Never was there more truth in the old adage about every organisation that is not specifically right-wing eventually becoming left-wing. The pay review bodies which are supposed to provide independent advice to the government on public sector pay have become a menace. They have become advocates for trade unions and care not a jot about the taxpayer.
Teaching and nursing unions are threatening strikes if the government does not accept the recommendations of pay review bodies. The one concerned with teachers’ pay has suggested a 4 per cent rise and the one regarding nurses’ pay is suggesting over 3 per cent. They may seem modest rises, except that inflation is down to 2.6 per cent and productivity in the public sector has gone into reverse. Moreover, the government borrowed £16.4 billion last month alone, taking borrowing in the year to March to £151.9 billion.
Public sector pay awards are always going to be political
A genuinely independent pay review body would rapidly conclude that any pay rise over the rate of inflation would be a reckless move which puts the UK public finances even closer to disaster. This is not just because of the cost of the salaries themselves, but also the cost of pensions – most of which are unfunded and salary-linked. It would see that if public sector workers want to enjoy higher wages their productivity will have to increase sharply. It would see, too, that unfunded public sector pensions are draining the public purse; if workers want pay rises, they will have to agree to less-generous pensions.
Instead, pay review bodies in their terribly well-meaning way have ended up looking at public sector pay mainly from the point of view of the workers – choosing to award inflation plus a bit extra for good measure, regardless of the dire fiscal position of the country. It doesn’t help that the members of the pay review bodies themselves are paid a daily rate significantly higher than most of the workers on whose pay they are advising the government. The chairs of each body are paid £350 per day and other members £300 a day. Perhaps they fear an acute sense of embarrassment if they recommended less than a comfortable increase.
The first pay review bodies were set up by Harold Macmillan’s government with the intent of taking the politics out of pay rises. But then public sector pay awards are always going to be political. They require the interests of workers and taxpayers to be balanced. Trying to subcontract the whole business to unelected bodies just leads to unaccountability and potential conflicts of interest. While members of pay review bodies have to make declarations on their financial interests, their names do not appear on it. It is inevitable that members will have their own political views, and that over time these bodies are going to acquire a distinct political character.
True, the government is not obliged to accept the recommendations of any pay review body, but it is politically difficult to refuse. Refusing the recommendation of an ‘independent’ body gives trade unions a ruse to claim that a government is engaged in a war against workers. The present government has made a rod for its own back not only by accepting last year’s recommendations but also by trying to make political capital of Rishi Sunak’s government’s slowness in accepting them. Labour has consequently created an expectation on the part of the unions that these recommendations will always be accepted. The public sector finances have effectively been put in the hands of a few dozen individuals with a lack of accountability and no responsibility for ensuring the country does not go bust.
One day, perhaps sooner than anyone imagines, it may end up being another independent body which ends up deciding UK public spending: the IMF, as a condition of a 1970s-style bailout. If we get to that situation, pay review bodies will deserve some of the blame. They should be abolished before it is too late.
