Civil Service Pay

Michael Ellis Excerpts

Monday 29th November 2021 Commons Chamber

[The Paymaster General (Michael Ellis)]

I thank the hon. Member for Glasgow South West (Chris Stephens) for securing this important debate, and welcome the opportunity to respond. I know that, in his role as chair of the PCS parliamentary group—a position that I think he still holds—he shares my interest in matters relating to the civil service.

At the beginning of his remarks, the hon. Gentleman paid tribute to his grandfather. Although, of course, I did not have the privilege of knowing his grandfather, may I say that I am sure that his grandfather would be proud of him, not only for the speech that he has just given to the House, but for his service to his constituents as a Member of Parliament?

Across the House we all know that civil servants are committed to delivering vital services to the general public. That is what they do; it is the essence of who they are. Ministers are enormously proud—I include myself in this category—of the dedication and professional commitment that civil servants across the board and of all grades demonstrate in delivering public services and the Government’s priorities, particularly during what we know has been a very challenging time. Civil servants of all grades have played a vital role during the pandemic to maintain public services, and will have performed functions that will have saved lives.

Civil service pay is determined by separate processes for delegated grades—typically grade 6 and below—and the senior civil service, which is calculated separately. For delegated grades, the Cabinet Office publishes the pay remit guidance on an annual basis. The pay remit guidance is a cost-control document setting out the parameters of average awards in a pay remit year for Departments. For the senior civil service, it is different. The Senior Salaries Review Body makes independent recommendations to the Government based on evidence provided by the Government, with recognised trade union data and labour market data added into the equation.

In 2011, some 10 years ago now, the Government took a tough but fiscally responsible decision to implement a two-year pay freeze. That was followed by a 1% pay award between 2013 and 2017, applied across all workforces in the public sector, as many of us will recall. There is no doubt that these were difficult decisions but they were fiscally responsible ones that we had to take in response to the then economic position—a position, I need to say, that we had inherited from the previous Labour Government. Those responsible decisions ensured that the Government rewarded hard-working civil servants, which is as it should be, while enabling the UK to tackle the huge deficit that had grown. The sustainable pay structures that we put in place at that time supported many civil servants and prevented us, as a society, from burdening our children and grandchildren with even more debt that accrues. In the years post 2017—from 2018 to 2021—the 1% pay cap was lifted and the civil service received pay rises of up to 2.5%, which was actually higher than inflation at the time.

In the face of huge uncertainty and the unprecedented impact that the covid-19 coronavirus pandemic had on the economy, the Government temporarily paused pay rises for the majority of public sector workers in 2021-22. We ensured that those who most needed it had the protection that they needed, with 2.1 million public sector workers with median earnings at or under £24,000—therefore many of the individuals whose accounts the hon. Gentleman relayed to the House—receiving an increase of at least £250, equivalent to over 1%.

In his most recent spending review, my right hon. Friend the Chancellor of the Exchequer announced the end of the temporary pay pause in the public sector, including the civil service, starting from the 2022-23 fiscal year and throughout the duration of the spending review period, right the way through to 2024-25. During this forthcoming period, these increases will retain broad parity with the private sector while continuing to be affordable. It is thanks to the strong recovery in the economy and in the labour market that Her Majesty’s Government have been allowed to return to a normal pay-setting process. My right hon. Friend the Chancellor of the Exchequer also announced the increase to the national living wage of 6.6% to £9.50 an hour from April 2022 for those aged 23 and over, which will benefit more than 2 million of the lowest paid workers in the country. That will keep us on track for our target of the national living wage rate being two thirds of median earnings by 2024.

The public sector has on average better remuneration packages when compared with the private sector. That is not a well-known or acknowledged fact, but it is true. In 2019, the Office for National Statistics reported that the public sector benefits from a 7% on total remuneration compared with the private sector. In 2020, the median salary in the public sector was £1,770 higher than the private sector. That gap is most acute at the lower grades, where the public sector average hourly wage is 20% higher than the private sector.

[Chris Stephens]

I thank the Minister for his personal remarks, which are very much appreciated.

The Minister talks about public sector pay, but does he acknowledge the study from Dr Williams from the University of Surrey, which suggests that civil service pay is lower than the rest of the public sector? Can the Minister tell us what he and his departmental colleagues will do to rectify that situation?

[Michael Ellis]

I look forward to reading that report, and I will certainly have a look at it, but there is no getting away from the fact that when one looks at the last fiscal year, the public sector was being paid on average £1,770 higher than the private sector. That is particularly noticeable at the lower pay grades, where we find that public sector pay is 20% higher than private sector pay. I am happy to look at the figures he wishes to bring to our attention, and I will do that, but the premium I refer to also reflects the generosity of civil service pensions when compared with the private sector. Most members are in what are called defined-benefit schemes, where employers contribute around 27% of earnings. In contrast, most private sector employees receive defined-contribution pensions, which are dependent on investment performance and where employer contributions are typically around 50% of those in the public sector.

Following the outcome of the spending review, the Cabinet Office—my Department—is assessing what the affordability position will be for Departments to make pay awards going forward. The 2022-23 pay remit guidance is due to be published in spring next year, just a few months from now.

The hon. Gentleman made a powerful speech, with some moving contributions from people who had written to him and to others. I am confident that when we announce the 2022-23 civil service pay remit guidance, we will continue to strike the all-important balance between appropriate reward for hard-working civil servants and the need to live within our means as a nation and recover, as we need to do, from the economic impact of the pandemic.

[Chris Stephens]

I am grateful again to the Minister, who has been typically generous. When the Cabinet Office looks at the remit guidance, will it consider the nonsensical position of having all these different negotiations—something like 200 of them—taking place across Departments and reduce them while ensuring that pay across the civil service is equitable for the work done?

[Michael Ellis]

The hon. Gentleman makes an attractive argument for a reduction in the number of discussions. The rationalisation of those issues is always worth looking at, and I will ask my officials to look at that aspect.

I remain confident that when the Government announce the 2022-23 fiscal year civil service pay remit guidance, the focus will be on striking the balance expected of us by the general public between appropriate rewards for those hard-working individuals in the civil service—as one of Her Majesty’s Ministers, I know how hard civil servants work and I recognise the work that they do—and the need for all of us, in a fiscally responsible society, to live within our means. The Government have fiscal responsibility for that. We will strike that balance and together we will recover from the painful economic impact of the covid-19 pandemic.

Question put and agreed to.