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How to solve the public sector pay cap dilemma

Of all the mistakes in the Conservative election campaign, possibly most grievous of all was the promise to maintain a public sector pay cap of 1 per cent until 2020. It was one thing to maintain such a policy in the 2015 election campaign – when the Consumer Prices Index (CPI) stood at 0.4 per cent. It is quite another to do it now, with the CPI at 2.9 per cent. In May 2015, the Cameron government had a policy of capping public sector pay at 0.6 per cent. Now, the May government has a policy of cutting public sector pay by 1.9 per cent. Small wonder that nurses, teacher firefighters and many others aren’t very happy about it.

This is a problem that should have been foreseen, and which could have been avoided by capping public sector pay at the level of CPI. If that would have cost money there was a very good candidate for saving money: state pensions. They, too, should have been capped at CPI. Instead, the foolhardy triple lock assured pensioners a rise of 2.5 per cent a year even when CPI bottomed out at 0.2 per cent in October 2015.

There is plenty of scope, too, to trim the wage bill at the top of end of the public sector. What happened to David Cameron’s promise that any public body wanting to pay executives more than the £150,000 earned by the Prime Minister would need an extremely good reason to do so? As of this April, 405 civil servants and 2,314 council staff were earning more that Theresa May. Yes, the very same councils who blame the government’s ‘austerity’ programme for failing to deliver public services. Top public sector pay has become a scam. Senior staff like to compare themselves with FTSE 350 bosses and demand salaries to match, claiming that they will be poached by the private sector if they are not paid more. But then how many FTSE 350 companies are actually run by executives who transferred to those jobs directly from senior position in the public sector? I would love to hear from anyone who can name a single one.

Theresa May’s manifesto promised that it would ‘restore the contract between the generations’. She can do this by sticking to her promise to eliminate the ‘triple lock’ in favour of a ‘double lock’, tackling the fat cats – and by capping public sector pay at CPI rather than 1 per cent.

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