Rishi Sunak set to announce pay freeze for millions of workers

The chancellor is preparing an announcement of squeezed public sector pay in light of the economic shock of the pandemic, according to reports.

Government sources say the announcement will be part of a mini-budget on Wednesday and will include plans to launch a Whitehall savings drive to tackle record levels of borrowing. 

It will also see the tightening of public servants’ pay – many of whom were at the forefront of the government’s pandemic response. 

Up to five million public sector workers are reportedly facing the pay freeze.

Those set to foot the bill for the government’s spending include soldiers, police officers, teachers and civil servants.

It is understood that NHS staff, nurses and doctors are exempt from the pay cap.

Rishi Sunak is expected to argue that it is ‘not fair’ public sector workers receive pay rises while private sector employees are losing jobs and enduring pay cuts. 

In real terms, public sector pay is falling behind where it was a decade ago due to Tory austerity. 

In July, Sunak launched a spending review where he warned that public sector pay would need to keep ‘parity’ with private-sector wages.

He wrote at the time: “In the interest of fairness we must exercise restraint in future public sector pay awards, ensuring that, across this year and the spending review period, public sector pay levels retain parity with the private sector.”

The rightwing thinktank, Centre for Policy Studies (CPS), explained that freezing the wages of 5.5million public sector employees for three years would save £23 billion on the Treasury bill. It is expected Rishi Sunak will use this report as the basis in his consideration.

Stopping wage increases would, in effect, be a pay cut as wages would not keep up with the rate of inflation which is currently 0.5%.

Instead, if the pay rise was capped to just 1%, analysts think this could ‘save’ up to £11.7billion. 

The CPS – set up by Margaret Thatcher and whose director was one of the leading authors of the 2019 Conservative manifesto – claims private-sector workers have ‘suffered far more than those in the public sector’.

It says in its ‘Public Sector Pay: The Case for Restraint’ report: “The economic impact of the Covid-19 pandemic has been severe, but the pain has not been shared equally.

“Some businesses are folding under the strain, public finances have been decimated, while the public sector has escaped relatively unscathed.

“Healthcare workers aside, it is difficult to justify generous pay rises in the public sector when private sector wages are actually falling.

“At the same time, there is a need to control public spending and reduce the structural deficit which the pandemic is likely to have opened up.

“The Chancellor should redress this imbalance by showing restraint when it comes to pay and pensions in the public sector.”

Frances O’Grady, general secretary of the TUC, said: “Freezing their pay is no way to reward key workers for their service. Unions will fight for the proper pay rise they have earned. Working people must not bear the burden of the crisis.”

Dave Prentis, the general secretary of Unison, said: “The government must do what’s right next week and announce the wage rise staff have more than earned. Anything less risks destroying morale when the entire country is counting on them.”

Rehana Azam, national secretary of the GMB trade union, said: “Billions are being wasted, flowing out of Treasury into the pockets of their chums. Some people are benefiting from the pandemic while our workers are working throughout it.

“It’s dangerous territory for the chancellor if he imposes pay restraint as a way of offsetting the cost of the pandemic. We’re not through it, we’re still in it. Does he really want to do this when people’s morale is so low?

“When people have lost loved ones and people they’ve worked with, is now the time to kick them even more? I don’t think it would go down well.”