The teaching profession has seen average pay fall by £3 an hour in real terms and police officers by £2 an hour, while the wages of nurses have stagnated during a decade of public sector salary freezes, a new report for the government’s pay advisers has found.
The academic analysis was quietly published on Monday before a crucial cabinet meeting where Theresa May and the chancellor, Philip Hammond, are likely to face pressure from colleagues to agree a timetable for easing seven years of public sector pay restraint.
The report, commissioned by the Office of Manpower Economics – which supports the independent bodies making recommendations on public sector pay, found median hourly earnings of UK workers dropped in real terms by almost 6% between 2005 and 2015, with some sectors suffering worse drops than others.
Labour said the figures were highly significant, damning evidence of “the harsh and unfair reality of the Tories’ pay freeze on hard-working public sector workers”, whose earnings are decided by the government in contrast to those in the private sector.
The issue of public sector pay is expected to come to a head at a meeting of the cabinet on Tuesday morning, after signals from a series of influential ministers, including Boris Johnson, Jeremy Hunt, Justine Greening and Michael Gove, that the 1% cap on wage rises ought to be reconsidered.
Tory MPs and ministers have suggested the Treasury fund the change by scrapping planned tax cuts including to corporation tax and by raising the threshold for the 40p rate.
The chancellor is thought to be frustrated that so many senior colleagues are lining up to pressure him into action, with allies stressing that he was the one to relax his party’s fiscal rules.
Officially, Downing Street insists that there is no plan to lift the cap. However, in a sign that action could be imminent to address worries about morale and recruitment in the public sector, senior figures inside both Downing Street and the Treasury admitted that something needed to change, even questioning whether it was feasible to wait until an autumn budget in the face of demands from Tory MPs.
A source stressed that both Hammond and May had spoke out about hearing the message of the general election, in which the Tories lost their majority in the face of an anti-austerity promise from Labour.
In a speech to the Confederation of British Industry on Monday night, Hammond said the government’s approach to balance the needs of public workers with those who had to pay the bill hadn’t changed. However, he said he recognised that “the British people are weary after seven years’ hard slog repairing the damage of the great recession”.
He also said the time had come for a conversation on the level of funding of public services but it had to be a “grown-up debate” – arguing that borrowing was simply passing the bill to the next generation and that taxes couldn’t always fall on someone else.
The new report found a 3% drop in median hourly earnings between 2005 and 2015 for workers in 32 public sector occupations whose salaries are set by the government on the advice of independent pay review bodies.
It found median hourly pay fell by an even greater amount – 6% – during that period for workers across the board, as the recession of 2008 hit wages hardest in the private sector.
But the report showed George Osborne’s policy of pay restraint on public sector workers began to bite after 2010, as police officers, teachers, midwives, radiographers, nurses and doctors saw a marked decline in median hourly earnings.
According to the study by Professor Alex Bryson at University College London and John Forth, a fellow at the National Institute of Economic and Social Research:
- School teachers saw a drop in median real earnings from £25 an hour in 2005 to £22 an hour in 2015.
- Police officers saw a median real earnings fall from £20 an hour to £18 an hour over the same period.
- Doctors experienced a drop from £38 an hour to £30 in median real earnings.
- Prison officers saw median real earnings fall from £16 an hour to £15 an hour.
- Nurses reported median real earnings of £16 an hour in 2005, rising to £17 an hour in 2010, before dropping back to just over £16 in 2015, showing a slight rise of 1.4% over the decade.
The hourly median wage figures were adjusted for inflation, based on 2015 prices and rounded to the nearest pound.
Labour’s shadow chancellor, John McDonnell, said the research underlined the need for urgent action, claiming “empty words or infighting from members of the cabinet” was not enough when key public sector workers were turning to foodbanks.
“This a damning report that reveals the harsh and unfair reality of the Tories’ pay freeze on hard-working public sector workers,” he said, claiming May was failing to meet a basic test of fairness.
“The fact that some of the pillars of our community and the public sector, such as teachers, nurses and police officers, are seeing their pay cut exposes the complete duplicity of a government which likes to praise their work, but will not actually truly reward it.”
McDonnell called on the government to “step aside” and let Labour lead the country in the national interest.
A number of senior Tories believe May needs to take action after Corbyn’s promise to better fund public services and end tuition fees energised younger voters and those working in the public sector.
Research showed that the Tories trailed Labour by five points with public sector workers, who were significantly more likely to vote than their private sector counterparts – with turnout at 76% compared with 66%.
Dr Sarah Wollaston, the Tory MP who chaired parliament’s health select committee up to the election, said there was considerable strength of feeling among her colleagues on the backbenches and in cabinet that action was needed to ease the pain.
“It is not a matter of if, but when,” she said, arguing that the issue was not just about public sector pay but properly funding public services. “And the discussion should move onto how we pay for it.”
She said that everyone ought to contribute but with the burden falling more on the better off and with “intergenerational fairness” also taken into account.
Pointing out how controversial it had been when the Tories had suggested a new policy for social care in its manifesto, Wollaston called on the prime minister to ask all political parties – including Labour – to sit down and discuss how to fund this.
“That may mean taking ideas from everyone’s manifestos – including Labour’s,” she said.
Although Hammond is minded to look at how to ease the burden on workers, he is likely to challenge cabinet colleagues – who he considers to be lobbying ahead of the budget – to spell out what difficult tax decisions they would consider to pay for any changes. Another option is to find more departmental cuts.
As well as the interventions for health and education workers, Sir Michael Fallon – the defence secretary – will also make the case for military personnel.
The latest research will add to the pressure on the chancellor over public sector pay. But some Conservatives may point to the finding that private sector workers have had an even worse time during the recession, and make the case that the cap should therefore continue.
Prof Bryson, co-author of the report, said the big difference between private and public sector employees was that the latter are “public servants [and] as such, the government can determine their annual pay settlement”.
He said: “When deciding what to do, government will weigh public concern over pay equity for groups like nurses, and experts’ concerns regarding public employers’ ability to recruit, retain and motivate staff, against the potential costs of lifting the 1% cap for the public purse.”
Bryson said the private sector had seen unprecedented falls in real wages after the financial crisis and then the public sector followed that downward trajectory after 2010.
“It’s not a good picture for virtually anybody,” he said. “The labour market in Britain has been suffering badly whether you are in the private or public sector. I think it’s going to be a question for the government not if but when and how they are going to address the build-up of pay pressures in the public sector.”
He said the falls in public sector median hourly wages looked somewhat less bad when the figures are adjusted for changes in the workforce, such a shift to younger or less experienced workers.
He added: “But arguably one of the reasons why you have younger or workers of less tenure might be that they are responding to the relative earnings that they can get in the public sector.”
Pay is not the only issue of austerity that is causing tension for the government. Gary Porter, the Conservative chair of the Local Government Association, will use a keynote speech to warn that councils will have lost 75p in every £1 of central government funding by 2020. He will say that local authorities should be at the front of the queue in any easing on austerity.
Calling for local government to keep business rates that are collected locally, Lord Porter told the Guardian that failure to act would leave councils “skint”.
“[Ministers] are aware of the issue – they know that councils will fall over if they don’t come up with something,” he said. “They have a year to get it sorted or those councils go bust.”
Pressure is also mounting from unions representing workers. In an article for the Guardian – Janet Davies, who leads the Royal College of Nursing, said she was encouraged from a shift in mood in government.
“For every day that the cap remains in place, the official register of who can practise as a nurse is haemorrhaging more names than are added,” she said. “The government must lift this cap and close the gap on lost earnings.
“It has been a political decision not to give the NHS the money it needs and the resulting cuts and pressures put patient care at risk.”
