Ministers have been warned that the independent public sector pay review system is close to breaking because the government insists it recommends below-inflation awards for millions of workers.
The independent Senior Salaries Review Body sounded the alarm as the government accepted its recommendation of a maximum 1 per cent rise for mandarins, judges, health quango executives and senior military officers.
The government’s 1 per cent cap on public sector pay rises is causing “frustration and demotivation” among the best-paid public servants and getting in the way of necessary workplace reforms, ministers were told.
“In the current context, it is difficult for the SSRB to operate effectively. If the government continues to see value in having an independent body to advise on senior salaries, we believe that some serious reflection is required about how to make better use of it,” warned the body.
The recommended rise is in line with those given this year to frontline public sector workers like nurses and teachers. Inflation is running at 2.6 per cent. Ministers are coming under intense pressure to end pay restraint.
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The SSRB said that the cap — in place since 2013 and due to continue until 2019-20 — was making it “difficult” for the body effectively to do its own job of recommending pay structures which will motivate staff and help improve public services.
While it found no evidence of widespread recruitment and retention problems among senior public servants, it warned that the position could “deteriorate rapidly”. Changes to pension tax were already having an adverse effect, it found.
Accepting the SSRB’s recommendation, Damian Green, the first secretary of state, announced a review of senior civil service pay which could see changes implemented as soon as April 2018.
Ministers will consider “innovative” proposals to offer higher pay to recruit into hard-to-fill posts and to attract “people of the right calibre”, while keeping within the overall pay limit, he said.
But the FDA union, which represents senior civil servants, said that the 1 per cent “straitjacket” should be ditched.
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While welcoming the promise of a review, its assistant general secretary, Naomi Cooke, said: “Reform of senior civil service pay needs to be fully funded and it needs to happen soon. The current government pay policy is failing and is doing so in a way that costs civil servants and costs the public dear.”
Most of the senior civil service are almost £14,000 a year worse off than they were in 2010 in real terms and earn 46 per cent less than their private sector counterparts, while in the most senior, director-level, jobs, the pay gap with the private sector is as much as 71 per cent.
In a report to ministers, the SSRB said it had found signs of “fragile morale” among senior public servants.
“Frustration and demotivation could already be damaging workforce performance and be a warning sign of future recruitment and retention problems,” it said.
The SSRB said the government had made “disappointing” progress on reforming pay to provide incentives for better performance.
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“The manner in which the 1 per cent public sector pay policy is being implemented is holding back necessary workforce reform,” it said.
“We are seeing very little evidence of pay being linked to workforce strategy or outcomes.”
Instead, pay policy was characterised by “long periods of rigidity, followed by reactive responses to specific pressures”.
Mr Green said: “The government greatly values the important work that public servants do in delivering essential public services.
“We understand the need to ensure that we are able to recruit, retain and motivate staff with the right skills and experience.
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“However, there is a trade-off between pay and jobs in many public services, and pay restraint is one of the many difficult choices the Government has had to make to help put the UK’s public finances back on track.”