Public sector workers have not created this recession – but they will be the ones paying for it as the chancellor today imposed a two-year pay freeze on the 72% of public sector staff who earn more than £21,000 a year, and announced average cuts of 25% on most government departments.
"Many public sector workers work very hard," said the chancellor, George Osborne, as he announced the pay freeze.
It was, perhaps, a Freudian slip on the part of Osborne as he presented his first budget, that he went on to say public sector workers had not caused this 'reception'. He quickly corrected himself – 'recession', not 'reception' - but the reception of Osborne's budget across the public sector is unlikely to be warm.
Osborne announced a further £17bn cut in public sector budgets by 2014-15. There will be no further reduction in capital spending cuts, he said, but all departments, apart from the NHS and international aid, now face average cuts of 25% by 2014-15.
However, that may vary between different departments; the full picture will be announced on Wednesday 20 October, when the comprehensive spending review figures are to be released, according to the chancellor.
Professor Colin Talbot, professor of public policy and management at Manchester Business School, said the departmental cuts were worse than expected. Talbot said that between now and 20 October, Whitehall will be in "perpetual turmoil trying to figure out how to turn this commitment into actual cuts in real services".
NHS Confederation acting chief executive Nigel Edwards said the pay freeze for public sector workers will help save the NHS money - but the increase in VAT would mean a simultaneous rise in the cost of goods and equipment.
"So although health spending will continue to rise year on year, all NHS trusts will find they are challenged to do more for the money they have," he commented.
The two-year pay freeze for public sector workers does not apply to the 1.7m public sector staff who earn less than £21,000. Those staff - 28% of the total workforce, according to Osborne – will receive a flat-rate pay rise of £250 in each of the next two years.
Peter Smith, director of public sector consulting for Hay Group, said that while some form of pay freeze was inevitable, there is a question about how it will be implemented. "The government does not directly pay the whole public sector workforce," he said, which will make the freeze difficult to implement. In addition, even within the "big battalions" of staff paid directly by the government, many, including teachers and some NHS staff, receive automatic incremental rises. "So even if there is a settlement of zero, pay will still increase," he said.
In the budget, Osborne made a strong attack on public sector pay and the cost of public sector pensions, despite growing controversy over the figures.
Yesterday, union leaders accused the government of inflating the cost of final-salary public sector pensions, saying that figures showing a £1tn hole in the pension system were based on a misreading of the way the system works.
The government has announced two reviews of public sector pay and pensions.
Will Hutton is to head a review to look at fairer pay, while former Labour minister John Hutton will head an independent commission on public sector pensions.
• The Guardian has launched Cutswatch, to monitor how the decisions taken in Westminster will impact on local public services, and is asking for feedback from public services professionals, as well as service users, on how the cuts are affecting services around the country.
From Bubb's Blog
From Whitehall Watch
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