Restraint and Fairness in Public Sector Pay - Liberal Democrat Policy

10.21.17am GMT Tue 8th Dec 2009

Liberal Democrats will cap public sector pay rises at £400 per person to limit the growth of the public sector pay bill while ensuring fairness for teachers, nurses, police officers and other public sector workers. The cap will save taxpayers about £4bn a year, reducing pressure on front line services and protecting jobs. For workers themselves, it will ensure the lower your salary is, the higher percentage pay rise you are eligible for.

Why it is Necessary

There is a budget deficit of £175bn - of which about £90bn is structural - meaning it will not be eliminated by future economic growth. It is vital that we reduce public spending so we do not need to borrow so much money in the future.

Public sector pay amounts to nearly £160bn, about a quarter of all public spending, so any serious attempt to limit spending must include proposals about pay rises. Many people in the private sector have already taken pay cuts or freezes in response to the crisis. We want to limit increases in public sector pay without unfairly penalising people on low incomes or enforcing pay cuts onto hard-working public servants.

Choosing this approach will also significantly reduce the pressure for cuts to numbers in the public sector, helping to protect people's jobs.

Policy Detail

Every public sector worker will be eligible for a pro-rata pay rise of up to £400. This is the equivalent of a 2% pay rise for someone on £20,000 a year, but a 3.3% pay rise for someone on £12,000 and a 0.4% pay rise for someone earning £100,000.

Managers will not have to award the £400 pay rise to everyone - they will have flexibility in allocating their budgets so that, where appropriate, organisations can agree further pay restraint in order to protect job numbers.

Costs/Savings

The impact on existing spending plans is as follows:

2010/11 - £0

2011/12 - £2.2Billion

2012/13 - £4.4Billion

2013/14 - £4.5Billion

2014/15 - £4.6Billion

The effect of the policy has been costed on the assumption that pay rises under existing policies would continue at 2.5%.

Labour say: Workers with salaries of over £150,000 will have to be individually approved by the Treasury.

We say: Labour isn't facing up to the real problem. Their refusal to get real on public sector pay shows just how badly they are failing to sort out Britain's finances.

Conservatives say: One-year pay freeze for everyone on a salary of over £18,000.

We say: The Conservatives are going to freeze the salaries of millions of teachers, police officers, nurses and firemen even though they can find the money for tax cuts for millionaires. They are out of touch with the needs of ordinary people - it's clear life would get worse, not better, for most people under a Conservative government.