Public sector pay awards could increase staffing costs to almost £5bn this year resulting in 110,000 job cuts if additional funding is not granted, according to a report by the Institute for Fiscal Studies (IFS).
The report estimated that public sector pay rises of 5% across the UK this year could cost central and local government £4.8bn. In addition, an inflation-matching (10.5%) pay award would cost £17.9bn.
The IFS said that if the additional costs were met entirely through job cuts, a reduction of approximately 110,000 public sector workers would be necessary this year. This number would increase to 390,000 for pay awards matching inflation.
Bee Boileau, research economist at the IFS, told Room151 that a rough estimate for the impact of a 5% pay award across local government would be £1.7bn. If these additional costs were met solely through workforce cuts, authorities would need to lose 40,000 workers.
“If cuts fell evenly across the public sector, based on the fraction of general government headcount represented by local government, we might expect headcount cuts of around 40,000 in local government in 2022/23 to afford the 5% pay rise – or cuts of around 140,000 to afford an inflation-matching pay rise of 10.5%,” she said.
In the National Employers for Local Government Services pay offer in July, council employees were offered a flat-rate pay increase of £1,925. This equates to a pay rise of more than 10% for those on the lowest pay points and around 4% for senior council and school staff.
Boileau broadly estimated that if local government pay were kept constant in real terms after this year, “the headcount cuts necessary in 2024/25 are estimated to be around 80,000 and if inflation-matching pay rises were offered in all three years, this figure would rise to 180,000”.
These estimations assume that the proportion of general government employment represented by local government remains constant between 2022 and 2025.
—————
FREE weekly newsletters
Subscribe to Room151 Newsletters
Room151 LinkedIn Community
Join here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
