PM signals need for public sector restraint by freezing ministers' pay

PM will FREEZE ministerial pay amid outrage at MPs’ £3,000 salary hike and anger at public sector’s coronavirus-proof wage increases

  • Boris Johnson has frozen ministerial salaries amid anger at mooted rise for MPs
  • MPs’ pay is linked to the wider public sector where earnings have been soaring 
  • ONS figures show public sector pay rose at annual rate of 4.1% in latest quarter
  • By contrast regular pay in the private sector flatlined after shrinking for months 

Boris Johnson today froze ministerial pay in a stark signal on the need for public sector restraint amid the coronavirus meltdown.

The PM acted amid growing outrage over plans to hand MPs a £3,000 hike because their salaries are linked to the wider public sector – which has been seeing a surge in pay over the past year.

But fears are mounting about the precarious state of the government’s finances, as it is on track to borrow more than £300billion this year due to the pandemic.

Experts warn that millions face unemployment in the hospitality and retail sector, while those who keep their jobs can look forward to huge tax rises.

MP watchdog Ipsa has said it intends to keep their salaries tied to public sector rises in October, but Labour leader Keir Starmer has said the money should be handed to key workers instead.

And Mr Johnson – who has faced speculation about his own financial situation after taking a pay cut on becoming PM, divorcing his wife and having a baby with fiancee Carrie – sent a tough message this afternoon.

Boris Johnson (pictured in Downing Street today) froze ministerial pay in a stark signal on the need for public sector restraint amid the coronavirus meltdown

The annual rate of change in total weekly earnings in the private sector in August alone looked slightly brighter at 1.3 per cent – although it was still far below the public sector at 3.6 per cent

The premier’s official spokesman said: ‘The Government is only responsible for ministerial salaries.

‘Ipsa, which is independent of both Government and Parliament, has responsibility for determining MPs’ salaries.

‘What I can say to you today is that the Prime Minister has decided that at a time of significant pressure on public finances it is only right that ministerial salaries should be frozen.

‘This means that Commons ministerial salaries have now remained frozen since 2010 and Lords ministerial salaries will remain frozen at 2019/20 levels.’

The move means that the pay for a secretary of state in the Commons will be £4,168 less than they are statutorily entitled to.

Earlier in the crisis, Rishi Sunak dodged when asked whether ministers should take a pay rise in solidarity with suffering workers – as has happened in countries like New Zealand. 

The move comes amid anger over the plight of private sector workers during the coronavirus pandemic, as they face going without pay rises while public sector employees continue to enjoy salary growth. 

Public sector pay was growing by 4.1 per cent in the last quarter despite the crisis, figures showed today. 

In contrast to the bumper annual rate for public workers for June-August, the private sector flatlined, recording zero change.

Inflation-busting pay increases were announced by the government in July – 2.8 per cent for medics and 3.1 per cent for teachers.

But a grim picture emerged in the latest data on earnings released by the Office for National Statistics. 

The public sector has so far been spared much of the furlough pain, pay cuts and layoffs in the rest of the economy.  

Tory MP Andrew Bridgen told MailOnline: ‘Ultimately what all the public sector needs to remember is that everything we get is paid for by the private sector, and by someone making a profit and paying tax. 

The Labour leader Sir Keir Starmer said yesterday that politicians should not receive a rise that could take their salary to around £85,000 during the coronavirus meltdown

‘Certainly politicians should never forget that – everything good comes from making a profit and paying tax. There is no other source of income.’ 

According to the ONS, regular pay in the public sector was 4.1 per cent higher in June to August than the same period last year.

By contrast, the private sector saw zero annual growth. In the construction sector, pay was down 5.3 per cent, while wholesaling, retail, hotels and restaurants remuneration was 1.8 per cent lower.

The annual rate of change in total weekly earnings in the private sector in August alone looked slightly brighter at 1.3 per cent – although it was still far below the public sector at 3.6 per cent.

MPs’ annual pay rises are set independently by the Independent Parliamentary Standards Authority, which has linked them to figures for public sector pay rises for October – due to be published in December.

This graph from the National Institute of Economic and Social Research shows public and private pay growth (per cent per annum, excluding bonuses)

That particular measure came in at 3.7 per cent for August, down slightly from 4.1 per cent in July.

Sir Keir Starmer yesterday blasted the idea that MPs, currently paid around £82,000, should get an inflation-busting pay-rise in the middle of the  economic crisis.

The Labour leader called for the cash to be given to key workers instead in ‘this year of all years’ after their long hours of dedicated work throughout the pandemic.

Sir Keir told LBC radio: ‘We shouldn’t have it.’

The National Institute of Economic and Social Research published data on pay growth today, saying the construction sector was worst hit – declining by 5.3 per cent – while public sector growth was up by 4.1 per cent.

According to the ONS, regular pay in the public sector was 4.1 per cent higher in June to August than the same period last year, while the private sector flatlined

It also found that since the beginning of the pandemic, public sector wages have risen twice as fast as private sector wages – 1.8 per cent against 0.9 per cent from February to August.

Cyrille Lenoël, NIESR senior economist, said: ‘The UK labour market is in a difficult transitory period with local lockdowns affecting nearly a third of the country and infection rates on the rise. 

‘Recent policy announcements such as the Job Support Scheme and the local furlough scheme are welcome steps to contain the fall in employment and provide some income support. 

‘But the multiplicity of job support schemes and heightened risks related to Covid-19 limit the effectiveness of these policies.’

Last week it emerged public sector workers were keeping hold of their jobs and salaries during the pandemic as figures showed they earned more than those in the private sector.

The graph above shows the percentage difference between public and private sector workers employed by companies/organisations of varying sizes. The greatest earnings difference was in the ‘upper-skilled’ occupations of the smallest firms – employing 10 or fewer staff – where public sector workers earned 24 percent more than their private counterparts.

Those working in the public sector earned on average 7 per cent more than those toiling in the private sector in 2019, according to the Office of National Statistics on October 4.

The greatest earnings difference was in the skilled jobs of the smallest firms – employing 10 or fewer staff – where public sector workers earned 24 per cent more than their private counterparts.

It comes after inflation-busting pay increases announced by the government in July – 2.8 per cent for medics and 3.1 per cent for teachers – cut a deeper chasm between these ‘key workers’ and those who work in supermarkets or care homes.

Percentage public sector pay increases by profession 

School teachers 3.1%

Doctors & dentists 2.8%

Police officers 2.5%

Armed Forces 2%

National Crime Agency 2.5%

Prison officers 2.5%

Judges 2%

Senior civil servants 2%

Senior military 2% 

These taxpayer-funded pay increases will likely take the public sector premium back up to around 10 per cent, which it enjoyed before David Cameron’s coalition government introduced measures to cut the deficit.

The pandemic’s savaging of private businesses will, therefore, exacerbate the differences between the sectors because those who manage to retain their jobs will pay higher taxes to maintain the wage increases in the public sector.

Writing in The Sunday Times last month, Dominic Lawson argued that the government is staring down the barrel of strikes by teachers and medics if it moves to stem the national debt – which has soared past the £2 trillion mark – with a pay freeze.

‘There will probably be calls for industrial action from the main teachers’ union under its reliably militant leader, Mary Bousted, and from the British Medical Association,’ Mr Lawson wrote.

‘The latter will provide an even more than usually difficult opponent for a Conservative administration that has sanctified the NHS for political reasons — and because doctors and nurses had put themselves under the most extraordinary pressures when working to save patients from the coronavirus during the peak of infections.

‘But it is not just the carers (clapped every Thursday during the height of the pandemic) who enhance our lives. A tirelessly helpful waitress, a wonderful cook, a solicitous barman in a pub — all these people make us feel better. Perhaps, given their present predicament, we should have a clap for caterers.’ 

The largest difference is in the pensions afforded to the different sectors. Most in the public sector are still receiving an inflation-proof defined-benefit pension – based on salary and how long they’ve worked for their employer.

But in the private sector the increased length and diminishing rates of interest on government bonds has made such generous pensions impossible to guarantee.

Former pensions minister Baroness Altmann describes public sector workers as ‘the pensions aristocracy — and they don’t realise it.’

Pensions are a large component of the ONS workings. They found that 89 per cent of public sector workers contributed to a pension in 2019, compared with 75 per cent in the private sector, notwithstanding the introduction of auto-enrolment in 2012.

Of all the employees in the public sector, 82 per cent were in defined benefit schemes, compared with just 8 per cent of all employees in the private sector.

In the private sector, employees were predominantly either in a defined contribution scheme (21 per cent), in a group personal pension scheme (21 per cent) or in a National Employment Savings Trust (15 per cent).

Of those with no pension, 11 per cent were paid by the state and 26 per cent by a private company.

As well as the difference between the public and private sectors in their pensions, the other major determining factors were the age of employees, their sex and their skill level. 

Young workers tend to be paid less than older workers and in 2019, the mean age of private sector employees was 40 years, while in the public sector it was 44.

As regards sex, women on average earn less per hour than men – a subject which the ONS has covered in great detail.

The disparity was smaller in the public sector where men earned 22 per cent more than women, compared to the private where men earned 34 per cent more.

The report also noted that the public sector employees more skilled workers than the private sector: 47 per cent of those being paid by the state are ‘upper-skilled’, compared with a quarter of those paid privately.

‘Upper-skilled’ workers include scientists, IT engineers, medics, teachers and lawyers.

Meanwhile the lower-skilled occupations in the public sector were paid more on average than those in the private sector: £13.62 per hour versus £11.24. 

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