13 November 2017

The Chancellor may break the pay cap for more public sector workers in the upcoming Budget. But he shouldn’t channel money into wages at the expense of solving the real public service pressures, argues Dr Emily Andrews.

In some cases, increasing the pay of public sector workers will be the best answer to easing the pressures on services. But in others, channelling money towards higher wages while allowing other problems to mount would simply feed into the Government’s reactive cycle of ‘crisis, cash, repeat’.

Breaking out of this cycle doesn’t have to mean spending more money right now - at least not in all public services. But it does mean that Phillip Hammond must stop ducking the challenging political debates of the Budget.

If the Chancellor does not fund NHS wage increases, hospital overspends and waiting times will rise

According to Jeremy Hunt, the NHS pay cap has already been scrapped – but we don’t yet know if the Chancellor is going to pay for it. He may avoid the issue and wait for the NHS Pay Review Body to make its recommendations in March.

This would be a mistake. Phillip Hammond should learn from his failure last year to mention social care in the Autumn Statement and the political furore that followed. He must face up to the contentious political issues.

It is unrealistic to fund pay rises for NHS workers from the already-squeezed budget of the Department for Health or, as the Chancellor is reportedly asking for, through further productivity improvements.

The dangers of over-optimism are clear when you look at the previous NHS efficiency target of £22bn in savings by 2020/21. Hospitals are continuing to overspend their budgets, even without the extra money being diverted into increased wages.

The Chancellor’s only realistic options are to allow those overspends to continue or put in more cash up front. And if he squeezes investment in the Sustainability and Transformation Plans in order to pay for this short-term boost, then hospitals will continue on the trajectory they are on now – with waiting times continuing to grow and workers feeling the pressure.

Teachers are very unlikely to receive a pay rise

Unlike NHS workers, teachers are unlikely to receive a centrally-funded pay boost in the near future. The Treasury didn’t pay for the Conservative manifesto pledge that no school would face budget cuts as a result of the new schools funding formula - and Justine Greening, the Education Secretary, had to find £1.3bn from elsewhere in her department's budget. 

An across-the-board pay rise for teachers should not be the Chancellor’s priority. Evidence on the importance of pay to teacher retention is mixed. A recent National Audit Office survey of school leaders shows that 67% cited workload as a barrier to retention while 34% cited pay. Paying existing teachers more at the expense of recruiting teachers where they are needed – specifically in subjects like maths and computer science where recruitment targets are consistently missed – would be a mistake.

The Government needs to demonstrate that schools can manage with a new funding settlement when the £1.3bn runs out in 2019. Otherwise, it must prepare for another expensive political battle in two years’ time.

If the Government won’t pay for more police officers, they need to explain why

Police officers had a pay boost earlier this year, funded from existing budgets. That boost makes sense in the context of low morale and a high incidence of long-term sick leave.

Calls for extra colleagues on the beat are likely to go unheeded. Despite growing pressures in specific areas, Home Secretary Amber Rudd made it clear that they should not expect more cash.

She may well be right that issues such as cyber-crime and terrorism could better tackled by investment elsewhere. But reeling off a list of spending commitments – such as the £1.9bn cyber security investment announced last year – will not help her win the argument. We need to know what we’re getting for the money.

The Chancellor may yet come up with some politically expedient giveaways next week. But don’t let that distract you. His willingness to knuckle down to reform will give us a sense of just how serious the Government is about sticking around for the long term.

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