Public sector pay freeze could save up to £23bn by 2023

The Centre for Policy Studies has claimed that freezing public sector pay for the next three years could save a cumulative £23 billion.

The think tank argues that since the start of the pandemic, private sector workers have suffered far more than those in the public sector, and makes the case for public sector pay restraint over the next three years to ensure the labour market isn’t unfairly weighted towards the public sector.

The public sector currently employs roughly 5.5 million workers, at a total cost of around £190 billion a year, and this could increase substantially over the next few years unless the government exercises pay restraint.

The think tank’s report suggests that if pay were to be frozen across the public sector, the government could save £3.8 billion in the first year, £7.7 billion in the second and £11.6 billion in the third year. If NHS staff were exempt from the freeze, to account for their hard work and sacrifices during this pandemic, the government could save a cumulative £15.3 billion over the same period.

The paper also sets out a more generous approach, which would see pay increasing by one per cent each year for three years, which could save £11.7 billion over that period – or £7.7 billion if a higher rate were still granted to healthcare workers.  

Robert Colvile, Director of the CPS, said: “The economic impact of the Covid-19 pandemic has been severe, but the pain has not been shared equally. Some businesses are folding under the strain, public finances have been decimated, while the public sector has escaped relatively unscathed.
 
“Healthcare workers aside, it is difficult to justify generous pay rises in the public sector when private sector wages are actually falling. At the same time, there is a need to control public spending and reduce the structural deficit which the pandemic is likely to have opened up. The Chancellor should redress this imbalance by showing restraint when it comes to pay and pensions in the public sector.”