Employment

England faces £1.7 billion hit from public sector pay freeze, TUC claims

The TUC said the freeze could also lead to weakened wage growth for other workers if public sector employees spent less money

Rishi Sunak's plans for a public sector pay freeze could harm the economy, unions warn.

Rishi Sunak's plans for a public sector pay freeze could harm the economy, unions warn. Image credit: HM Treasury / Flickr

Plans to pause pay increases for public sector workers could cost England’s economy £1.7 billion, the TUC has claimed.

New analysis by the union found the changes to pay could weaken the economy as those working in the public sector were forced to “tighten their belts”.

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In last November’s Spending Review, which was blasted by campaigners as “a missed opportunity”, Sunak promised a pay rise for NHS doctors and nurses but other public sector workers such as teachers and policemen had their pay frozen. 

TUC general secretary Frances O’Grady said this amounted to a pay cut when inflation was taken into account. 

“Key workers have kept the country going through the pandemic. The prime minister clapped them, but his applause will ring hollow if he cuts their pay,” she said. 

The new analysis, which calculated the difference in economic activity expected with and without the changes, found the economy could shed £1.7 billion between April 2021 to March 2022 if the pay freeze went ahead. This would amount to an average of £3.2 million per constituency.

The TUC claimed the public sector pay freeze could also lead to weakened wage growth for other workers if public sector employees became more frugal, adding that those whose jobs depended on consumer spending could be at particular risk. 

The union is calling on the chancellor not to “repeat the mistakes of the 2010s” when public sector workers saw their pay capped, claiming this led to “wages falling across the economy and the worst slump in living standards in more than 200 years”. 

O’Grady added: “Boosting key worker pay helps everyone. It puts more money in the pockets of working families. And their spending supports jobs in local businesses and high streets.

“This will help to level up our unequal economy. And it gives key workers the respect they have earned.”

A Treasury spokesperson said: ‘’Given the unique impact of Covid-19 on the health service, and despite the challenging economic context, the Government will continue to provide for pay rises for over one million NHS workers.

‘’The Government will also prioritise the lowest paid, with 2.1 million public sector workers earning less than £24,000 receiving a minimum £250 increase.”

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