A new report shows higher pay rises for UK public sector workers would not significantly contribute to inflation.
The report from the Institute for Public Policy Research (IPPR) challenges Prime Minister Rishi Sunak’s argument against larger wage settlements.
Last week, Mr Sunak announced a pay rise of at least six percent for teachers, nurses, doctors, and police, asserting that the offer was final, despite the potential for additional strike action.
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The IPPR suggests a pay increase of up to 10.5 percent could be utilized to restore public sector pay to pre-pandemic levels, with a negligible impact of 0.14 percentage points on inflation if funded through increased borrowing.
The impact would be even smaller, approaching zero, if the increase were financed through taxation.
The proposed 10.5 percent pay increase would cost £7.2 billion beyond the government’s initial offer.
The think tank highlights a “triple crisis” in the public sector, noting how years of below-inflation pay hikes have adversely affected living standards and contributed to recruitment and retention challenges.
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The NHS in England faces over 100,000 unfilled vacancies, while teacher training recruitment is 40 percent below the Department for Education targets.
The TUC’s research shows since the 2008 financial crisis, only the finance and business services sector has seen pay levels outpace inflation.
Annual growth in public sector pay has recently reached 5.8 percent, the fastest rate since 2001.
But it still lags behind the private sector by a historic margin and significantly trails other sectors.
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Inflation remains at 8.7 percent, driven by escalating energy costs and rapid food price increases.
Paul Nowak, the general secretary of the Trades Union Congress, said: “It is nonsense to blame workers for stubborn inflation when pay packets have been obliterated. Real wages have been falling and have been for almost two years.”
IPPR researcher Joseph Evans said larger pay increases in the public sector would not exacerbate inflation.
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He said: “Research shows that there is very little inflationary impact from a significant pay rise, but that the need to stop the fall in living standards for public sector workers is urgent.”
A government spokesperson defended the current pay awards, saying they are the highest in 30 years and align with pay growth across the economy.
They said: “They are fair, responsible and sit alongside further work to improve retention in the public sector.
“High inflation is the most destabilising force in our economy, eating into pay cheques and slowing growth – and further borrowing to fund these pay rises would only prolong the pain.”
