Government must boost public sector pay or face recruitment crisis - IFS

Posted On: 
19th May 2017

The next government must increase public sector pay or risk losing vital workers to the private sector, the IFS has warned.

The IFS says the government could "struggle" to rival the private sector in recruitment
PA Images

The thinktank has analysed the spending commitments of each of the three main parties in England, and says increased funding for public services is needed to maintain standards.

The independent body said the Tories could "exacerbate" recruitment problems by maintaining the 1% cap on pay increases, while Labour and the Lib Dems would need to pump billions more into the sector to deliver on their pledges.

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Public sector pay outstripped that of the private sector after the recession in 2008 - as private sector earnings fell sharply in real terms.

The Tory cap, which has been in place since 2011, could see the difference between public and private sector wages closer than at any point in the last 20 years, the IFS said.

The body adds that while Labour’s plans to up salaries through the reintroduction of Pay Review Bodies could see the difference stabilise to pre-crash levels, they would be forced to find an extra £9.2bn by 2020-21 – with £2.9bn earmarked for the NHS.

The Liberal Democrats’ pledge to ensure wages keep pace with inflation, would require an extra £5.3m, the IFS added.

Under their plans the difference in pay between the two sectors would match that from the 2000s, when there was a "significant shortages of nurses".

The IFS says a pay rise in the public sector would benefit 5.1 million public sector workers, including 1.6 million in the NHS, and 1.5 million who work in education.

Senior Research Economist at the IFS Jonathan Cribb said while the plans of each party "differ significantly", each would face "trade-offs".

"Recruitment and retention problems are beginning to emerge in the public sector following successive years of public pay restraint," he said

"The Conservatives’ plan of 1% increases for the next two years risks exacerbating recruitment problems - and ultimately reducing the quality of public services - as public pay growth would fall markedly behind growth in private sector pay.

"Labour’s plans to return to the recommendations of Pay Review Bodies would boost public sector pay but require significant extra resources (around £9bn per year in 2021-22) for government departments to pay for the higher wage costs, unless departments make cuts elsewhere.

"The Liberal Democrats’ plans imply public pay increases larger than the under the Conservatives and smaller than under Labour."