Public Sector Pay Policy

Luke Graham 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.

[Neil Gray (Airdrie and Shotts) (SNP)]

The hon. Gentleman appears to be outlining a case for the end of public sector pay restraint. Will he advise us what he feels the Government could do to ensure that Departments are able to fund the pay rises that my hon. Friend the Member for Glasgow South West (Chris Stephens) talked about? Might that include the Treasury investing in those Departments?

[Luke Graham]

Yes, that is the point I am making. Recommendations will be forthcoming as part of the delegated pay reviews. I will come to the NHS shortly, but some of the NHS pay increases that were put forward have been funded. I am sure that the Minister will talk about funding in further detail.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I am sympathetic to the points my hon. Friend raises, and I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate. The pay review bodies historically have had their hands tied by the Government’s 1% pay cap. Is it time that the Government listened to those independent pay review bodies and implemented the meaningful increases they recommend, given that they have regard to recruitment and retention issues throughout the public sector and particularly in the sectors in which they recommend increases?

[Luke Graham]

I am a Back Bencher, not a Minister, so I am wary of committing the Government, but yes. My point is that where pay increases are recommended, the Government should fund them. Given that inflation is now increasing after a period in which people had to make sacrifices and we had to have more financial control, it is only fair that we ensure that there are sustainable pay increases across Departments and the different sectors of public life to reflect the increases in the private sector.

As real wages grow across the United Kingdom—much like the economy as a whole—I am glad that some hard-working public sector staff are reaping the benefits of the UK Government’s new, more flexible approach. For example, the pay rises of between 6.5% and 29% over the next three years in the NHS in England represent great progress. I welcome the fact that pay increases will be larger for lower-paid staff and smaller for those on the highest salaries. The hon. Member for Glasgow South West mentioned that those increases compare with increases of 3% plus 1% in Scotland.

We should be really clear, because sometimes we do not get the full story on Scottish issues. We speak in favour of some of the pay increases, but it is clear that the increases have been between 6.5% and 29% in the NHS in England, and 3% plus 1% in Scotland, as the hon. Gentleman said. We all face challenges—I just wish the Scottish National party would be more honest about those challenges.

[Neil Gray]

Will the hon. Gentleman give way?

[Luke Graham]

I will, but let me complete this point.

It is right that pay increases have been directed more at people who are just about managing and at those on lower incomes. They should benefit those who really need a pay rise. I note that the devolved Administration in Scotland mirrored the UK Government’s 1% pay policy when it was in place, and I am glad that public sector workers in Scotland will now also receive increases. I hope they are as generous as the ones afforded by the UK Government.

[Neil Gray]

Does the hon. Gentleman accept that the pay differential between the NHS in England and the NHS in Scotland is 1% in favour of employees in Scotland?

[Luke Graham]

We have to be very careful about making generalisations. On a case-by-case basis, especially for some lower-income workers, that 1% differential does not apply. I would be more than happy to talk to the hon. Gentleman elsewhere and go into that level of detail.

We are talking about pay, but the other side of the equation is tax. I am disappointed that the SNP Administration in Edinburgh have decided to increase income tax in Scotland. Anyone who earns more than £26,000—slightly below the average wage in the United Kingdom—is now a so-called high earner and has to pay more income tax than their English and Welsh counterparts. That includes teachers, nurses and doctors. Importantly, it also includes armed forces personnel stationed in Scotland, who now pay more tax than any other British armed forces personnel stationed around the world.

[Neil Gray]

That is not true.

[Luke Graham]

It is.

[Neil Gray]

rose—

[Luke Graham]

I will let the hon. Gentleman intervene, but I will come back on that point.

[Neil Gray]

I am sure the hon. Gentleman understands and appreciates that the terms and conditions of armed forces personnel ensure that there is an even playing field between different areas of deployment. That means that if there are spikes or drops in taxation or any other cost of their employment, they do not have to suffer those themselves. They will get the pay rise, but they will not have to suffer the tax rise.

[Albert Owen (in the Chair)]

Order. Mr Gray will respond to the debate from the Front Bench, so he will have protected time. I ask him to be a bit more disciplined and allow Back Benchers to have their time, too.

[Luke Graham]

Thank you, Mr Owen. I always welcome a lively debate.

To be clear, that pay rise will not come from the devolved Administration that imposed the tax; it will come from the UK Government, who will have to cough up to bridge the gap. It was not me who said that Scotland has the highest rate of tax for armed forces personnel; it was Lieutenant General Nugee at a hearing of the Public Accounts Committee just yesterday. That is fact. It is clear that it will be left to Her Majesty’s Treasury to try to bridge the gap and ensure that people are not disadvantaged.

Scotland was already the most taxed part of the United Kingdom, and nurses, teachers and other public sector staff have been forced to pay, at least in part, for the pay rises they have been given. Money that they have been given through pay rises has been taken away through more tax. That is happening at a time when Scotland badly needs to attract more public sector workers to deal with the horrendous staffing shortages that have developed in the NHS and schools in the past 10 years. The UK Government and the devolved Administration should do as much as possible about that.

Let me make one more point about tax, which is a topic that generates lively conversation across the Chamber and will—and should—continue to be debated during this Parliament. The tax increases in Scotland, which were meant to be a progressive move, deliver only 38p more per week for those on the lowest incomes. That is not progressive; it is pathetic. It shows the contrast between the UK Administration and the SNP Administration in Edinburgh: the SNP does not have a grip on our public services in this day and age, and plenty of people in Scotland are being disadvantaged as a result. The UK Government have shown that it is possible, through a strong economy, to give public sector workers a sustainable pay rise without them having to pay for it through increased taxes.

[Chris Stephens]

Can I bring the hon. Gentleman back to reality? Each and every UK Government Department has budgeted for a civil service pay rise of 1%. The Scottish Government have taken a different approach. Does he not acknowledge that in reality the public sector pay cap is still in place for employees who work for the UK Government?

[Luke Graham]

I will not speak for the Minister, who I am sure will cover this, but the pay rises of 6.5%-plus in the NHS are being fully funded. I am sure that as recommendations from other pay review bodies come through, they will be funded, too.

[Chris Stephens]

rose—

--- Later in debate ---

[Luke Graham]

I am sorry; I am finishing. I am sure the Minister will come back on that. The simple point is that the public sector does deserve a pay rise. It should be one that is sustainable but one that we constantly review. I 100% agree with the Government’s more flexible approach. We should maintain those public sector pay rises and always ensure that, especially as the Government go into more challenging circumstances and we try to be truly global Britain, public sector pay and the packages that surround it are just as attractive and rewarding as every private sector role, no matter where in the United Kingdom.

[Several hon. Members rose—]

--- Later in debate ---

[Grahame Morris]

The hon. Gentleman is correct. I hope the Minister reflects on that and applies resources appropriately so that we can recover for the Treasury the maximum revenue from those who are avoiding paying their fair share of tax.

[Luke Graham]

Will the hon. Gentleman give way?

[Grahame Morris]

I will. I cannot refuse the hon. Gentleman as he gave way so many times.

[Luke Graham]

I thank the hon. Gentleman. I acknowledge that there is still work to be done on our tax code, but does he recognise that since 2010 a number of measures have been brought in to close tax loopholes, which have yielded some £5 billion in extra tax returns and tax revenue?

[Grahame Morris]

I recognise that efforts have been made to close the tax gap, but the publication of the Panama papers and various revelations indicate that it is much larger than had been previously estimated. In my humble opinion, it is counterproductive to get rid of skilled and experienced tax collectors employed at offices such as Peterlee in my constituency who have expertise in this field. We would be better off retaining that expertise and allowing those collectors to get on with the job we have trained them to do.

The imposition of pay restraint has compounded issues raised by the hon. Member for Glasgow South West and my hon. Friend the Member for Liverpool, Walton (Dan Carden) such as the generational pay gap and equal pay. The system includes discriminatory practices nearly 50 years after the Equal Pay Act 1970 and any Government should be ashamed that such problems are still evident.

It is clear from independent research undertaken by the Centre for Labour and Social Studies on behalf of the PCS that any increases in public sector pay would have to come from the resource departmental expenditure limits—the departmental budgets for current spending. It is disingenuous of Government to suggest that pay claims—even those recommended by independent pay review bodies—will be funded when the departmental expenditure limits do not reflect those awards. Departments as a whole will therefore suffer real-terms cuts to their resource departmental expenditure limits up to 2020. That falls way short of what is needed for a 5% nominal pay rise in the current year, and it fails to accommodate annual pay rises of 1%.

Given current projections of departmental expenditure, the research concludes clearly that any pay rise for public sector workers across listed Departments would have to come from cuts to jobs or to public services. It is a great deception. We must be careful with our language in terms of deliberately misleading anybody, but we should be straight about this. It is a cause of instability to promise constantly that the public sector pay cap is temporary when it is applied year on year. Eight years down the line, we still have effectively a public sector pay cap. In that time, prices have risen by 22%, but public sector pay has risen by just 4.4%. Wage freezes and the Government’s pay cap have lasted throughout that time, bringing financial misery to public service workers and their families and causing huge damage to services.

--- Later in debate ---

[Neil Gray (Airdrie and Shotts) (SNP)]

I am in awe at my constituency neighbour, the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), for enabling us to have more protected time for the Front-Bench speeches, given what you said earlier, Mr Owen. It is a pleasure to take part in the debate with you in the Chair, and I must add my congratulations to those given by others to my hon. Friend the Member for Glasgow South West (Chris Stephens) on securing this debate, and on his detailed and passionate speech. My hon. Friend’s advocacy in this place and his previous trade union role, as has been acknowledged in the House already, make him ideally suited to lead such a debate. My wife is a local authority primary school teacher and is therefore impacted by public sector pay policy, although, thankfully, not that of the UK Government.

My hon. Friend the Member for Glasgow South West made a valid point regarding the ability of the UK Government to adhere to the Equal Pay Act 1970 when they are engaged in 200 pay negotiations, and the hon. Member for Solihull (Julian Knight) expressed his alarm at such a notion. My hon. Friend also highlighted the incredible statistics on low pay in the Department for Work and Pensions—the irony is not lost, I am sure—and the proportion of staff receiving tax credits. The fact that those workers will now be under additional universal credit conditionality from their own employers represents an incredible state of affairs.

A public sector pay rise, as outlined by my hon. Friend, is helpful for the economy and the private sector, as well as providing workers with the ability to enjoy a fruitful existence. When we add the fact that we are living through the worst decade for pay growth in 210 years, that is a major concern. My hon. Friend also touched on low pay and the situation in Scotland, and the more generous Scottish Government pay offer. He made a good, detailed and passionate speech, and I commend him for that.

I was reprimanded by you, Mr Owen, for jousting during the speech of the hon. Member for Ochil and South Perthshire (Luke Graham). He made a point about the need to end pay restraint. Of course the Scottish Government were the first in these isles to lift the pay cap and fund the pay offer to the workers for whom they are responsible, and the hon. Gentleman appeared to support my call for the Treasury to fund Departments to bring about an end to the 1% cap. I look forward to his next appearance at Treasury questions when he will make that strong point to the Chancellor. He also spoke about the 6.5% pay offer to the NHS in England. That, of course, is spread over three years—a point that has already been made from the Labour Benches. I am sure that the hon. Gentleman was not trying to suggest that that offer is comparable to the 3% being offered on an annual basis in Scotland. My point about the 1% pay differential between England and Scotland is that it includes those in band 1—the lowest paid as well as those in higher brackets.

The hon. Member for Easington (Grahame Morris) made a good speech, advocating for the Treasury to fund an end to 1%. He also talked about the apparent temporary nature of the pay cap. He was right to say that where the UK Government, not the Scottish Government, have responsibility, the pay cap is in effect still in place.

The hon. Member for Solihull also made a good speech. He was right to say that civil servants in Whitehall and across these isles are incredibly talented and do a fantastic job. He also appeared to acknowledge that pay restraint should have been temporary—and should have ended. I challenge him, as I did the hon. Member for Ochil and South Perthshire, to challenge their Treasury colleagues to fund UK Departments to end the 1% cap.

The hon. Member for Barnsley East (Stephanie Peacock) spoke from experience, as a former teacher and also given the impact of public sector pay restraint in her area. What she said was absolutely right. My constituency neighbour, the hon. Member for Coatbridge, Chryston and Bellshill, made a typically impassioned, if pithy, speech, and we were grateful for his contribution.

As has been alluded to, we have made a far more generous offer in Scotland to our fantastic public servants. We look to reward them for the work that they do for us all. To tackle low pay, the Scottish Government have committed to paying the real living wage of £8.75 an hour, as opposed to the UK Government’s minimum wage premium of £7.83 for over-25s and their minimum wage of £7.38 for those between 21 and 24, £5.90 for those between 18 and 20, and £4.20 for under-18s. This year they have also offered a graduated pay rise starting at 3% for workers earning up to £65,500. That rise will benefit three quarters of all public sector employees in Scotland.

[Luke Graham]

I praise some of the devolved Administration’s moves to make sure that there is correct funding for people on lower incomes, but does the hon. Gentleman recognise that the national living wage was brought in by a Conservative Government and it would not exist otherwise? As well as criticising, he should give a little praise, too.

[Neil Gray]

My problem with the so-called national living wage is the fact that it is not national, because it is not available to under-25s, and it is not a living wage, because it does not get near the real living wage. Its branding was clearly an attempt to make it look as though it were the real living wage; that is massively problematic. I acknowledge that it is a large pay increase for some, but not all, of those on the minimum wage. It is important for the UK Government to acknowledge the fact that under-25s in particular are still being penalised.

[Luke Graham]

rose—

[Julian Knight]

rose—

--- Later in debate ---

[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?

[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.