Public Sector Pay Policy

Julian Knight Excerpts

Tuesday 5th June 2018 Westminster Hall

[Luke Graham (Ochil and South Perthshire) (Con)]

It is a pleasure to speak under your chairmanship, Mr Owen. I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate. I am sure that he will agree with much of what I say.

Public sector pay has been a hot topic for parties across the political divide over the past few years. The 1% public sector pay cap, which was introduced in 2010 by the coalition Government, was seen at the time as a reasonable approach to help to reduce the deficit while keeping pay increases in line with the very low rate of inflation. The cap, which formed part of the Government’s long-term economic plan, helped to get this country’s public finances back under control and ensure that the finances that keep the public sector running got back on to a more sustainable footing.

In recent months and years, with some of the deficit costs having come down and the Government having met some of their targets, we have seen some of that effort and sacrifice bear fruit. That necessary process allowed the UK Government to protect public sector jobs and services, which I believe is why the Scottish National party Administration in Scotland and the Labour Administration in Wales also implemented the 1% pay cap policy.

However, as I am sure hon. Members across the Chamber would agree, that was never intended to be a permanent or even a long-term solution. That is why I am pleased that the UK Government are moving away from the 1% public sector pay policy in favour of a more flexible approach. It is more than fair that that shift in pay policy comes now. However, as one of my hon. Friends mentioned, the policy helped to address some of the issues that were emerging between private and public sector pay. As a result of the great recession, we saw a decrease in private sector pay that was not reflected as severely in public sector pay. We have since seen a divergence, and then a convergence.

[Julian Knight (Solihull) (Con)]

My hon. Friend makes an interesting point. Is the situation he describes not exacerbated by pensions differences? The fact is that the pensions of public sector workers are far more valuable than those in the private sector.

[Luke Graham]

That is right. We need to look at pay, but we need to look at overall packages as well, including pensions and other rights and responsibilities that both public and private sector employees benefit from. I am really clear that the public sector should always be as competitive and attractive as the private sector in both pay and packages, and I certainly do not argue that there should be any decrease in that.

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[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.

[Rachael Maskell]

Will the hon. Gentleman give way?

[Julian Knight]

I am really conscious of the time. I apologise.

Not only must the public sector modernise to keep pace with the evolving needs and expectations of modern Britons but it is absolutely essential that the civil service is equipped to take on the new responsibilities that will fall to the Government as we exit the European Union. It is worth remembering that the pay freeze has allowed public sector managers facing tough budget constraints to save jobs. I have a problem with the statement made by the hon. Member for Glasgow South West. If Departments pay more than 1%, there will be job losses. In fact, if there had not been pay restraint, we would have had more job losses. The point is that that pay restraint meant we were able to keep more people in employment. That is an important point to make. Many people in the public sector have taken that very much on board, but I know that over time patience has worn thin. I will make one other point about the hon. Gentleman’s speech. I imagine the 200-plus pay negotiations are inefficient, and I want to convey that to the Minister today

Of course, the purpose of austerity is always to return the public finances to a point where we can safely and responsibly start making the investments that Britain needs, and I am glad that the Government are now in a position to reconsider the public sector pay freeze. Nor is pay the only way in which Ministers are investing in civil servants. In a speech on 24 January, John Manzoni, the chief executive of the civil service, set out the sheer scope of the modernisation programme currently under way, and a key part is investing in the people who make the service what it is.

For example, the Digital Academy is equipping 3,000 civil servants a year with new skills that will help to transform the way we deliver services, and the new Data Science Campus in Newport is going to train up to 500 fully qualified data analysts for the Government. That is absolutely crucial at this particular time. A concerted drive to streamline the number of Government buildings will help to ensure that the great majority of civil servants are able to work in modern, collaborative environments that will help them to fulfil their potential. The Assessment and Development Centre, launched in 2016, has assessed more than 1,000 people to help them progress in their careers and make sure that the civil service meets the same professional standards that prevail in the commercial sector.

Such long-term investments will benefit not only service users but civil servants. Providing modern working environments, clear career pathways and strong development support is as important to attracting and retaining the best people as competitive pay.

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[Luke Graham]

rose—

[Julian Knight]

rose—

[Neil Gray]

Mr Owen has already reprimanded me for jousting during the debate and has indicated that I should wind up. [Interruption.] By all means I shall give way to the hon. Member for Solihull.

[Julian Knight]

While the hon. Gentleman is being so generous and giving such fulsome praise, will he also be generous in recognising that the Government and the coalition Government raised the personal allowance to such an extent that the very lowest incomes have risen considerably?

[Neil Gray]

I have already stated—this is probably for another debate—that interventions in the tax system are not the most efficient way of targeting people on low incomes. A far more efficient and effective way of targeting them to ensure that they have a proper quality of life would be to increase the rates of the work allowances of universal credit and tax credits. [Interruption.] I think we have said enough on that, and perhaps it is a debate for another day.

The Scottish Government have protected public sector jobs and services for the people of Scotland by delivering on our promise of no compulsory redundancies and an affordable public sector pay increase that reflects the cost of living. It is difficult to compare the pay offer with that in areas for which the UK Government have responsibility, because there is not the same universal pay offer as there has been in Scotland, as outlined by my hon. Friend the Member for Glasgow South West. We see a piecemeal approach from the UK Government, because Treasury Ministers have consistently and belligerently refused to fund a public sector pay rise for all UK Government Departments. That means it is up to individual Ministers to find the money to pay for awards from existing, squeezed budgets.

While this Government rightly praise our emergency services for their response to the likes of Grenfell or the various terror attacks, and they rightly and routinely praise NHS staff, teaching staff, prison officers, Jobcentre and tax office staff, and other public sector workers, they do not match that praise with fair reward. Hopefully, in the summing-up speech, we might finally find some movement from the Minister. The UK Government must follow the Scottish Government’s progressive lead when they publish their civil service pay guidance. They must fully fund an expansion in public sector pay, rather than just lifting the 1% restriction. If the UK Government agree that our public sector workers deserve a pay rise beyond 1%, they need to put their money where their mouth is, as the Scottish Government have done, and fund it.