Earlier this week, the Office for National Statistics (ONS) released new stats that show exactly why we need to control public sector pay rises. The data showed a substantial increase in borrowing and a sharp increase in public sector net debt - which currently stands at £2.4 trillion, an increase of £170.1 billion compared with May 2021.
The ONS said that:
- In May 2022 public sector borrowing was £14.0 billion - £8.5 billion more than before the pandemic in May 2019.
- Central government receipts were £66.6 billion - £5.7 billion more than in May 2021.This included £48.3 billion in taxes and £14.4 billion in compulsory social contributions, which are almost entirely national insurance payments.
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Debt interest payments were £7.6 billion, a £3.1 billion rise from May 2021. The Office for Budget Responsibility has forecast central government interest payments to reach £83 billion this year - a huge increase to last year’s figure of £54 billion.
This data comes after almost a week of rail strikes, as RMT members rejected the government’s proposal of a three per cent wage increase. They instead called for a seven per cent rise, due to inflation and the rising cost of living.
This has prompted a number of other public sector workers to threaten to ballot for industrial action, such as the teaching unions, who are calling for a 12 per cent pay increase.
The ONS estimates that 5.7 million people are currently employed within the public sector, meaning that any mass industrial action would ground the economy to a halt. However this also puts into perspective why excessive and uniform pay rises for millions of public sector workers are simply not affordable.
This is because the taxpayer will ultimately have to foot the bill for the government’s increased borrowing, which is already at a record-high due to the covid pandemic. The public sector net debt of £2.4 trillion hangs over us all. To expect taxpayers to also compensate for higher public sector wages, while the cost of living continues to rise, would mean further burdens for millions of hard-working people in the private sector - now and for years to come.
If there is fiscal wiggle room to be found, it should be used to get growth going for the benefit of all taxpayers. The dynamic tax model commissioned by the TaxPayers’ Alliance has shown that scrapping the health and social care levy, cutting VAT to 17.5%, bringing forward the income tax cut and pushing on with the national insurance threshold rise would increase average weekly earnings by £13 and GDP by £56 billion. Cuts to income tax would relieve some of the burden that public sector workers face and ease the momentum towards strike action. Plus it would boost growth and be fair to those in the private sector too.
Ultimately, in the face of record-high government borrowing, it is unreasonable for public sector wages to shoot up. It should not be the taxpayer’s responsibility to fund this expense on behalf of a government which so far, refuses to cut their taxes and promote growth and investment. We have 2.4 trillion reasons to hold firm against demands for unaffordable rises.