Millions of public sector workers such as police officers, teachers and nurses, will lose automatic annual pay rises and see any additional pay hikes held at about 1% as part of a cuts package.
Mr Osborne told MPs that every year, some public sector employees received an increase through an “antiquated” pay progression system, regardless of performance. He then added that automatic annual pay rises for civil servants would end in two years time and public sector pay rises would be limited to an average of up to 1% for 2015-16, saving at least £1.3bn. According to the treasury, some public employees have enjoyed automatic pay increases of up to 7%.
The chancellor said, “Progression pay can at best be described as antiquated; at worst, it’s deeply unfair to other parts of the public sector that don’t get it and to the private sector that have to pay for it.”
“We are also working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police. The armed forces will be excluded from these reforms.”
The news announced by George Osborne, provoked a furious response from unions, who warned of future critical staff shortages in nursing, education and social services. Commenting on this, TUC general secretary Frances O’Grady denounced his package as ‘a toxic mix of bad economics, nasty politics and dishonest presentation’.
Treasury minister David Gauke later said that civil servants had to accept the ending of automatic pay progression – or face even more job losses.
He said: “There is a bit of a trade-off between how many people you can afford to employ and public sector pay and that’s been a point that we’ve made from the very beginning. At a time when there are a lot of people both in the private sector and the public sector that have seen at times cuts in pay and in many cases a freeze in pay, that it’s only right that that’s shared out.”
“And it’s not particularly fair that, whereas some people in the public sector have seen a pay freeze over the last three years, there are others who have seen significant increases just because of working for an additional year.”
The Public and Commercial Services union, which represents most civil servants, said it was “deeply unfair” to stop pay progression in the civil service.
The PCS said fewer than half of Whitehall departments had pay progression, including the two biggest HM Revenue and Customs and Work and Pensions.
A spokesman said: “This will hold down pay for years to come and will deny workers an agreed rate for the job.”
Ministers have already announced plans for a major overhaul of teachers’ pay. Under the proposals, which are due to begin coming into effect from this autumn, pay will be linked to performance in the classroom, with schools setting salaries, rather than following a national framework.
Deputy general secretary Leslie Manasseh said: “The Chancellor obviously isn’t aware that his Government have scrapped progression for most civil servants already, apart from where it is part of an employee’s contractual rights.
“Our members have already put up with two years of pay freezes followed by pay caps alongside pension contribution increases of over 3 per cent. Many members have seen the real value of their pay plummet by up to 15 per cent.”