This suggestion comes from the TaxPayers' Alliance/ Institute of
Directors report on saving £50 billion. For a PDF of the full report
(including footnotes for claims made below) click here.
"The pay freeze would run in 2010-11, and would then affect the baseline for future years. The calculation is based on the 2008-09 (the latest year available) level of spending on public sector pay of £157,695 million being frozen for one year rather than increasing at an annual rate of 4 per cent, which is the current rate of increase. This would, in practice, mean that public sector employees would not move up pay bands during the year, in addition to not receiving any pay increases within their existing band.
To avoid double-counting, this figure has been reduced by 1.66 per cent to take account of the reductions in back-office staff that we suggest (see section 2.3). The exemption in the pay freeze for members of the armed forces serving in or returning from conflict zones, such as Afghanistan, is morally the right thing to do, and will have a negligible effect on the overall saving.
Rationale
Since 2000, median gross hourly pay has increased by 40 per cent in the public sector, compared with 31 per cent in the private sector. Median gross hourly pay is now 25 per cent higher in the public sector. The public sector has now overtaken the private sector in the pay stakes for the vast majority of jobs – gross hourly pay is higher in the public sector for all but the top 10 per cent of employees. Gross annual pay tells a similar story – median gross annual pay has increased by 37 per cent in the public sector since 2000, compared with 31 per cent in the private sector.
Employees in the private sector have also been harder hit by the recession. Private sector employment has fallen by almost 700,000 over the past year, while there has been a 40 per cent increase in the number of part-time workers who cannot find a full-time job. Pay cuts and 4-day weeks are now common features. In the public sector, by contrast, employment has increased by almost 300,000 over the past year, and pay is now increasing at an annual rate of 4 per cent.
A recent survey of IoD members also found that business executives across the country are cutting back, with around half experiencing pay freezes or pay holidays, and 40 per cent seeing their bonuses fall.
A public sector pay freeze has been suggested by, among others, the Chief Executive of the National Audit Office, who wrote that “as public sector workers have done well over the past decade, they will tolerate some modest real reduction in earnings”. We should not pretend that this will be without some pain. But generosity over recent years must now be balanced by wage restraint. The far more painful alternative would be widespread public sector job losses in the future, as the structural deficit (or the IMF) would force us to make harder choices."
Savings id: One year pay freeze across the public sector, excluding members of the armed forces serving in conflict zones.
Department: Across Whitehall
Annual saving: £6,203 million from 2010-11 onward.
***
Previous idea for saving: (17) Abandon plans to extend the compulsory school leaving age to 18.