Public sector pay: anger rises

Dave Statham, Brent East CLP, analyses how public sector pay has fallen behind the private sector and inflation. Will New Labour keep the lid on it?

The Blair Government is continuing the Tory practice of squeezing public sector pay. Not content with phasing in pay awards, the changes to review bodies are likely to worsen the situation for public sector workers. In future, review bodies will be required to take affordability, ie. departmental spending limits, into account along with the Government's 2.5% inflation target and other targets on output and efficiency.

Despite government promises that review bodies' independence will not be undermined, many in the trade union movement are clearly unconvinced. Even the TUC General Council has concluded that the staging of review body awards is in danger of becoming a norm. The rejection of a 4% pay offer by BBC staff in the summer, and the likelihood of industrial action soon, should have served as a warning to the Government that public sector workers have had enough of pay restraint. Earnings in the private sector have risen by as much as 6.2% this year when public sector increases have struggled to top 3%. But this is not just a short-term trend. A significant pay gap has opened up between the private and public sectors over the last six years.

Lamont's 1.5% limit on public sector pay rises in 1992-3 was followed by a freeze on pay bills. Pay rises could be negotiated provided they were funded from cost savings, alongside other savings targets. Although a variety of deals were done in different parts of the public sector, the overall effect was to curb the level of pay settlements. Figures from the Labour Research Department show a gap between the overall settlement mid-point for the public and private sectors of 1.5% in 1993, 0.2% in 1994, 0.5% in 1995, 0.5% in 1996 and 0.3% in 1997. In 1998 settlements in the public sector ranged around 3% while the private sector level was 3.6%. The cumulative shortfall in the public sector, with this latest gap of 0.6%, adds up to 3.6%.

However, the actual gap in earnings, taking bonus payments, overtime, performance pay and so on into account, is more like 10%. Between January 1992 and April 1998 average earnings in the private sector rose by 31%, as measured by the Average Earnings Index. Over the same period, public sector earnings rose by only 20%, showing that as the economy picked up in the mid 1990s public sector workers were left behind.

As a result of these trends, average full-time earnings in the public sector are now lower than in the private sector while in 1992 they were slightly higher. Comparisons made on an occupational basis show that in only two out of eight major occupational groups did public sector workers earn more in 1997 than their private sector counterparts (see table). In 1992 the tally was four out of eight. The public sector has more professional workers, "personal and protective service" jobs (police, fire, health), and "associate professionals" (technicians), with fewer operatives and craft workers than the private sector.

Others in the public sector will be watching developments in the pay review bodies with interest, even if they are not directly involved. Pay levels for the police and fire services are determined by formulas, with the police having received an increase of 4% in September. But negotiations in civil service agencies, in local government, and in further education where a new national agreement is being drawn up, will all be influenced by the Government's handling of the pay review body groups.

Currently review bodies cover doctors, nurses, professions allied to medicine and related groups in the NHS, and their recommendations are taken as a guide for other health workers. There are also review bodies for school teachers in England and Wales, the armed forces, and senior staff in judicial, military, and civil service posts, along with parliamentary salaries. But this may be about to change.

An independent review committee is currently looking into pay problems in higher education, with a report due at the end of the year. The Association of University Teachers argues that there is a "two-tier public service", with staff not covered by pay review body arrangements falling further and further behind those who do have such arrangements. Its call for a pay review body for higher education has won employer support, but it remains to be seen whether the current review will lend its backing to this proposal.

An extension of the review body system will inevitably have an impact on pay across the public sector. But unless this is coupled with a willingness on the part of the Government to try to close the pay gap between the public and private sectors, discontent could turn to anger and the BBC staff could be the first of many.

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