Ease low public sector pay or risk a recruitment crisis, warns IFS

Institute for Fiscal Studies warns of a looming crisis if the squeeze on pay accelerates

A squeeze on pay packets has intensified since the vote for Brexit (Getty)

There is a strong case for relaxing the squeeze on pay for higher-skilled public-sector workers in the UK, according to the Institute for Fiscal Studies.

Further restraint would take government pay to “historically low levels” relative to the private sector and risk damaging schools, hospitals and other public services by making it harder to recruit and retain high-quality staff, the London-based think tank said in a report published Wednesday.

Cracks in austerity began to appear this month when Theresa May announced that the 1 per cent cap on public-sector pay increases is to be lifted for police and prison officers.

The easing is expected to be extended to other government workers as ministers are forced to confront voter anger after seven years of budget cutting under the Conservatives.

The squeeze on pay packets has intensified as inflation accelerated in the wake of the Brexit vote in June 2016, with nurses and Bank of England employees among the groups to protest in recent weeks.

But with the government spending £181bn employing more than 5 million people, easing pay restraint will be expensive, the IFS warned.

It estimated that increasing wages in line with either inflation or private-sector earnings would cost £6bn by 2019–20.

“The Treasury could provide extra funds for this by raising taxes, cutting other spending or borrowing more,” said IFS Senior Research Economist Jonathan Cribb, who wrote the report. “Asking the National Health Service, for example, to fund higher pay increases from within existing budgets would be very challenging.”

Bloomberg