paid so little that the national living wage floor increase this April will push their salaries up. It is worth noting that when many Departments contract work, they insist that people get paid at least the real living wage as determined by the Living Wage Foundation, yet the civil service itself point blank refuses to guarantee to pay civil servants at least the real living wage.

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

I thank the hon. Member for giving way and emphasising that point. Does she share my concern, and that of many others, that the statistics she has just quoted are the reason for an increasing number of civil servants using food banks in order to survive week by week?

[Beth Winter]

I thank the hon. Member for his contribution and I fully agree. I will come later to the stark figures on the use of food banks by civil service staff.

As I said, the past 13 years of pay freezes and pay caps have slashed the value of civil service pay. There is also the current civil service pay remit process, which is completely unacceptable. The FDA union describes the current system as “entirely flawed and incoherent” and as one that completely fails to allow for a strategic approach to pay, reward or meaningful negotiations.

Repeated pay cuts cannot simply be imposed without industrial disputes. Pay needs a negotiation between employers and employees. The current civil service pay remit process does not even offer the façade of employee involvement through the trade unions that even the increasingly discredited public sector pay review bodies are meant to offer. The end of national pay bargaining in the civil service by the Thatcher and Major Governments and the introduction of departmental and agency-delegated responsibility for setting pay continued the Tory ideological attack on the powers of the trade unions.

In the “Continuity and Change” White Paper, John Major’s Tory Government set out how, previously,

“centralised pay systems covered groups of staff whatever department they worked in, with settlements negotiated nationally between the Treasury and the unions.”

Even the claim that pay is delegated is a fallacy. Pay continues to be determined centrally. Ministers can, and do, still determine pay in these different bargaining units. That is evidenced by George Osborne’s imposition of a two-year pay freeze in the civil service, which he did without permission from the delegated bargaining areas. He was allowed to do that. That has been the approach for the past 30 years. It now applies to more than 200 bargaining units across the civil service, from the DWP to the National Museum of Wales. It is not logical, practical or cost-effective, and is certainly not fair. The fragmentation of the pay system has been described by the former Minister for the Cabinet Office, the Secretary of State for Levelling Up, Housing and Communities, the right hon. Member for Surrey Heath (Michael Gove), in his evidence to the Select Committee on Public Administration and Constitutional Affairs as the “balkanisation” of pay. I would like to hear whether the Minister agrees with that comment.

What is the cost to the Government, both in finance and efficiency, given the duplication of human resource process, of changes to payroll procedures across so many units? It is just not cost-effective. Although civil service Departments essentially follow the same grading structure, the salaries paid at different levels by different Departments mean increasing disparities, resulting in significant inequalities. There has been an entrenchment of inequalities that existed in the 1990s, and an opening up of new gaps that did not even exist then. The PCS union has argued that as a result there has been an entrenchment of historic gender and ethnicity pay caps, and the development of pay differentials across Departments for the same grades. That includes women being paid less than men, and the pay process has not allowed them to break out of that. Last year, Civil Service World reported how the civil service’s median gender pay gap had widened for the first time in six years, with a gender gap in average hourly earnings of 11.3%. In most cases, where large median pay gaps exist, it is because there is a higher proportion of men in senior and more highly paid roles, or of women in more junior roles. The PCS has argued that, as civil servants are increasingly being co-located into regional hubs organised by His Majesty’s Revenue and Customs and by the Government Property Agency, the difference in pay between staff at the same grades is becoming increasingly apparent—so much so that the PCS has said that it is preparing to begin large-scale equal pay challenges, bringing cases on behalf of women in one bargaining unit against men in another.

Ethnicity pay gaps are also a significant cause for concern. Black members of staff are disproportionately employed in lower paid areas of the civil service. Only this morning, we heard shocking evidence of racism in the Cabinet Office from trade unions giving evidence to the Public Administration and Constitutional Affairs Committee. Regional inequalities have also been identified. For example, a median civil servant at administration assistant or officer level at the Ministry of Defence earns just over £20,000, whereas their equivalent in the Welsh Government earns around £24,500, nearly as much as the median executive officer, a grade higher, at the Department for Digital, Culture, Media and Sport.

The evidence clearly shows that the pay structures across the civil service are unequal, dysfunctional, broken and in urgent need of reform. The situation hinders the delivery of an efficient service, so the transfer of staff between Departments is complicated in the absence of a uniform and fair pay system, while the unfair pay differentials create obstacles to achieving effective joint working within or between Departments. As others have mentioned, poor pay and terms and conditions within the civil service are also resulting in recruitment and retention problems, which, in turn, are also very costly for the Government.

Analysis by the Institute for Government reveals that turnover in the civil service is the highest it has been for a decade, and that the recruitment and retention of highly skilled staff is a particular cause for concern. It stated:

“The National Audit Office, the Public Accounts Committee, Ministers and civil servants have described how a lack of specialist skills in areas from digital to finance has contributed to delays, cost overruns or policy and operational failures.”

Research commissioned by Prospect and the FDA this year concluded that in order to ensure that the civil service can recruit and retain the high numbers of staff required, it is essential that the Government urgently address the poor levels of civil service pay. That is all having a significant detrimental impact on staff.

In PACAC this morning, we discussed the civil service people’s survey and we heard shocking evidence of harassment, bullying, discrimination and racism in the civil service. I will just quote some startling figures from a recent PCS survey of its members: 85% said that the cost of living crisis has impacted their mental and physical health; over half fear losing their home; 40% say that they have used credit to pay for essential shopping; and almost a fifth say that they have missed work because of their inability to afford transport or fuel. As the hon. Member for Glasgow South West (Chris Stephens) has said, 40,000 are using food banks, and 47,000 people are claiming universal credit because pay is so low. That is totally unacceptable and that is why civil service staff have been driven—forced—to take industrial action.

Nobody makes the decision to take industrial action lightly; it is very much a last resort. It is not a choice but a necessity that has been forced on civil service staff. Since December, PCS has been engaged in a series of targeted industrial action across many Departments, including the Department for Environment, Food and Rural Affairs, the Driver and Vehicle Licensing Agency, the DWP and Border Force. That is why we will see over 130,000 civil servants take strike action on Budget day next week in an attempt to make this Government listen and improve their offer. PCS is not alone. The poor pay outcomes have also led the Prospect union to ballot its members and they have also overwhelmingly voted for industrial action. Even the fast-streamers organised by the FDA have voted for industrial action.

I am very conscious that some Government Members have sought many a time to assert that rising wages cause inflation by creating a wage spiral. I am confident that the Minister is aware that that does not stand up to scrutiny. Research by James Meadway for the General Federation of Trade Unions, cited in a recent pamphlet, said:

“Whatever it is that is driving inflation in the UK, it is not high wages. Wages have been low for a long time and are now falling very fast.”

Independent analysis commissioned from Incomes Data Research by Prospect and the FDA argues that,

“public sector pay rises might only lead to an increase in inflation if they at least matched or were higher than current rates of inflation, and then only if private sector employers followed suit, and then only if these employers then decided to deliberately pass on this aspect of increasing costs directly to consumers in the form of price rises.”

If the Government truly believe that they do not have the resources to fund the pay rise, they need to make it clear they will end some of the tax inequalities that continue to let the wealthiest off the hook and will introduce a new measure of wealth taxation.

Previously, I have highlighted what such measures might include, including the equalisation of the rate of capital gains tax with income tax, which, in a single measure, would raise up to £14 billion. The money is there; it is a political choice not to use it. The Government can afford to pay civil servants, all public sector workers and everybody who has been forced to strike a decent wage.

I will move to a conclusion. There are a number of issues that need addressing and I would welcome the Minister’s response to them. We need an audit of pay differentials impacting gender and ethnicity across Departments, an audit of pay differentials at the same employment grades across Departments, a grouping of agencies around their main Government Departments to harmonise pay arrangements and an acceptance of the need for pay remits that move the civil service towards national pay rates, which will establish moving floors at different grades and the safeguarding of differentials between grades. That should be a step on the way to the re-establishment of a national pay bargaining process that ends the refusal to negotiate with trade unions.

Indeed, Labour’s deputy leader, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), and her predecessor on the employment rights brief, my hon. Friend the Member for Middlesbrough (Andy McDonald), have set out that fair pay agreements will be negotiated through sectoral collective bargaining, reversing the decades-long decline in collective bargaining coverage. I am not asserting that that is a manifesto commitment to national pay bargaining for the civil service, but it is clear evidence of the direction in which the party intends to move. I refer people to the Labour party’s excellent “ A New Deal for Working People” employment rights Green Paper for more information.

Such an approach is essential in order to tackle the problems of insecurity, inequality, discrimination, enforcement, low pay and the raft of other issues that I outlined in my speech. Urgent action is also required, with the Government’s commitment to hold constructive talks with PCS to resolve the current dispute. In next week’s Budget announcement, we need a revision of the 2022-23 civil service pay remit that reflects an understanding that a 10% rise and a living wage of at least £15 an hour are wholly affordable—wholly in this Government’s grasp—and do not require a reduction in service provision. We need a reformed pay bargaining process for the civil service and across the public sector, and an end to the Tory low-pay agenda of holding down public sector pay. Diolch yn fawr, Mr Pritchard.

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

It is a pleasure to see you in the Chair, Mr Pritchard. I refer the House to my entry in the Register of Members’ Financial Interests, particularly my position as chair of the PCS parliamentary group. I thought I would do that, Mr Pritchard, because we usually hear shouts from the Conservative Benches about the Register of Members’ Financial Interests, but I notice that those Members are on strike today. No one from the Conservative Back Benches is here to take part.

Who are the heroes of the pandemic? I would suggest that among those heroes are those who worked in the civil service, such as those who were in the Department for Work and Pensions when there was an explosion of universal credit claims that had to be processed and of people to be paid on time. It was those people who made sure that universal credit payments were paid on time, helping those in need. The heroes of the pandemic include those who worked in HMRC, who had to make sure that businesses, including small businesses, received furlough payments to help ensure that the economic wheels were turning. They include those in the civil service who put together the rules and regulations to update the public on what to do and how to comply with covid regulations, to ensure that the public were safe and protected.

As such, what is astonishing about this debate—as the hon. Member for Cynon Valley (Beth Winter), who secured the debate, has outlined—is that the civil service seems to be treated worst of all across the public sector. Frankly, that is a disgrace. I want to concentrate on the economic case for giving civil servants and other public sector workers a real-terms pay rise. I note that in his demands for the Budget, my good friend the hon. Member for Aberdeen South (Stephen Flynn), the leader of the SNP group, has said that we must have pay rises that match inflation. It is not public sector pay that increases inflation: it is prices. Food inflation is currently around 13%, yet we are offering some public sector workers 2% or 3%: that is not going to help them feed their families, and it is not going to help them going forward. We need to look very seriously at this situation.

The Conservative Government keep telling us that they are the party of efficiency and small government, yet they allow a situation in which there are over 200 separate pay negotiations across the civil service for those who work for the Westminster Government. The fact that so many different pay negotiations are being carried out across the civil service is something that you really could not make up. If the Conservative Government allow that situation to develop going forward, they are opening themselves up to equal pay claims, and I hope the Minister will tell us how they are going to cut the number of pay negotiations. There should be one set of pay negotiations covering those who work for the Westminster Government.

I know that many colleagues want in, Mr Pritchard, so the final point I will make is this: if people are talking, they are not walking. Far too often, we hear Government Members blaming society’s problems on not just refugees, as we heard in the main Chamber earlier, but trade unions. “It is the trade unions’ fault that we have so many societal problems at the moment”—what a risible argument! If the Government keep pursuing that level of tactic and introducing such rubbish legislation, such as the so-called minimum service levels legislation, it is only going to intensify the situation and make it worse. I want to hear from the Government how they are actually going to sit around the table and enter into meaningful negotiations like other Administrations do, including the Scottish Government.

[Mark Pritchard (in the Chair)]

I will have to enforce an informal time limit of five minutes.

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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.

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[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.