George Osborne: paying peanuts and expecting not to get monkeys?

We will go on restraining public sector pay.

It was just one line in George Osborne's speech at the Conservative Party Conference in Birmingham yesterday, and it may have gone unnoticed by many out in the country, assuming that they were even paying attention to the speech itself. But, for public sector workers, it will have caused alarm and dismay in equal measure.

Years of pay freezes, or 1% paybill increases, and tens of thousands of job losses, combined with sizeable increases in contributions for smaller retirement pensions have seen earnings fall dramatically in real terms. An Executive Officer working for HM Revenue & Customs in London, for example, will have seen his or her salary increase from £29.272 in 2007/08 to £30,331 in 2013/14, an increase of 3.6%, or less than 0.6% year on year. That doesn't look good, but they will be paying an additional 3.85% in pension contributions. In other words, they are earning, in actual terms after pension contributions, marginally less than they were six years earlier.

These are, dare I remind you, gentle reader, the people who are expected to raise the funds to help meet the country's commitments, reduce the deficit and investigate all of those tax evaders who so exercise George.

Inflation over that period? 21%. You can see the problem. Indeed, the only consolation is courtesy of the Liberal Democrats, as the Personal Allowance, the amount that an individual can earn without deduction of income tax, has increased over the same period from £5,225 to £10,000. Alright, that hasn't earned any gratitude from the Civil Service trade unions, but since when was it likely that they would?

And, as the economy recovers, this steady deterioration in pay and conditions is beginning to have an effect. Last November, Accounting Web, which describes itself as the UK's largest community for accountants (I try not to recoil in horror...), noted that HMRC resignations were at their highest level since 2008/09.

There is, of course, a risk that those who resign are those most likely to find better pay and conditions elsewhere, but whilst HMRC continues to meet its targets, one cannot see the Treasury taking any action to improve pay competitiveness. After all, their pay scales are even worse, as Sir Nicholas Macpherson, the Permanent Secretary at HM Treasury, noted last year;

It’s frustrating for us to be some sort of feeder second division Belgian football team which provides really good people for Premier League teams like Chelsea and Manchester United.” Sir Nicholas said he had discussed the matter with the Bank of England’s Governor, Mark Carney who had been “very helpful”.

One really does wonder if we want the country to be run efficiently...