Thursday, 29 June 2017

Public sector pay and the end of austerity

Two ministers, Michael Fallon and Chris Grayling, indicated yesterday that the Government might consider reviewing the cap on public sector pay. However, once the Treasury got wind of these remarks, the story got knocked on the head. Matching the rate of inflation in public sector pay would cost over £4 billion a year at a time when there is still a big budget deficit.

This came after a report from the British Social Attitudes Survey suggests that popular support for higher taxes and spending is stronger than it has been for a decade. There was particularly strong support for more spending on health and education. The survey was conducted in the second half of last year before the general election.

One needs to ask whether respondents realised they might have to pay higher taxes themselves. As the head of the Institute of Fiscal Studies pointed out yesterday, austerity could not be ended just by imposing higher taxes on businesses and rich individuals.

The Government will undoubtedly continue to consider the issue of public sector pay between now and the Budget. It may be that any increase would be targeted on particular groups such as nurses.

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