Public Sector Pay Policy

Christian Matheson Excerpts

Tuesday 5th June 2018 Westminster Hall

[Christian Matheson (City of Chester) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Owen. I offer my congratulations to my good friend, the hon. Member for Glasgow South West (Chris Stephens), who has been a consistent advocate against this disastrous policy. I also thank my hon. Friends the Members for Easington (Grahame Morris), for Barnsley East (Stephanie Peacock) and for Coatbridge, Chryston and Bellshill (Hugh Gaffney), who have all given clear real-world examples of the effect of the public sector pay freeze.

The hon. Member for Ochil and South Perthshire (Luke Graham) and my good friend and, dare I say it, fellow Cestrian, the hon. Member for Solihull (Julian Knight) talked about the genesis of the public sector pay freeze policy, which dates back to the financial crash. I will simply make the point that it was not public sector workers who created the financial crash, but they are the ones who still have to live with the detriment of it, seven to 10 years afterward, while it took Wall Street and the City of London only a couple of years to get back on the big bonus trail. But we are where we are.

The slogan is, “A country that works for everyone”, although that slogan has not aged particularly well. The country is on its knees, facing the largest inequality and division since the 1980s and early 1990s. As we have seen with failures such as Capita, G4S and Carillion, commercial failure is rewarded with more public funding, while our public sector services at the sharp end are being taken for granted.

[Luke Graham]

Will the hon. Gentleman give way?

--- Later in debate ---

[Christian Matheson]

Just the once. The hon. Gentleman was very generous with his time, which is why I cannot be too generous with mine.

[Luke Graham]

Understood. I have a quick question: the hon. Gentleman said that inequality had increased and was the worst since the 1980s. Can he quote the source of that data, please? I would dispute it.

[Christian Matheson]

First, I do not necessarily trust the figures from the current Government, because they are well known for cooking the books, but I genuinely suggest that the hon. Gentleman comes down to any food bank—

[Luke Graham]

That is not answering the question.

[Albert Owen (in the Chair)]

Order.

[Christian Matheson]

I suggest that the hon. Gentleman comes down to any food bank and finds out whether its recipients believe that equality is greater or worse.

The Government talk of lifting the public sector pay cap, but that is nothing more than a politically cute headline. After seven years of crippling pay freezes, the real-world consequences of the Government’s policies are half a million children of public sector workers in poverty, while Ministers have dished out a £70 billion tax break bonanza.

[Afzal Khan]

I want to make a point about the children. I have had many constituents come to me raising concerns about school assistant teachers. Some of them in the academies are earning £12,000—a poverty wage—while bosses routinely get salaries of £150,000. Does my hon. Friend agree that that injustice requires action and that we should look at instituting a maximum ratio for boss to worker pay in the public sector?

[Christian Matheson]

That would be a very interesting exercise, and we could certainly look at some of the sky-high pay for the bosses of some of the academy chains, but I will not go into the detail of that just now.

The problem with the modern Conservative party is that it is not at all modern. Old habits die hard. In addition to selling off public assets, they have now turned their attention to asset stripping our public sector workforce itself. As we know, the NHS is currently going through a mass exodus, with 10% of nurses leaving last year alone and over 100,000 vacancies across the service. The decision to scrap the pay freeze should have been made years ago. Landman Economics and the Trades Union Congress—I join colleagues across the House in paying tribute to the TUC on the 150th anniversary of its founding—estimate that there were real pay cuts and a loss of 13.3% between 2010 and 2018 for health and education workers, and 14.3% for public administration workers. Those figures have been reiterated by the Royal College of Nursing, which says that this has,

“damaged the morale and finances of NHS staff”.

Having spoken to numerous public sector constituents living from pay cheque to pay cheque and having to choose between heating or food, I suggest that that is a polite understatement.

[Dr Poulter]

The hon. Gentleman makes a fair point. I draw attention to my declaration in the Register of Members’ Financial Interests in making this intervention, but there has been great reliance on agency and temporary staff in both the education sector and the NHS as a result of the failure to retain and recruit staff in many areas. Does he agree that improving the terms and conditions and the pay of NHS staff would help to address that and would improve NHS finances overall, and that it is a short-sighted Treasury that does not take note of that point?

[Christian Matheson]

The hon. Gentleman is very experienced in matters of health and the NHS, and I suspect that what he says has real merit. Frankly, there are private companies offering bank staff across the NHS and making a large amount of money that would be better spent on frontline services and on paying staff more than the 1% pay cap. I thank him for his contribution.

We have all heard the heart-wrenching stories of public sector staff having to work two jobs to pay their bills or having to use food banks just to eat. This is modern Britain, where our greatest national treasure and our most valuable assets are treated with the same contempt and disregard that tax-dodging conglomerates have for our country. The Chancellor agreed to a below-inflation pay increase for NHS staff of 6.5% over three years on the condition,

“that the pay award enables improved productivity in the NHS”.

In real terms, that means forfeiting a day’s holiday each year for less money. Public sector workers have been cheated out of thousands, have had their pensions negatively affected and have now had their workload increased for less money.

If hon. Members visit any hospital, such as the Countess of Chester hospital in my constituency, they will see the NHS running on the goodwill of its staff. I know of health care assistants on wards who will work a 12-hour shift with barely a 10-minute break. They do that because they believe in what they are doing, but they are already working to maximum capacity and productivity, yet the Government still demand more to earn a pay rise that they have, in reality, already earned several times over. If hon. Members visit any school, where cuts still bite despite Government promises of more cash, they will find headteachers worried that any pay rise granted by the Government will have to be found from existing school budgets—the usual Conservative tactic of passing the responsibility on to someone else.

The hon. Member for Glasgow South West and my hon. Friend the Member for Easington referred to the study by the Centre for Labour and Social Studies on the terms of civil service pay rises. It is the same tactic. We have heard that the pay rise would have to come out of resource departmental expenditure limits for current spending; yet, as we have also heard, Departments as a whole will continue to suffer real-terms cuts to their RDELs up to 2020 and, of the principal Departments covered, only the Ministry of Defence will see an increase in this area of its budget. They made that point clearly, and it calls into question whether the Departments will be able to award pay rises of more than 1%; in fact, they might not even be able to raise that 1%.

Our police and prison service staff were offered a 1% increase and a 1% bonus, which will leave them with, yet again, a below-inflation increase. The chairman of the Police Federation said that staff had been left “angry and deflated” and had experienced a 15% decrease in real spending terms compared to seven years ago. Prisoner numbers are up and are increasing by an average of 3.5% per year, while the number of frontline prison officers, who have been offered a below-inflation 1.7% increase, has remained static.

The pay cap may have been verbally ended, but there is no evidence of its ending in the real world. Take-home pay, in real terms, has not increased. The quite shocking reality is that less than 4% of public sector workers will benefit from the Government’s decisions last September, and no further spending or new money has been made available in the autumn or spring Budgets. What makes one part of the public sector more worthy of being paid fairly than another? Even if the pay cap was genuinely lifted, it would not make up for the loss of thousands of pounds in the past—and indeed in the future, as a knock-on of the pay freeze now. One advantage of the pay cap is that, by keeping wages low, it makes it easier for parts of the public sector to be privatised, and for the privateers to make bigger profits off the back of low-paid but hard-working employees.

I will finish on a point also made by the hon. Member for Glasgow South West, first about pay in the private sector. For many positions in the private sector, public sector roles and pay increases are used as a comparator. Squashing public sector workers’ pay keeps some private sector pay deals flat as well. By crushing the pay of several million public sector workers, billions of pounds of spending power is taken from the private sector, as the hon. Gentleman said. I imagine that very few civil servants, school dinner ladies or police officers salt away their money in offshore tax havens. They spend it here in the UK in the private sector, which then pays the taxes to support public services. The pay freeze is therefore not just unfair—it is bad economics.

For the record, I will wind up by suggesting that the next Labour Government will lift the public sector pay cap for all public sector workers. We demand nothing less from this Government. In “Funding Britain’s Future”, Labour set aside a costed £4 billion to ensure that every public sector worker will get an above-inflation pay rise. The pay review bodies have been operating under the constraint of a Tory 1% cap for eight years. The Government must now lift the pay cap across the whole public sector, rather than playing one group of workers off against another.

[The Parliamentary Secretary, Cabinet Office (Oliver Dowden)]

It is a pleasure to serve under your chairmanship, Mr Owen. I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate. I know that, in his role as chair of the PCS union parliamentary group, he takes a keen interest in matters relating to the civil service—as do I, as a responsible Minister.

This has been a valuable debate, with intelligent contributions from most—not all—hon. Members. I think I will be able to address most of those points in my speech, so if hon. Members will forgive me, I will not go into detail at the beginning. However, I shall try to cover any remaining points at the end of my remarks, because I am conscious of how much time we have left.

The starting point has to be the role of civil servants. I know from my experience—both recently as a Cabinet Office Minister and in the five years I spent in Downing Street as an adviser—the standard of our civil service. I have worked with some of the most genuinely committed, talented and hard-working public servants in our country, and I pay tribute to every one of them. At a time when our country faces many challenges, not least how we deliver Brexit, we can rely on our civil servants to help us. I see that every day in my role as a Minister, whether in the groundbreaking work of the Government Digital Service or the critical work of our civil contingencies team. Day in, day out, I see the tremendous quality of the work that they deliver.

The starting point for me and the Government is that all civil servants deserve to be rewarded for the work that they do, so that we can attract the brightest and the best. At the same time, that has to be balanced against the wider constraints faced by our public finances. I will set out some context. The shadow Minister spoke about who caused this situation, so let us remember. When we came into government in 2010, the UK had the largest deficit in its peacetime history. We were borrowing £1 for every £4 or £5 that we spent. Who caused that? It is quite clear: the last Labour Government. We had to deal with that legacy.

In that context, I make no bones about the fact that we had to take some very difficult decisions. As has been said by many hon. Members, including my hon. Friend the Member for Solihull (Julian Knight), one of those difficult decisions, given the proportion of public expenditure accounted for by public sector pay—about a quarter—was that public sector pay had to be restrained, which is why we introduced a pay freeze for the first two years of the Parliament, followed by the 1% pay cap.

[Christian Matheson]

I am most grateful to the Minister for giving way; I will only intervene once. If what he says is the case, can he explain how the last Labour Government were responsible for the crash of the sub-prime mortgage market in the United States, which caused the crash here?

[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.