Civil Service Pay

John McDonnell Excerpts

Tuesday 7th March 2023 Westminster Hall

[John McDonnell (Hayes and Harlington) (Lab)]

My hon. Friend the Member for Cynon Valley (Beth Winter) and the hon. Member for Glasgow South West (Chris Stephens) have comprehensively covered most of the issues. There is little to say, apart from maybe the Minister saying, “I give up and we’ll go and sort this out.” I also declare an interest as a member of the PCS parliamentary group. There is no financial relationship as such; it is not even affiliated with the Labour party, although I keep trying.

I want to get across to the Minister what the Government need to face up to. In recent years, the Government have come for civil servants’ pensions. They lost in court over that, but they have not even addressed the legal judgment. In addition, they cut their redundancy payments, and now they are insulting them with a 2% pay offer. As the hon. Member for Glasgow South West said, these are the people who worked throughout the pandemic, and were applauded by Government Ministers for what they did. I remember the then Chancellor applauding HMRC and Department for Work and Pensions staff for the role that they played, many of them working from home. And then they get the insult of a 2% pay increase. It is no wonder that, for the first time in civil service history, there will be 100,000 civil servants on strike in a week’s time.

The Government rely on the myth that it is nothing to do with them, and all to do with the Departments that are negotiating. That myth has been exposed time and time again. The pay remit is set by central Government. As my hon. Friend the Member for Cynon Valley said, the Government hide behind ludicrous pay structures. Having 200 individual units is not just inefficient but completely counterproductive. The result is that the civil service is demoralised, and it is failing to retain and recruit in many sectors. At the same time, I never expected public servants to be paid such low real pay. We have seen the issues with food banks, and some workers not even being able to afford the transport costs to get to work. Collectively, as a Parliament, we are the employers. Parliament holds Government to account; we all have to shoulder a responsibility. The Government have to recognise just how serious the situation is. They cannot underestimate the depth of anger that is out there among civil servants, their families and their communities.

The Government have hidden behind the high cost of settling at inflation-proofing; they themselves have used the mythical figure of £28 billion. The Institute for Fiscal Studies has already said that there is 4% to 5% within the Government’s existing budget structures for 2022-23, so the cost to get to inflation-proofing may be more like £15 billion to £17 billion. I will not go into detail, but others have pointed out how much the Government will get back in tax, national insurance contributions and so on. As a result of that, we are talking about single figures in terms of the cost to ensure that civil servants are inflation-proofed. The Bank of England destroyed the argument that this causes inflation in some way. Some 80% of the inflationary factors are external, and not to do with pay. The Government cannot argue that wages are causing inflation when they have been held down for 13 years. As others have said, they are now between 12% and 23% lower.

Finally, we need an inflation-proofing offer immediately so we can avoid the industrial action that is taking place. We want a reform of collective pay bargaining structures so we can get away from the current ludicrous system and back to collective bargaining itself. I think that in the future, all pay settlements across the whole economy should minimally be based on inflation-proofing, so that people are not impoverished as a result of pay settlements imposed upon them by the Government.

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[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.

[John McDonnell]

It is difficult to see how a reasonable settlement below the rate of inflation—for example, the fire brigade settlement of 7%, with backdating and 5% for next year—could in any way offend against the Bank of England Governor’s comments. Have the Government even considered an offer of that sort to the civil service?

[Alex Burghart]

The right hon. Gentleman is a former shadow Chancellor. He will appreciate that the higher the pay settlement, the slower the rate of decline in inflation is likely to be. [Laughter.] He laughs; I hope he has realised how the numbers work.

[John McDonnell]

This is unique in economic history in this country. We are arguing that a pay award below the rate of inflation is still inflationary. I have never heard that one before, and I think we should record it for posterity.

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[Mark Pritchard (in the Chair)]

Indeed, there are a lot of passionate feelings on both sides of this debate.

[John McDonnell]

There was a flippant remark from the Minister with regard to meeting PCS members. I just remind him that PCS members in my constituency—two Border Control staff—died during the pandemic because of covid. They sacrificed their lives keeping this country safe.

[Alex Burghart]

On a point of order, Mr Pritchard. The right hon. Gentleman knows full well that there was no flippant remark about PCS whatsoever. [Interruption.] There was no flippant remark whatsoever. The record will state that all I said was that you had been invited to join the picket line, Mr Pritchard. That is not a flippant remark about PCS.

[John McDonnell]

This is a serious debate about people living in poverty.

[Mark Pritchard (in the Chair)]

Order.

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[Beth Winter]

May I ask, through the Chair, whether the Minister will agree to attend the picket line to listen to the real-life experiences of so many thousands of civil service staff? As I began to say, if the Government are not going to address these issues for the people who are suffering, surely they will do so, because it is in their own interests. The overwhelming evidence shows that the current system is not efficient. It is not cost-effective and it will not address the cost of living crisis—

[John McDonnell]

Could my hon. Friend give way to the Minister so that he can respond and confirm whether he is coming to meet the PCS members next week?

[Beth Winter]

I certainly would like to give way.

[Mark Pritchard (in the Chair)]

The Minister can choose to respond or not, because he has concluded his remarks. If he wants to intervene, he can, but it is entirely down to him. The hon. Member who moved the motion can continue for the last minute and then allow me to put the Question, or can talk out her own time, which will mean the Question is not put. She can make that decision. [Interruption.] Order. The right hon. Gentleman should know, as he has been here for a very, very long time. I have been very patient with him.

[John McDonnell]

Too long.

[Mark Pritchard (in the Chair)]

Whether or not the right hon. Gentleman thinks he has been here too long is entirely a matter for him. He will come to order, thank you.