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Budget 2021: Public sector workers set for pay rise, says Sunak

Super Admin 20 Oct 26
Image source, Getty Images

Millions of public sector workers are set to see their wages rise next year after the government confirmed their pay freeze is being lifted.

Chancellor Rishi Sunak will use his Budget on Wednesday to say nurses, teachers and members of the armed forces are among those set to benefit.

A "temporary pause" in salary progression was introduced last November as a response to the pandemic.

Labour says tax and price rises mean families face a cost of living crisis.

Separately, campaigners for a freeze in fuel duty have been told to expect the tax to be frozen for a twelfth year in a row at Wednesday's Budget.

The BBC has also been told VAT on household energy would not be cut with the Treasury arguing it would be poorly targeted and that lower income households could be better helped through other schemes.

The public sector pay freeze was part of the government's response to what it described as the "economic emergency" caused by Covid, with only the lowest-paid excluded.

In his spending review in November 2020, Mr Sunak said he could not justify an across-the-board increase when many in the private sector had seen their pay and hours cut in the crisis.

He said the pandemic had forced ministers to take extraordinary measures to protect people's jobs and incomes by "targeting our resources at those who need it most".

The Treasury said exactly how much of a pay rise public sector workers receive depends on the recommendations from the independent pay review bodies, who set the pay for most frontline workforces - including nurses, police officers, prison officers and teachers.

  • 2010-12: Two-year pay freeze, excluding workers below £21,000
  • 2013-17: Pay awards limited to an average of 1% per year
  • 2018-20: No explicit pay policy
  • 2021: One-year pay freeze, excluding NHS staff and workers earning below £24,000

In an announcement on Monday, the Treasury said the chancellor would use his forthcoming Budget to say "the solid economic recovery and encouraging signs in the labour market" mean the "pay pause" can be lifted.

In a statement, Mr Sunak said: "The economic impact and uncertainty of the virus meant we had to take the difficult decision to pause public sector pay.

"Along with our plan for jobs, this action helped us protect livelihoods at the height of the pandemic.

"And now, with the economy firmly back on track, it's right that nurses, teachers and all the other public sector workers who played their part during the pandemic see their wages rise."

Business Minister Paul Scully said it was "important public sector workers are recognised for what they do and are rewarded fairly".

He said it was part of a number of measures to help people on low incomes, which also included the rise in the national living wage announced on Monday.

He told BBC Breakfast: "We know there are pressures. We know this is a difficult time for the economy, for people in the country in terms of the cost of living."

The Treasury said the "temporary pause" had helped ensure the gap between public and private sector pay did not widen further during the height of the pandemic.

It said public sector average weekly earnings rose by 4.5% in 2020/21 whilst private sector wage increases were a third lower than they were pre-crisis, at 1.8%.

Ministers will be "running a full pay round and the awards will be announced next year once government responds to the pay review bodies' recommendations", the Treasury added.

Wednesday's announcement will not outline pay offers for public workers, those will come after independent pay bodies report in the new year.

But the chancellor will confirm that the year-long freeze will end in April - meaning five million people are in line for a pay rise.

The government has talked at length in recent weeks about higher wages being an antidote to rising prices and a crucial part of the economic recovery.

Rishi Sunak will hope Wednesday's pay package - which will include raising the minimum wage to £9.50 for people over 23 - is a sign he has a plan.

Mr Sunak defended the decision to freeze pay this year but said that with the economy back on track, it was right to reward public sector workers.

But the TUC said the pay freeze wouldn't be over unless the chancellor fully funded increases above the rising cost of living.

The announcement comes at a time of fierce debate about the pressure families are under amid soaring energy bills and price rises for goods in shops.

Opposition MPs have accused the Conservatives of presiding over a cost of living crisis with cuts to universal credit and tax rises to fund the NHS and social care.

There is disquiet among some Conservative backbenchers too about whether ministers should be doing more to help struggling households.

The UK's largest union, Unison, said the pay freeze would continue "in all but name" unless government departments get extra money.

Its general secretary Christina McAnea said while there was "never a good time to freeze public sector pay", to do so "at the peak of a pandemic was the height of folly" while "staff were doing their all to keep under-pressure services running".

She added: "There can be no decent public services without the people to run them.

"Pay freezes don't help employers hold on to experienced staff, nor attract new recruits.

"But if the chancellor doesn't allocate extra money to government departments to fund the much-needed wage rises, the pay freeze will continue in all but name."

Clive Watson, executive chair of the City Pub Group, said the rise would cost his company "about £1m a year - that's on top of energy costs going sky high and inflation and employers' national insurance contributions going up".

"We cannot absorb all these increased costs… the only way forward for us is to put the price of food and beer up in our pubs."

Torsten Bell of the Resolution Foundation described the announcement as "blindingly obvious" adding that it was "totally inevitable" the pay freeze would be lifted.

"What we don't know, is what is going to happen to public sector pay - lifting the freeze is one thing, but a rise could be anything between 0 to a million per cent pay rise."

Labour says many of those working on the frontline dealing with Covid are among those being hit by the government's choices.

Shadow chief secretary to the Treasury Bridget Phillipson said: "This Conservative government's choice last year to freeze pay for so many frontline workers, who have been among the real heroes of the pandemic, was damaging and unsustainable.

"The government must work to ensure a fair settlement and reflect the vital work of all key workers including many who have been burnt out over the course of the pandemic."

Meanwhile, the Commons Speaker Sir Lindsay Hoyle has told MPs it was "not acceptable" to brief the media ahead of MPs about the Budget.

Sir Lindsay said that ministers used to "walk" if they briefed about a Budget.

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