Pay rises for public sector despite the recession

Office desk

Private sector workers have suffered a pay freeze over the past year - but their counterparts in the public sector enjoyed an inflation-busting 3.7% rise, according to official figures.

Private sector pay (including bonuses) failed to grow at all over 2009, with average earnings unchanged at £448 a week. While many private firms were forced to cut costs to stave off bankruptcy last year, in the public sector the average total pay rose to £457 per week.

Is there a growing gap between private and public sector pay? Have your say below...

With retail price inflation - the measure generally used to determine pay rises - rising 2.4% in the year to December, this means that (in real terms) private sector workers actually suffered a pay cut last year – whereas the public sector enjoyed a real-time hike.

In total, average wages rose by 0.8% over the three months to December 2009 compared with a year earlier. However, before the recession, annual growth in pay averaged 4.3%, according to Charles Davis, senior economist at the Centre for Economic Business Research.

The great divide in the labour market experience of UK workers piles further pressure on chancellor Alistair Darling to address the balance in his forthcoming Budget - and slash public sector pay in a bid to reduce Britain’s £178 billion deficit.

In his pre-Budget report last December, Daling did pledge to cap contributions by the state to public sector pensions by 2012, saving around £1 billion a year. Public sector employees, especially those earning more than £100,000, would in turn contribute more.

Dealing with the deficit

Labour’s current plan is to halve the budget deficit over four years, while the Conservative Party has called for faster and deeper cuts - though details of how it would achieve this remain vague.

“The gap between public and private sector wages is unacceptably large, reinforcing the need for a freeze in the overall public sector wage bill, which will be a key measure in reducing Britain’s unsustainable budget deficit,” said David Kern, chief economist at the British Chambers of Commerce.

Other official figures show the public sector had a current budget surplus of £1.2 billion in January 2010, but net borrowing of £4.3 billion.

At the end of January, net debt was £848.5 billion - equivalent to 59.9% of gross domestic product.

This is the first January deficit since at least 1993, according to Jonathan Loynes, chief European economist at Capital Economics. He describes the figures as "truly dreadful".

"We had expected the normal January surplus to be smaller than last year’s, but the outturn of a £4.3 billion deficit has dashed any hopes that the worsening trend in the public finances might finally be easing a bit," Loynes adds.

It is now possible that full-year borrowing figure could hit around £180 billion, which is around £10 billion higher than Darling's pre-Budget Report forecast of £170 billon.

Loynes says: "For now, the markets and credit rating agencies seem prepared not to put the UK in the same category as the fiscally-challenged eurozone economies like Greece.

"But with the budget deficit heading towards 13% of gross domestic product this year, and perhaps exceeding that of Greece, it is clear that a more credible plan to restore the public finances to health will be required shortly after the general election to keep the markets and rating agencies at bay."

And Mark Bolsom, head of the UK trading desk at Travelex, says: “This figure will only endorse the argument for full-scale spending cuts in the public sector and is quite likely to have negative consequences for [economic] growth. Unfortunately, we are about to undergo a period of fiscal austerity, whoever wins the general election.”

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I am a public sector worker and my pay increase was 1.5%. This year I am told that my pay is expected to be frozen. I would love to know who got this suggested inflation busting pay rise cos it certainly wasn't me or my colleagues!

davelucas - you got a pay rise??! I work in the private sector, in a very profitable company and nobody in our entire company (over 20,000 employees) got a pay rise or bonus, or other award this year. Moreover we have been told up front that our pay is likely to be frozen for up to five years as we are anticipating a sharp rise in bad debts. Our pensions have been devalued (not on a final salary pension scheme), and our pension contributions are to be increased to compensate. there are to be no promotions or movements of staff within the company for up to five years, and there is nowhwere to go because pretty much every company in our sector is the same. On top of this my working week is circa 45 hours with no overtime. Now tell hard done by do you really feel?

Private sector workers can command higher wages than public sector workers so are at an advantage from the outset.

To the guest above, your company is in one sector, hardly a good representation of the private sector as a whole.

These "official figures" (which haven't been referenced in the article) are only for one year. Every previous year I'll bet private sector pay rises have exceeded public sector pay rises.

I would like to know what private sector workers thought when NHS workers during Mrs. Thatcher's term in office had below inflation wage rises year on year on year!. We never heard them saying that the government should look after the staff in the NHS!! They were all too busy earning their inflation busting wage rises. The vast majority of public service employees have some of the lowest levels of pay in the country. This years' pay rise was part of a 3 yr package and must be one of the only rises that exceeded private sector rises in recent history.
We are fed up with hearing about "gold standard public sector pensions" as if we all retire on massive pensions. The average public sector pension is approx. £5000 per year so this tells you how many people receive lower than £5000.On top of this a large proportion of staff are part-time and only receive pro rata pensions.
Just keep a realistic perspective on the subject!

Where did I say I was hard done by? All I said was I would like to know where these figures come from.

For the record, public sector pay rises have been below private sector rises for many years. Our pensions have also been devalued and our contributions increased following a change in the superannuation regulations.

Seems to me that the public sector is not quite the cushy number that every body thinks it is.

Where do I find what pay awards have been given to senior managers in Dorset County Council. I have heard they have an award of 3.9% and the rest are on pay freeze.
Can this be verified?