I have received a substantial number of letters and e-mails regarding the public sector pay cap.
I know the value and appreciate the importance of the work that public servants do in delivering essential services. At Summer Budget 2015, it was announced that the Government will fund public sector workforces for an average annual pay increase of 1 per cent for the 4 years from 2016-17 onwards. At the time, the Office for Budget Responsibility estimated that this policy would protect 200,000 public sector jobs. These jobs might not have been protected in a post-2010 atmosphere of crippling deficit, rising unemployment and a devastated economy, inherited from the last Labour government.   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 public finances back on track. Since 2010, the deficit has been brought down from 10% to 3% of GDP. However, fiscal responsibility is not just financially paramount, it is also a moral duty: if we do not reduce the deficit, the next generation will pick up the bill.
Nevertheless, the Government knows how instrumental public sector workers are and because of this they still earn 13 per cent on average more than comparable private sector workers. Treasury analysis has shown that in recent years public sector remuneration is also still at a significant premium; the value of a public sector pension compared to a private one is worth an extra 20 to 30 per cent of salary.
The last Conservative government also increased the personal Income Tax Allowance from £6,500 to £11,500, saving every taxpayer, including nurses and other public sector workers, £1,000 per year.   As the Chancellor has said, public sector pay policy has always been designed to strike the right balance between being fair to our public servants and being fair to those who pay for them. That approach has not changed and Ministers will continue to assess that balance.
July 2017