Public sector pay

This briefing provides an overview of public sector pay policy; the financial implications of the cap and the cost of removing it; trends in public sector pay; and recent debate on the subject.

Since 2013 the Government has funded public sector workforces for average pay awards of 1%. During the period 2011-2013, a public sector pay freeze was in place for public sector workers excluding those earning £21,000 or less, who received pay increases of at least £250. 

The pay for many public sector workers is set in light of recommendations from Pay Review Bodies, covering pay in the armed forces, NHS; the Prison Service; teachers; senior public sector workers; the police; and the National Crime Agency. The Pay Review Bodies are issued with remits from the Government and report annually.  The remits restate current Government pay policy, and it is within these constraints that the Pay Review Bodies issue their recommendations.

On 12 September 2017 the Chief Secretary to the Treasury, Elizabeth Truss, indicated that the 2018/19 remits for the Pay Review Bodies may allow flexibility to depart from the 1% cap in some cases. At the 2017 Autumn Budget, the Government confirmed the “end of the 1% pay policy”. The Pay Review Body remit letters were sent out on 7 December 2018. Each contained a similar statement, reiterating the move away from the 1% policy.

When the Coalition Government introduced the two-year public sector pay freeze in Budget 2010 the Government suggested that it would “save £3.3 billion a year by 2014-15” relative to wages rising in line with the Bank of England’s 2% inflation target. The Government estimated that the latest incarnation of the 1% cap, introduced in Summer Budget 2015 and covering the four years up to 2019/20, would save “approximately £5 billion by 2019-20”.

Average pay is higher in the public sector than in the private sector: at April 2017, median weekly earnings for full-time employees in the public sector were £599 in the public sector compared to £532 in the private sector. However, public sector workers tend to be older and more highly-educated than for the private sector as a whole, so after controlling for differences in workers’ characteristics, the gap in pay is much less.

The experience of earnings growth across both the public and private sector is very broad and there are a substantial number of workers who see large rises or falls in pay each year. Nevertheless, since 2012 pay increases have been more positively skewed in the private sector than in the public sector.  

This briefing provides an overview of public sector pay policy; the financial implications of the cap and the cost of removing it; trends in public sector pay; and recent debate on the subject.