Introduce a 2-year public sector pay freeze, increase contributions to unfunded public sector pensions from 6 to 8% of salary and cut pay for the top 10% of earners in the public sector by 5% - 2/5
Shortly before the last General Election, the TaxPayers’ Alliance produced a manifesto. Here is the latest in our series of posts looking at how the Coalition Government has performed in relation to our recommendations.
We recommended a range of proposals so that the Government could get a grip on pay and pensions in the public sector. The Institute for Fiscal Studies says that those in the public sector earn nearly 5% more than their equivalents, even after adjusting for things like education and gender, and this increases to almost 17% when pensions are taken into account.
Any Government that is trying to close a yawning deficit should look to tighten up in pay and pensions to state employees, particularly when packages are far more generous than in the private sector. In Ireland, a cut of 10% in salary was implemented. Their finances have been fixed more rapidly than ours.
The TPA’s proposal was less stringent than that, but still would be no doubt painful for the workers involved. But it shows the importance of maintaining sounder public finances when times are good – the adjustments are gentler when the bad times come.
The Government did talk tough on this at the start of the Parliament and announced a 2-year freeze at the emergency Budget. But this freeze only applied to pay points on pay scales, which meant that many staff in the public sector still enjoyed rising pay because they could still rise up the pay scale with 'increments' within their pay bands. Furthermore, announcements on public sector pensions did not go far enough in improving the long-term outlook for the public finances. And not enough was done by the high earners in the public sector to demonstrate their commitment to help reduce the deficit – so we have scored the Government a 2.
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