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Public Sector Beats Osborne’s Pay Freeze

Jim Pickard

Hundreds of thousands of public sector workers have received pay increases despite George Osborne’s “pay freeze,” announced in mid-2010.

Steve Cole | Photodisc | Getty Images

The Treasury had hoped to save 3.3 billion pounds ($5.2 billion) over two years through the pay freeze. But the Financial Times has learned that six Whitehall departments, as well as the National Health Service, armed forces and police, were unable to impose the full freeze.

This was because of contractual obligations to staff, who were guaranteed annual increases within their position’s official pay scale—or window—provided they passed an annual appraisal.

“Your job could be in a pay window of 23,000 pounds to 27,000 pounds,” one official told the FT. “If you perform reasonably well, you can move up that sliding scale. It is the pay scale that has been frozen.”

Salaries were frozen only after staff reached the upper limit of their pay window.

Analysis of pay scales within the NHS, which employs 1.2 million staff, suggests that increases have typically been between 2 and 5 percent. The police have 130,000 people on the payroll and the armed forces about 170,000.

“Most of these will receive [salary] progression, except for when they have already reached the top of their band,” said the Treasury. “Progression pay applies in limited circumstances and will only be paid during the pay freeze where there is a legal requirement to do so.”

Unison, the public sector union, said the pay increments reflected staff training and rewarded workers who had reached certain skills levels. A union official said: “The vast majority of staff have been very hard-hit by the government pay freeze. The increments do not go up indefinitely: a healthcare assistant doesn’t become a nurse or a nurse a doctor.”

Staff in other parts of government, including the communities and business departments, the Home Office, the Department for Transport, Department for International Developmentand some parts of the Ministry of Justicealso benefited from the guaranteed increases.

An FT request under the Freedom of Information Actshowed that 44 percent of business department staff enjoyed a pay rise in 2010, and 34 percent in 2011.

However, 15 Whitehall departments, including the Treasury, Revenue & Customsand Work and Pensions, imposed an absolute freeze on staff pay, apart from those earning less than 21,000 pounds, who were always exempt from the Chancellor’s order.

Matthew Sinclair, chief executive of the TaxPayers’ Alliance, said it was wrong that public bodies were finding “crafty ways” to get round the pay freeze, which was put in place to repair the public finances after a decade of “unsustainable” increases in spending.

He said: “It’s high time that these bodies accept the severity of the fiscal crisis and stop awarding increases when they shouldn’t, as taxpayers deserve better value.”

Officials argued that departments had made very deep cuts to running costs since 2010, and staff were under much more pressure than before—with some working longer hours.

Following the pay freeze, the chancellor has announced a 1 percent cap on staff increases for two years in a move he hopes will save a further 1.1 billion pounds.