THE government is facing growing clamour for an end to the public-sector pay cap to alleviate Britain’s cost of living crisis in next week’s Budget.
Research from the IPPR think tank revealed yesterday that much of the cash spent on higher wages after lifting the 1 per cent cap would almost immediately return to the Treasury in the form of higher tax revenue and lower benefit payments.
It calculated that a pay rise for cash-strapped public-sector workers in line with inflation over the next two years would cost £5.8 billion.
However, according to the study, once income tax receipts and national insurance were combined with lower benefit payments, this figure falls to £3.5bn.
It would also boost spending and in turn bring more cash into government coffers.
TUC general secretary Frances O’Grady warned ministers to do their homework, describing the report as “compulsory reading” for them.
“Raising public-sector pay would boost spending in local economies and would help the public purse by raising tax revenues and reducing the cost of in-work benefits,” she added.
The research, supported by general union GMB, showed how public-sector pay had been “significantly eroded” over the past seven years.
A schoolteacher outside London is now paid nearly £3,000 less in real terms than in 2010-11. Nurses have also received an effective £3,000 pay cut over the same period.
GMB national officer Rehana Azam said: “Recruitment and retention problems are impairing public services for everyone as staff are pushed to breaking point. The public-sector pay pinch is hurting, but it isn’t working.
“It is a moral outrage that in one of the world’s richest economies, public-sector workers are left homeless, skipping meals and relying on foodbanks.”
Unison general secretary Dave Prentis warned that the country and its public services could not afford the pay cap to stay in place a moment longer.
“Unless Chancellor Philip Hammond comes up with the extra money to fund a decent wage rise for all public servants in next week’s Budget, there’ll be a high price to pay.
“As experienced staff leave for better-paid jobs in other parts of the economy and employers can’t pay enough to attract new recruits, the staffing crisis grows.”
The report comes as inflation remains at its highest levels for five years.
Office for National Statistics figures published yesterday show that the Consumer Prices Index measure of inflation was 3 per cent last month, unchanged from a five-year high in September.
Labour’s Treasury spokesman Peter Dowd said the figures were “deeply worrying,” showing that people are losing out due to seven years of failed Tory economic policy as wages continue to “lag behind prices.”
Ms O’Grady urged the government to “stop turning a blind eye to Britain’s cost of living crisis” and called on Mr Hammond to act.
“Next week’s Budget is a chance to give five million public-sector workers the pay rise they are long overdue,” she said.
A Treasury spokesperson said: “We understand that people are concerned about increases in everyday costs.
“That’s why we have cut taxes and introduced the national living wage, which has lifted the wages of the lowest-paid by over 6 per cent above inflation.”
However, PCS general secretary Mark Serwotka warned of possible industrial action unless the pay cap was axed.
He said: “Our recent ballot on pay shows that the government’s own workers have sent a clear signal that the cap must go and that they are prepared to fight for a decent pay rise.”