Public Sector Pay Policy

Julia Lopez Excerpts

Tuesday 5th June 2018 Westminster Hall

[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.

--- Later in debate ---

[Julian Knight (Solihull) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Owen. I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing this important debate.

Let us first get something straight about the British civil service in devolved Administrations and in England and Wales. According to the international civil service effectiveness index, this country is fortunate to have the finest civil service in the world. Sometimes in our surgeries we have little problems come to us, but we have to realise that for every situation we see, things might not be so bad and there are thousands of cases that civil servants get right and the decisions made are in many instances spot on. Compared to many other countries, as we travel around the globe and become involved in political discussion with people from other nations, the UK civil service is incredibly honest and has a code of ethics that is an example to the world. It is important to recognise that fact here today.

Over the past decade both Labour and the Conservatives have had to make difficult decisions about how to prioritise public spending while reducing the deficit. However, we are now in a position to lift the pay freeze and make the investment needed to help the service maintain its world-leading position.

According to the Treasury, roughly £1 in every £4 of public spending is spent on pay. After the crash, therefore, politicians of all parties, including Labour and the Scottish National party, recognised that restraints on public sector pay had a necessary role to play in bringing the deficit under control. That was absolutely the correct choice to make at that time. We have to put this into context. A GDP debt of 11% is enormous. We can cope with that for a year or two, but not for a sustained period. We have to get it under control. If we do not, the markets go against us, the country ends up borrowing at far higher rates of interest, and we end up going down the road of Greece and Spain where we have seen public sector pay actually cut: I do not mean in real terms, but actually cut by up to 40%. People’s old-age pensions and fixed pensions were cut at the most vulnerable time.

[Julia Lopez]

Will my hon. Friend give way?

[Julian Knight]

I will give way, although I am conscious of the time.

[Julia Lopez]

I thank my hon. Friend for giving way. I totally agree with him. Although there has been a public sector pay cap over the past years, that does not tell the whole story. Does he agree with me that across much of the public sector during those years, pay increased automatically with every year served because it had been contractually agreed before the cap came into force? Also, staff could move between bands, so it is not the case that there was completely flat pay. It is more nuanced.

[Julian Knight]

My hon. Friend makes a fair point, but it is right and proper that the Government now take into due consideration the independent pay review bodies so that the 1% cap is dispensed with over time. However, I take my hon. Friend’s point in its entirety.

--- Later in debate ---

[Oliver Dowden]

I thank my hon. Friend for that helpful intervention; I am absolutely sure that he is correct.

Inequality was also raised, but again let us look at the actual figures. Income inequality is down since 2010, and is lower than at any point under the last Labour Government, so let us start with the facts of the situation. Not only that, but we have helped the lowest paid. For example, when the freeze was introduced, we ensured that anyone earning under £21,000 received at least a £250 increase in their pay.

In addition, as many of my hon. Friends have mentioned, we introduced the national living wage, the effect of which has been to benefit more than 2 million people, leaving them more than £2,000 better off since its introduction. As a result, figures from the last two years show that the lowest paid in our labour market received pay rises almost 7% above inflation, and many of those who benefited were our lowest-paid civil servants. Indeed, the overall picture shows the salaries for junior grades of civil servants remaining comparable to private or public sector equivalents, and in total remuneration both administrative assistants and administrative officers—the lowest paid in the civil service—are paid more than their private and public sector equivalents in London.

[Julia Lopez]

My hon. Friend is making a strong case for the reasoning behind the Government’s decisions. However, many of us are concerned that we are now seeing false economies. For instance, restraining public sector pay is leading to increases in agency costs and a loss of talent, which has reduced productivity in some sectors. We now need to look at what those costs are. What analysis has he done of those costs versus the costs of increasing pay?

[Oliver Dowden]

My hon. Friend is absolutely right, and in a moment I will come to the fact that we have actually lifted the 1% pay cap across the board.

However, I will make one further point on the measures the Government have taken to help the lowest paid—and, indeed, all workers. I am referring to the increase in the personal allowance. When we came to power in 2010, the personal allowance—the tax-free allowance—stood at £6,475. It now stands at £11,850. That is near enough a doubling, and it means that any basic rate taxpayer will be more than £1,000 better off compared with 2010. Through a combination of ensuring that we have a national living wage and tax cuts, we have ameliorated many of the impacts of the necessary public pay constraint, which we had to introduce. In addition, we have frozen fuel duty, saving the average driver £850 compared with pre-2010 plans.