Monday, January 11, 2010

Conservative proposals to reduce the deficit (part 1)

A look at the Conservative Party website indicates that they will:
  • A public sector pay freeze, except for the lowest paid. We will freeze pay for all public sector workers in 2011, except for those earning under £18,000. The savings from this are equivalent to protecting more than 100,000 jobs.
There is no doubt that such a proposal is popular, albeit not with public sector employees, especially as the reputation of public servants is probably lower than it has ever been. Unfortunately, nearly half of the civil service earn less than £20,000 per annum, many Departments are already imposing pay freezes, and the long-term impact of relative deterioration in salaries makes recruitment and retention of the talented people needed to administrate a country a bit more difficult.

Of course, the Conservatives didn't come up with this policy on their own. As Vince Cable said in the debate on the 2006 Pre-Budget Report;

"The Chancellor presented the Budget numbers reassuringly, but he knows perfectly well that if capital investment is to grow, current spending, especially public sector pay, must be dealt with severely in the years ahead."

There is no evidence provided to support the contention that the savings are equivalent to protecting 100,000 jobs, although if this is being offered up as an alternative to saving 100,000 jobs, we perhaps all need to be worried.

The Public and Commercial Services Union notes in relation to Civil Service salaries that;
  • Civil servants average earnings growth has lagged behind other sectors for 10 years.
  • Over 100,000, almost 20% are paid less than £15,000 a year.
  • Nearly half of the civil service or approximately 250,000 people earn less than £20,000 a year.
  • More than half the civil service earn less than the national average UK salary which is over £23,000.
    • Approximately 40,000 people working for the Department for Work and Pensions, which includes jobcentres and benefit offices received no pay rise at all.
    • Apparent differences in average earnings between public and private sector in the annual survey of hours and earnings is explained by structural changes in the public sector such as the transfer of lower paid support roles to the private sector resulting from patterns of privatisation
    Or, in other words, there are a lot of public sector employees scraping by, some unable to make ends meet. Additional income for them means additional spending in the wider economy, as their saving ratios are generally low.

    I don't expect that the Conservatives will offer much comfort to them, whereas a significant cut in their tax liability would. Cue Vince, I think...

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