Public Sector Pay Cap

– in the House of Commons at 12:48 pm on 5th July 2017.

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Photo of John Martin McDonnell John Martin McDonnell Shadow Chancellor of the Exchequer 12:48 pm, 5th July 2017

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement outlining the Government’s policies with regard to the public sector pay cap.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

We all recognise that public sector workers do a fantastic job. Over the past seven years, we have seen major improvements in our public services. Crime is down, with a greater proportion of police on the frontline. More children are achieving higher standards at school and going on to apprenticeships and university. Our NHS is looking after more people than at any time in its history.

Government pay policy is designed to be fair to public sector workers, who work so hard to deliver these strong public services, but we must also ensure that we are able to provide those public services on a sustainable basis for the future. In many services, workers have received pay additional to the 1% national increase. Teachers had an average pay rise of 3.3% in 2015-16. More than half of nurses and other NHS staff had an average increase of over 3% in 2016. Military service personnel also saw an average additional increase of 2.4%. Salaries in the public sector remain comparable to those in the private sector. In addition, many benefit from higher pension entitlements. They also benefit from the rise in the personal allowance, worth £1,000 to a basic-rate taxpayer.

We are currently completing the pay review process for 2017-18. We have accepted the pay review body recommendations made for doctors, the NHS and the armed forces. We will be looking very carefully at the recommendations on the remainder and making determinations in the usual way. As the Chancellor said on Monday, our policy on public sector pay has always been designed to strike the right balance of being fair to our public sector workers and fair to those who pay for them. That approach has not changed, and the Government will continually assess that balance.

Photo of John Martin McDonnell John Martin McDonnell Shadow Chancellor of the Exchequer

I welcome the right hon. Lady to her post, but when we ask a question of the Chancellor, we would expect the Chancellor to respond to that question. We simply wanted clarity on whether the pay cap is still in force. That is all we asked for.

The response that we have seen today confirmed what most commentators are now saying: this is not a Government; it is a Cabinet of absolute chaos. Let me explain that the existing Government policy, as set out in the comprehensive spending review 2015, due to be ratified today in the Supply and Appropriation (Main Estimates) Bill, is still a 1% pay cap, and this is the diktat to which the various pay review bodies are still working. In fact, they are written to and told that their proposals have to reflect

“the Government’s policy on public sector pay awards”.

Yet over the last week we have seen, to be frank, absolute confusion in Government— total disarray. The question we are posing is, “Who actually speaks for the Government on this issue?” On the day of the Queen’s Speech, No. 10 was briefing out the end of austerity and the relaxing of the pay cap, only to be contradicted by an incandescent briefing from No. 11. Daily fearful of a putsch, No. 10 then backs down. For the Prime Minister it must be tough, living next to a disruptive neighbour you can’t stand, you try to get rid of, and you can’t get on with.

We then receive in the press the wisdom of Boris Johnson, who, according to a spokesperson,

“supports the idea of public sector workers getting a better pay deal”.

This is followed by his past campaign manager turned political assassin, the new Environment Secretary, who supports the putsch against the Chancellor. Then the whole process degenerates into farce when we have David Cameron, earning £100,000 a speech, telling us that the people who want more than 1% are “selfish”. The Chancellor has called for a grown-up debate. I agree. What we have seen are Cabinet Ministers scrapping in the school playground. Cut off from the real world that most people live in, the Chancellor has no understanding of why our public sector workers are so angry. They are angry because they have had enough of seeing tax cuts to the rich and corporations while their pay is being cut.

Can the Chief Secretary to the Treasury clarify how the Government’s estimates 2017-18, as per the Supply and Appropriation (Main Estimates) Bill on the Order Paper today, will accommodate the reported offer to the fire and rescue services, which, we are told, is subject still to Government funding? Moreover, if we are to see another Government U-turn, which in the case of public sector pay we would welcome, can the Government confirm how they will fund the £5 billion needed that they say would be saved by the 1% pay cap? Or are we being confronted with yet another uncosted commitment within weeks of a Parliament commencing? It’s the magic money tree again.

The Government’s own report on Monday showed how much doctors’ and nurses’ pay had fallen. Does the Chancellor think that is fair? Given that 20% more nurses left the nursing register than joined it this year, does the Chancellor agree with the chief executive of the Royal College of Nursing that:

“For every day…the cap remains in place” the profession is “haemorrhaging”?

Finally, given the chaos on the Government Benches over this policy, can the Chief Secretary tell us when an actual decision will be made about the future of the pay cap? Will public sector workers have to wait until the next Budget before finding out whether they will have decent pay for the next two years? Should not the Chancellor now write formally to the pay review bodies to say that they are now free to do what is right by public servants and pay them a fair pay award this year?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I do not know whether to be disappointed or delighted that the shadow Chancellor does not want to see me at the Dispatch Box, but I am here today to answer his questions because I am responsible for this policy area, and I think that is entirely appropriate.

As has been outlined by the Prime Minister and the Chancellor already, our policy on public sector pay remains in place, because it is the responsible thing to do. It is the responsible thing to balance the importance of recruiting and retaining high-quality people in our public services with making sure that our public finances remain sustainable so that we can continue to see the improvements in our public services that we have seen under this Government.

Some of the shadow Chancellor’s comments were disingenuous. He did not reflect the fact—

Withdraw!

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Order. I know these matters pretty well by now. The right hon. Lady must resume her seat. I am sure that she has got a very versatile vocabulary, and she must deploy some other term. She cannot accuse a Member of being disingenuous; that is an imputation of dishonour. She has been in the House long enough to know that she should not say that. It is very simple, no debate required—a simple withdrawal. Thank you.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I do withdraw that, Mr Speaker, and apologise for it.

Perhaps the right hon. Gentleman was mistaken in what he said, because in 2015-16 we saw teachers get 3.3% worth of progression pay, we saw more than half of nurses and NHS workers get over 3%, and we saw military service personnel receive 2.4%. I therefore suggest that he include those facts in the figures next time he speaks. As for the fire service, he knows perfectly well that those pay policies are set independently and are covered within the local government budget.

I think it is wrong that we are hearing the Opposition talk down our public services when we are seeing huge improvements, we are seeing more people attracted into our public services, and we are seeing the best performance ever in our education system and our health system. As for uncosted commitments, the right hon. Gentleman has £60 billion worth.

The right hon. Gentleman asked about the pay review process. Well, the process is very simple. We have received recommendations from pay review bodies already this year. They make decisions based on the individual circumstances within those sectors. We have followed all of their recommendations. We will look at the further recommendations we need to make decisions on, and we will look at the balance between affordability and making sure that we retain and recruit high-quality public sector workers. This is the right approach. It is not saying that we are going to open up the cheque book, bankrupt our public services and see people lose their jobs, which is exactly what has happened in countries like Greece that took that approach and took their eye off the public finances. The right hon. Gentleman needs to take a more balanced approach in the way that he looks at this issue.

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

During the rather fractious proceedings to date, one Member has been the embodiment of calm and serenity. That Member should be imitated by others, and will now be called to contribute—Mr Kenneth Clarke.

Photo of Kenneth Clarke Kenneth Clarke Father of the House of Commons

Those are not adjectives that have been applied to me throughout my political career, Mr Speaker, but I am grateful to you for that credit. May I congratulate my right hon. Friend the Chief Secretary to the Treasury on straightforwardly restating the Government’s sensible policy on this issue? It is necessary as part of our ensuring, in this post-Brexit world, that we keep the economy on track; that steady, sustainable growth continues; and that we steadily eliminate the problem of debt and deficit that we inherited.

Does my right hon. Friend agree that if she were to give way to this week’s lobbying on the subject it would be a political disaster, because the Government would be accused of a U-turn and a surrender? It would set off a wave of pay claims across the entire public sector, which the Opposition are obviously looking forward to taking part in if they can provoke them. It might also be an economic disaster, and it would not be in the interests of the many people in the public and private sectors who are having economic difficulties in these times, and who want to look forward to a much more prosperous future as we get our economy back to health.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My right hon. and learned Friend has a huge amount of experience in this area. He is correct to say that we need to take account of the sustainable, long-term financing of public services. We need to look at the specific issues in each sector where we need to recruit and retain staff, and we also need to look at fairness with the private sector. At the moment, public sector and private sector salaries are roughly comparable. As a country, we need to improve our productivity and our growth rate. That is the way to ensure that everybody benefits. The Government have a fantastic record when it comes to getting people into work, and unemployment is at its lowest level since 1975. We need to make sure that we continue with that.

Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Social Justice)

I welcome the Chief Secretary to her place. We had all hoped that today would bring some commitment and certainty from the Government on public sector pay. Instead, our public sector workers continue to be stonewalled from the Dispatch Box, while members of the Cabinet have apparently abandoned collective responsibility to brief for an end to the cap. Perhaps that says more about those Ministers’ desire to undermine the Chancellor and the Prime Minister than it does their commitment to public sector workers. According to The Times, the Prime Minister wanted to announce something today but could not get her Ministers to agree a line.

This week, a report by academics from University College London was published quietly by the UK Government’s own Office of Manpower Economics. The report showed that average hourly public sector wages fell in real terms by 6%—or, for some, by up to £3 an hour—in the past decade. That is perhaps part of the reason why the past decade has been the worst for wage growth in 200 years, and why in-work poverty continues to rise. With that in mind, can the Chief Secretary advise our dedicated police, firefighters, nurses and others—who put their lives on the line and make great sacrifices for us—what they have to do to earn a fair pay rise, as they will do in Scotland? Or does the Chief Secretary support former Prime Minister David Cameron’s comments from Seoul yesterday, when he said that it was “selfish” to campaign for an end to the pay cap?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

As I have outlined, pay is determined by a very clear process. Independent pay review bodies make recommendations on areas such as pay for the police and nurses. We will look very carefully at those recommendations to balance fairness for public sector workers, and recruitment and retention of the best possible people, with affordability for the public finances. That is a responsible approach to take, and it will ensure that our economy grows and unemployment continues to move in a positive direction.

Photo of Helen Whately Helen Whately Conservative, Faversham and Mid Kent

Since 2010, 13,000 more nurses have been employed in the NHS. I am worried that the Labour party’s unfunded proposals for public sector workers could lead to a cut in the number of nurses, given the £68 billion black hole in the financing of the party’s manifesto. Will my right hon. Friend assure me that when she looks at pay for nurses, she will not only consider what is a fair level of pay, but ensure that we remain able to afford to employ more nurses in the NHS? Will she also ensure that we continue to focus on sound finances and a strong economy to pay for our public services?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend is right to point out that, by having this balanced policy, we have protected jobs in the public sector and we have protected important services. The Office for Budget Responsibility outlined in its report that our policy protects the jobs of 200,000 public sector workers. That is important for those people, but it is also important for our constituents who receive those public services and who are seeing improvements in our schools and hospitals, and a reduction in crime. It is important that we take that balanced approach.

Photo of Vincent Cable Vincent Cable Liberal Democrat, Twickenham

Does the Chief Secretary not accept that there was a fundamental difference between the economic conditions when the 1% cap was introduced, when there was a fear of large-scale unemployment and deflation, and the economic conditions of the present day, when there are chronic labour shortages throughout the public sector and salaries have been eroded by rising inflation? Will she not lift the cap to reflect basic economic reality?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

First of all, public sector pay is comparable with private sector pay. In addition, public sector pensions are set at a higher level, on average, than private sector pensions. The pay review bodies have a remit to look at retention and recruitment when they make their independent decisions. Of course, I will look at all their recommendations when they come out. The right hon. Gentleman has made an omission that was also made earlier; a lot of those roles have pay increments independent of the 1% cap. Teachers’ pay increased by 3.3% in the last year for which we have records, so it is not right to talk solely about the 1% cap. In fact, public sector workers are rewarded in a number of different ways.

Photo of John Redwood John Redwood Conservative, Wokingham

A recent Office for National Statistics study shows that public sector productivity fell by 5.7% in the long period from 1997 to 2014. Is not the way forward better pay for smarter working? Do we not want pay awards that give something for something, so that the taxpayer wins, the service user wins and the employee wins?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My right hon. Friend is correct to say that we want improvement in our public services. I have highlighted education, where more children are going to good and outstanding schools; and I have highlighted our health service, which is dealing with more patients than ever before. School pay policy is set by individual academies, for example, so we are giving more freedom over pay and pay determination. It is important to look at the public finances as a whole, and to ensure that, overall, we are living within our means as a country.

Photo of Gloria De Piero Gloria De Piero Shadow Minister (Justice)

Right now, 130 workers at Annesley Department for Work and Pensions office are being told that their place of work will be closed and their jobs relocated up to an hour’s drive away. Have these public sector workers not suffered enough from the seven-year pay cap? Is not the last thing that they need to be told that they need to find more money to pay for their travel to and from work?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The hon. Lady refers to a specific issue with a jobcentre in her constituency. I am sure that the DWP is looking at how those people can be assisted, and it is certainly something that I am happy to raise with the Work and Pensions Secretary on her behalf.

Photo of Vicky Ford Vicky Ford Conservative, Chelmsford

In Chelmsford, we are very proud to be home to one of the places where nurses are trained—the great Anglia Ruskin University, which I visited just last week. It is good to hear my right hon. Friend speaking about how nurses have benefited from pay progression, and also from lower taxes, through the increment.

Part of increasing the prosperity of public sector workers is the provision of an increasing number of training opportunities. There is great excitement in my constituency not only about the introduction of degree apprenticeships and being one of the first places in the country to build a new medical school, but about affordable housing and people having more money in their pockets. Can the Chief Secretary confirm that increasing prosperity is not just about pay, but about having a strong economy to deliver more houses, more training and more skilled opportunities?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend is right that we need to look at what is included in the wider package that people receive, whether that is support for their pension, additional flexibilities or additional elements of pay and training, because training and progression are extremely important. I remember visiting Chelmsford prison in her constituency, which was looking at training opportunities for prison officers. We are looking at that throughout the public sector, because job satisfaction derives from many things, and although pay is of course important—I would not deny that—job satisfaction is also about working conditions and about people on the frontline feeling empowered to do their jobs well and knowing that they are making a contribution. Being a public servant is incredibly important, and we need to show that we are giving people on the frontline the ability to make decisions and really improve people’s lives for the better.

Photo of John Mann John Mann Labour, Bassetlaw

As a public sector worker, how much has the right hon. Lady’s own pay increased since 2010 and how much has her productivity increased since 2010? Can the country afford her pay increase, and if so, does she agree with me that Britain deserves a pay increase?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I would answer the hon. Gentleman by saying that my pay has gone both up and down since 2010, but my pay is set independently. The important point is that the pay of public sector workers is determined by the pay review bodies, whose recommendations I take very seriously, and that is how we should approach this issue. Rather than trying to politicise the issue and saying that we should have a blanket approach, we have set public sector pay review bodies the remit to make such decisions themselves.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

When will the Government introduce the £95,000 cap on exit payments for public sector workers? The legislation is on the statute book, but it has not been implemented. Will it be implemented soon so that we do not have any more payments such as the £390,000 paid earlier this year to the chief executive of Bournemouth Borough Council to leave?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I would be very happy to discuss that issue with my hon. Friend later.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Brexit)

The rise in inflation, the recommendations of pay review bodies and the closing of the gap between private sector and public sector pay have quite rightly focused attention on the whole issue of the current pay policy. Does the Chief Secretary agree that rhetoric about austerity and uncosted and unfinanced amendments to the Queen’s Speech in this House are no substitute for looking at the tax and borrowing implications and the implications for other parts of the public sector of a review of pay policy?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

We need to look not only at the important issue of fairness for public sector workers and the issue of recruitment and retention, but at the overall health of the British economy, so that we can make sure we carry on having low unemployment rates and growth in our economy and carry on dealing with the debt that is a result of the great depression that we suffered as a country. We need to pay down the debt and get the deficit further down so that we can continue to enjoy high-quality public services.

Photo of Maria Caulfield Maria Caulfield Conservative, Lewes

As someone who has worked as a nurse during the period of the pay cap and pay freeze, may I just say that that is very difficult to do as a public sector worker? The issue is greater than just a pay rise; it is also about the pay structure. When Labour introduced the “Agenda for Change” system, it created an increment system under which people have to wait five, six or seven years to get the pay they actually deserve. The increment system is not working, and it also gives trusts the opportunity to downgrade people, with a sister in one hospital on band 7 while another somewhere else is on band 5. The pay structure is not working, and that needs to be looked at as urgently as the pay cap.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend’s great expertise as a former nurse is shown by the detailed question she has asked. We need to make sure that we reform public services and give people the opportunity to progress and be trained in the roles they fill. One of the roles of the pay review body is to look at such structures, as well as at rates of pay. During the processes they go through, those bodies certainly take evidence from frontline workers, unions and experts in the area, and I hope that they will take such issues into consideration.

Photo of Tony Lloyd Tony Lloyd Shadow Minister (Housing)

The Chief Secretary referred to productivity increases in the public sector. We recently saw firefighters racing into Grenfell Tower, paramedics and police racing into the Manchester Arena after the bomb, and doctors, nurses and other medical professionals working around the clock to save people’s lives. What advice would she give to her hon. Friends on the Government Benches about productivity increases by those people, who have served the people of this country?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

Those firefighters, police and others in the emergency services have done a tremendous job, and I am sure we are all extremely grateful to them for regularly putting themselves in the line of danger. The hon. Gentleman is right to point that out.

What does productivity mean? I talked earlier about empowering people on the frontline to be able to make decisions and do things more quickly. When I talk to nurses and teachers, they sometimes say that they want less bureaucracy so that they can get on with the real jobs that they have been employed to do, and that is why more police are spending more time on the frontline. Productivity means giving people more job satisfaction—spending more of their time doing the job that they have come in to public services to do—and that is why we are reforming public services and seeing improvements.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

Does my right hon. Friend agree that it is vital that the Government should continue to balance fairness for public servants and fairness for taxpayers who pay for public services?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

We need to ensure a continual balance in being fair to the people working in public services—giving them the training and opportunities they deserve, and paying them fairly—while at the same time making sure that they will be able to continue to work in those public services in the future. If we look at what happened in Greece when the deficit got out of control, we can see that there was a 36% reduction in spending on the health service. [Interruption.] Members on the Opposition Front Bench may groan, but they should look at the facts about what happens when unfunded spending commitments are made. Let us be clear: the Institute for Fiscal Studies has said that Labour’s spending plans would lead to the highest levels of taxation we have ever seen in peacetime Britain. Theirs are not moderate but extreme proposals that would lead to people losing their jobs.

Photo of Jim McMahon Jim McMahon Shadow Minister (Communities and Local Government) (Devolution)

The Chief Secretary quite rightly outlined that there is more to the package offered to public sector workers, including pensions, but will she confirm that the average pension for a local government worker is less than £80 week? What message does it send when, on top of that, their wages are supressed and their workloads have increased twofold? Is not the truth that this Government know the cost of everything and the value of absolutely nothing?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

We care about how well our public services are serving the public, and we want to have highly motivated people working in our public services who feel valued and properly remunerated. That is why such decisions are made by independent bodies.

Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

Members on both side of the House want strong wage increases for those at the bottom end, whatever sector they are in. Will the Chief Secretary tell us what our new national living wage will do to the incomes of those at the bottom end, and will she confirm that it will give us one of the strongest minimum wages in the world?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend is right and I congratulate him on the role he had in that policy. We are raising wages for those on the lowest incomes and taking more people out of tax. Basic rate taxpayers have seen a £1,000 reduction in their tax bill. That is important in dealing with the cost of living and in making sure that it always pays for people to go into work.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Environment and Rural Affairs)

In a very readable book, “Austerity: The History of a Dangerous Idea”, Professor Mark Blyth charts the fact that austerity always fails, either at the ballot box or with people waking up to the failing nonsense that is austerity. If the Government instead concentrated on growth, the deficit would take care of itself. Is it not time that public sector workers, who pay taxes, are given the money to spend in the economy and create that growth?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I understand that the hon. Gentleman’s party voted to support our pay policy earlier this year.

Photo of Lucy Frazer Lucy Frazer Conservative, South East Cambridgeshire

The Institute for Fiscal Studies estimated that Labour’s proposal would cost £9 billion a year, which is more than double the amount the party estimated in its manifesto. That would involve significant borrowing. Our interest bill is £50 billion a year. Does the Chief Secretary to the Treasury agree that that is £50 billion less to invest in our public services?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

That is right. Future generations will pay for the services that we are enjoying today, and that is wrong. We need to live within our means and make sure that people are properly rewarded. We need to make sure that things are fair between the public and private sectors. That is what the Government’s balanced policy is achieving.

Photo of Bambos Charalambous Bambos Charalambous Labour, Enfield, Southgate

My union Unison represents workers across the public sector. The hard-working nurses, teaching assistants, cleaners and local government workers in my constituency of Enfield, Southgate, who are not subject to increments have been asking me when they will get fair pay for the hard work they do for all of us. Does the Chief Secretary agree with me and some of her colleagues that in the light of the increases in inflation and the cost of living, the public sector pay cap must end now?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I have already said that our policy balances the need to make sure that people are remunerated properly—that is what the pay review bodies look at—and the need to make sure that public services are sustainable in the long term, because as well as making sure that people are paid properly and that the wider package is as good as possible, we need to make sure that those jobs are protected and secure in the long term.

Photo of Rachel Maclean Rachel Maclean Conservative, Redditch

Does the Chief Secretary agree that as a result of Labour’s economic mismanagement in 2008 to 2009, average wages—[Interruption.]

Photo of Rachel Maclean Rachel Maclean Conservative, Redditch

Thank you, Mr Speaker. As a result of Labour’s economic mismanagement in 2008 to 2009, average private sector pay fell significantly, while public sector pay remained stable. Does the Chief Secretary agree that it is important, when we look at the pay review bodies’ recommendations, to recognise the challenges faced by small businesses when they are outpaced by public sector earnings? Given that small businesses, as employers, create the majority of the jobs in this country, will she ensure that the pay review bodies take into account the views of small business people?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

We have got to the position where public sector pay is comparable with private sector pay, and public sector workers often have pension entitlements on top of that. It is fair to get to a position where pay is comparable, for the skills people have. That is fair for the businesses that we need to create wealth in our country, so that we can fund public services. It is fair for workers in both the private sector and the public sector. Nothing is more important than getting people into work and giving them a sense of pride and responsibility, and the ability to earn for themselves and their family that come with it. The Government should be proud of what we have achieved: the lowest level of unemployment since 1975. The idea that we should put that at risk by making our public finances unsustainable or by pricing small businesses out of the market is very dangerous.

Photo of Rosie Cooper Rosie Cooper Labour, West Lancashire

This issue is also about fairness—a word I have heard repeatedly. Liverpool clinical commissioning group paid themselves increases of between 15% and 81%, with a non-executive getting £105,000. An NHS investigation has confirmed that that is far outside the rules, yet the accountable officer and governing body have not been held to account. Does that send a message from the Government to the NHS that people can do what they want, that anarchy rules and that the pay cap will be applied selectively and is not fair?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

It is very important that all public sector bodies stick within the rules.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

I draw the House’s attention to my declaration of interest as a working NHS doctor. My right hon. Friend has talked rightly about the effect that increments have on progression pay, and the staff affected have received an increase in their pay. However, in the NHS half a million staff are at the top of their pay scale and have received a real-terms pay cut over the past few years. They work incredibly hard, above and beyond the call of duty. They are the people who gave up their days off to go in when the terrorist attacks happened in London and Manchester. Those people do need a pay rise. Does she recognise that many of those staff are now turning to agency work? The locum and agency bill in the NHS is £4 billion and rising. Does she recognise that part of dealing with the cost of locum and agency staff must be to increase the pay of permanent staff?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I completely agree with my hon. Friend that doctors and other medical staff do a vital job and have faced real challenges. We are reducing the agency spend in the NHS over time. It is important that we look overall at the affordability for the public sector. That is the remit of the independent pay review bodies. They hear evidence from the experts on the frontline and make their recommendations. We accepted the recommendation for doctors that was put to us. We accepted the recommendation for nurses and other NHS workers as well. We respect that pay review body process.

Photo of David Hanson David Hanson Labour, Delyn

Put simply, does the Chief Secretary think it fair that the public sector workers who face a cap also face a rise of around 5% to 7% in energy prices when the chief executive of SSE this year had a 72% increase in his pay, taking it to £2.9 million?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The Government are taking action on energy costs. We are also making sure that public sector workers receive increments in addition to the 1% that the right hon. Gentleman mentioned. We are taking action as a Government to raise the tax threshold, so that people on the basic rate are now paying £1,000 less tax. He needs to take account of the whole package; I think that he is cherry-picking some bits.

Photo of Ross Thomson Ross Thomson Conservative, Aberdeen South

Is the Chief Secretary to the Treasury aware that the Scottish Government set pay for 485,000 public sector workers, which is close to 90% of all public sector workers in Scotland? Does she agree with the statement by the Cabinet Secretary for Health and Sport on 10 May in the Scottish Parliament, when the Scottish Government voted against a pay increase for NHS staff, that

“we believe that there can continue to be value in the independent pay review process”?

Is my right hon. Friend aware of the Nuffield Trust report that highlights that the Scottish National party’s deep cuts to the health budget in Scotland are seriously harming the NHS?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

It is great to have one of my Scottish colleagues pointing out the facts about what is happening in Scotland. The Scottish National party has failed to deliver. We see worse performance in the Scottish NHS, and school standards in Scotland are falling, which is a huge shame. [Interruption.]

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Order. Mr Stephens, you are a very excitable denizen of the House. I had been intending to call you, but I think I will leave you to simmer down for a few minutes in the hope that you can recover such poise and composure as are available to you.

Photo of Liz McInnes Liz McInnes Shadow Minister (Foreign and Commonwealth Affairs)

The Labour Government brought in Agenda for Change for NHS staff, which finally put us—I was one of those NHS staff—on a fair rate of pay with an independent pay review body, but since 2010 the coalition Government and the Tory Government have systematically undermined Agenda for Change pay rates by capping and freezing wages. The Government are all too ready to describe NHS workers as fantastic, but giving them a fair pay award is just that—fantasy. Is it not time that the Government put their money where their mouth is?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The hon. Lady is not acknowledging the fact that more than half of those people on Agenda for Change are receiving average incremental pay of 3.3%.

Photo of Oliver Heald Oliver Heald Conservative, North East Hertfordshire

My right hon. Friend will be aware that the NHS has attracted workers from across the EU, particularly in nursing. When she looks at how we set public sector pay, will she look at international comparisons across the EU to ensure that pay is set in such a way as to continue to attract those very much needed staff to Britain? Does she have data on that that she can consider?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I thank my right hon. and learned Friend for his question. The pay review bodies are responsible for gathering the data on how we ensure that we retain and recruit the high-quality staff that we need in our NHS. I know they have looked at that in their reports this year, as I am sure they will do in future.

Photo of Clive Lewis Clive Lewis Labour, Norwich South

In the exceedingly fine city of Norwich, we have three NHS trusts, two local authorities and a teaching hospital—thousands of public sector workers who contribute to our economy, and who are struggling to make ends meet. Surely the Government must understand that austerity is dying on its feet. They should invest in those people. If they lift the public sector pay cap, they will invest in Norwich’s local economy. It is a win-win for everyone.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I should say to my fellow Norfolk MP that we are seeing improved public services in Norfolk, both in the health service and in our local schools. That is a result of the Government reforming services and investing in them, and ensuring that people receive pay that helps to retain and recruit the best possible staff.

Photo of Heidi Allen Heidi Allen Conservative, South Cambridgeshire

I understand that pay bodies are independent—it is important that they remain so—but will the Chief Secretary explain who sets the context for those pay bodies? When they undertake their reviews, will they take into account not only historical pay rises and the cost of living, but extra influences such as the influence of Brexit on our difficulty in recruiting nurses?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The answer is that the Government set the remit for the pay bodies last year. Those reports have all been submitted. We have responded to some of them, and we will respond to others in due course. Later this year, we will set the remit for the 2018-19 pay bodies.

Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion

No Opposition Member is talking down our public services in the way that the Chief Secretary to the Treasury claims. We are talking up the incredible commitment of the people who work in them, despite the contempt with which her Government treat them. She talks about job satisfaction. Does she accept that what contributes to job satisfaction for nurses is having the time they need to spend with patients? When the NHS is under such strain, nurses simply do not have the time to spend with patients because there are so many staff vacancies. The NHS is in crisis. Lifting the pay cap is a crucial way of addressing it. Why will she not do it?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

With respect, the hon. Lady talks the NHS down in her question. The fact is that the NHS is doing a tremendous job. We are reducing the bureaucracy so that nurses can spend more of their time with patients. My right hon. Friend the Health Secretary is driving an agenda of reform that is delivering better public services.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk

It is worth remembering what would have happened had the Labour party won the first general election after the great recession: its 2010 manifesto committed to tough action on pay, including a 1% cap on public sector pay. Does my right hon. Friend think that that was because Labour does not value public sector workers, or because it understood the reality of the country’s position as a result of its mismanagement of public borrowing and bank regulation?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

There is rather an issue of false consciousness on the Opposition Front Bench.

Photo of Karin Smyth Karin Smyth Labour, Bristol South

May I help the Chief Secretary? The pay review bodies operate within a budget that is set by the Government. It is a political decision not to accept their recommendations, which she can do something about. Before entering Parliament, I was proud to serve as an NHS manager. Managers in the NHS play a crucial role in both patient care and patient safety. Does she agree that equity of treatment on pay is crucial for senior and all levels of management in the health service, to ensure the recruitment and retention of the very best?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The hon. Lady talks about the recommendations of the pay review bodies. We have accepted all of the recommendations that we have reported on so far this year. They are able to make the recommendations they see fit. The Government set a remit, but the bodies are independent in what they advise us, and they have to take account of areas such as retention and recruitment.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Unemployment has fallen by 63% in my constituency since 2010. I have many nurses and teachers working in my constituency, but I also have careworkers, all of whom have benefited from tax changes introduced by the Government that mean they have an extra £1,000 in their pockets and in their take-home pay. Does the Chief Secretary agree that tax changes do not discriminate between private and public sector workers?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

Both private and public sector workers have a vital part to play in the economy of this country. By taking people out of tax, we have reduced the tax bills of basic rate taxpayers by £1,000. The Opposition propose the highest levels of taxation in this country’s peacetime history. Who would that fall on? It would fall on precisely the people whom we have been talking about in today’s debate.

Several hon. Members:

rose—

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Order. I mean to accommodate remaining would-be interrogators, but questions and answers from now on need to be shorter. They have been becoming ever longer as the session has proceeded.

Photo of Lilian Greenwood Lilian Greenwood Labour, Nottingham South

Fifty-five per cent. of public sector workers are not covered by review bodies, including most of our civil servants and some of those on the very lowest incomes. Will the Chief Secretary give any hope that real pay rises will be considered for the 3 million public sector employees without a review body, and what will be the mechanism for doing so?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

As with people who are under the purview of the pay review bodies, we need to ensure that we retain and recruit the best possible civil servants. At the same time, we need to ensure that that is affordable for the public purse.

Photo of Robert Jenrick Robert Jenrick Conservative, Newark

As the shadow Chancellor knows perfectly well, the former Prime Minister did not say that it was selfish for dedicated public sector workers to ask for a pay rise. He argued—I would agree—that it is selfish and immoral for politicians to offer benefits to the voters of today to be paid for by the voters of tomorrow. Does my right hon. Friend agree that, for her children and mine, it is important to balance fair treatment of the public sector with handing on a strong country not saddled by excess debt?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend makes an excellent point. We need to ensure that our public finances are properly sustainable, so that we can fund those public services in future, and so that we do not burden the next generation.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Transport)

Will the Chief Secretary write to the chairs of all the pay review bodies—those serving on them are incredibly frustrated—and ask them to set out the true cost of a nurse, a teacher, a soldier, and to report back to Parliament, so we can assess the independence of their research?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I am sure the hon. Lady is aware that all documentation from this year’s pay process will be published. She will be able to see the research they have looked at and the people they have interviewed in coming to their determination. In due course, I will be writing to the pay review bodies for their remit for the following year.

Photo of Robert Halfon Robert Halfon Conservative, Harlow

Public sector workers are the guardians of our nation in terms of our security, health, education and infrastructure, so we clearly have to do something, in particular for the lower paid. May I suggest to my right hon. Friend that, given revenue from corporation tax receipts increased by 21% in the past year, can we not have a special redistribution fund to use that increased revenue to at least help the lowest paid public sector workers?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My right hon. Friend will be aware that the flexibility we give to pay review bodies is such that they can decide to give higher rises to those on the lowest incomes in the public sector. I would also point out that those on the lowest incomes have benefited most from the raising of the personal allowance. There are various ways of ensuring support for those on the lowest levels of pay.

Photo of Liz Saville-Roberts Liz Saville-Roberts Shadow PC Spokesperson (Home Affairs), Shadow PC Spokesperson (Women and Equalities) , Plaid Cymru Westminster Leader, Shadow PC Spokesperson (Justice), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

It will interest the House, I am sure, to know that the Scottish Government announced last week that they are lifting the pay cap. The Labour Welsh Government have the ability to do exactly the same thing, but in reality Labour in Wales is the Conservative Government’s gwas bach, taking their lead from Westminster. Thirty thousand Welsh nurses are having their pay cut in real terms. I ask those on both the Government and Opposition Front Benches to explain to thousands of Welsh workers why Wales remains the poorest paid country in the United Kingdom.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The hon. Lady will be aware that that is a devolved issue and a decision for the Welsh Government.

Photo of Bill Grant Bill Grant Conservative, Ayr, Carrick and Cumnock

I am quite close to this debate. I served Strathclyde fire and rescue service for 31 years, so I am familiar with the good work that my colleagues continue to do; and I have two daughters in nursing. One is a nursing sister, or a senior charge nurse as she is determined today, and one is an auxiliary nurse and a single parent. I do not hear from them what I am hearing from Opposition Members, who are painting a dark picture. My daughters seem to enjoy their work. They work very, very hard, and there is no doubt that my colleagues in the fire and rescue service work very hard, too. My fear, if we continue to increase wages in the public sector, is the risk of a spiral, with inflation and mortgages going up. The point is the value of the take-home pay in your pay packet and what influences the buying power of public workers’ take-home pay.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend points out the impact on the overall economy of unsustainable increases. We need to look at the overall package for public sector workers, including the reduced taxes that most public sector workers are paying and improvements in areas such as training, and we need to ensure that any pay raises are sustainable.

Photo of Ruth Smeeth Ruth Smeeth Labour, Stoke-on-Trent North

I am sure the Chief Secretary agrees that public services are the backbone of our country, but the average full-time public sector employee will have lost £4,073 in real terms by 2020 because of this Government’s decisions. Does she think that that is fair?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I do not recognise that figure. I outlined the increments we have seen in areas such as teaching, nursing and the armed forces. We need to make sure we have a balance between fairness and affordability, and I outlined that earlier, too. That is what we have been doing and that is why we have been able to sustain high quality public services at the same time as reducing the deficit and seeing the lowest unemployment for 40 years. The fact is that unsustainable increases in public spending would lead to higher taxes, higher interest rates and a much worse outcome for working people.

Photo of Simon Clarke Simon Clarke Conservative, Middlesbrough South and East Cleveland

Does my right hon. Friend agree that the fact we are spending more on debt interest than on our schools perfectly encapsulates the reason why we need to be fair across the generations when it comes to setting public sector pay? Does she agree that there is nothing right or moral in making cheap promises based on money we do not have?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The Labour Government left us with a huge deficit and a huge debt, which we have had to deal with over the last Parliament. It continues to hang over us, which is why the only path is the sustainable path of making sure we grow our economy, so we can enjoy even better public services and see people’s pay rise across the board.

Photo of Chris Stephens Chris Stephens Shadow SNP Spokesperson (Trade Unions and Workers' Rights)

Mr Speaker, as a passionate trade unionist for 20 years sometimes my emotions get the better of me.

Will the Chief Secretary confirm that pay is so low in some Government Departments that 40% of employees in those Departments are in receipt of tax credits? Will she publish, for each UK Government Department, how many employees are in receipt of tax credits?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

We have good rates of pay across the civil service. We need to make sure that that is sustainable, so we can carry on making sure that we have good services in both the civil service and the wider public sector.

Photo of Nusrat Ghani Nusrat Ghani Conservative, Wealden

The public are rightly fed up with politicians playing politics with the NHS, so let us listen to what the NHS pay review body has evidenced and said. Is my right hon. Friend aware that the NHS pay review body stated:

“We do not see significant short-term nationwide recruitment and retention issues that are linked to pay.”?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

That is exactly why we have independent pay review bodies: they give us impartial advice and make recommendations. We accepted in full the recommendation of that body.

Photo of Margaret Greenwood Margaret Greenwood Shadow Minister (Work and Pensions)

NHS consultants in my constituency tell me that morale in the NHS is at an all-time low and that this is leading to real problems for recruitment and retention. Having voted against it only last week, I understand that certain members of the Cabinet are now in favour of ending the public sector pay cap. Will the Government now heed their calls and give public sector workers the pay rise they deserve?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I am not sure the hon. Lady has heard the last hour of our discussion. We need to maintain sustainable public finances at the same time as being fair to workers in the public sector.

Photo of Ben Bradley Ben Bradley Conservative, Mansfield

In my constituency, the local NHS trust has been crippled by Labour’s disastrous PFI deal, a £350 million building project that has now cost £2 billion in interest payments that could have otherwise been used for pay rises. Does the Chief Secretary agree that this proves absolutely that sound economic planning in the health service is the best way to provide fair pay in the future?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

PFI is yet another example of how the Labour party spent money it did not have and left future public service organisations, schools and hospitals with debts that they are now having to deal with. That is why we should not heed its irresponsible calls.

Photo of Gareth Snell Gareth Snell Labour/Co-operative, Stoke-on-Trent Central

The Chief Secretary earlier tried to draw a distinction between taxpayers and public servants. Public servants are taxpayers, so she cannot continue to draw that unfair distinction. I would like to introduce an element of maths. Will she acknowledge that when RPI is running at 3.2% and CPI is running at 2.8% but pay is capped at 1%, that is a real-terms squeeze on disposable incomes, which is hitting the living standards public sector workers? In the general election, when the Prime Minister was challenged on why nurses were having to use food banks she replied by saying it was a complex issue. How much does the Chief Secretary attribute the pay cap to that “complex issue”?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

As I have said before, there is the 1%, but there is also incremental pay in many public service professions. There is the 2.4% for the armed forces, and there is the 3.3% that was received by teachers in 2015-16. Labour Members should tell people about the whole picture, rather than cherry-picking specific numbers.

Photo of Kevin Foster Kevin Foster Conservative, Torbay

I am sure the Chief Secretary agrees with me—and with Gareth Snell—that public sector workers are taxpayers. When it comes to public sector pay, we should indeed look at the whole picture, including the major tax cuts that have been made since 2010 for those on the lowest wages.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

Absolutely. It seems to me that Labour Members want to count some things in their sums but not others, and that they are picking numbers rather than looking at the big picture.

Photo of Robert Courts Robert Courts Conservative, Witney

Will the Chief Secretary confirm that new Government 10-year gilts are paid at 1%, and will she confirm that if the markets lose confidence in our deficit reduction plan the interest rate is likely to rise, as is the cost to the country, which will mean less money for our public services?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend is right to draw attention to the macroeconomic picture, and to point out that if we do not have a confident deficit reduction plan such as the one that the Government have pursued for the last seven years, the financial markets will lose confidence, and the effect on working people will be a rise in interest rates, a rise in housing costs, and problems for the Government in respect of our borrowing.

Photo of Mike Wood Mike Wood Conservative, Dudley South

I declare an interest: my wife is a primary school teacher who is currently working as a teaching assistant.

Will the Chief Secretary ensure that both the rising cost of living and recommendations of the independent pay review bodies are properly taken into consideration in the setting of public pay policy for next year’s settlements?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

That is one of the factors that the pay review bodies consider, along with issues such as recruitment and retention and ensuring that the pay settlement is affordable. They have the responsibility of speaking to people like my hon. Friend’s wife who work in the public services, hearing what they have to say, and making a determination. There are different issues in different public services, and I think it wrong to suggest that there is a “one size fits all” solution.

Photo of Michael Tomlinson Michael Tomlinson Conservative, Mid Dorset and North Poole

The shadow Chancellor mentioned inequality. In fact, income inequality has fallen since 2010, and now the top 1% will pay 27% of all income tax, a higher proportion than was ever paid under Labour. Does that not show that the Labour party tries to talk tough when it comes to inequality, but it is left to the Conservatives to deliver?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

The shadow Chancellor does not like facts to get in the way of his rants.

Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Social Justice)

On a point of order, Mr Speaker. At the start of these proceedings I failed to declare the fact that my wife is a primary school teacher, which I did when I asked a similar question during Cabinet Office questions. I apologise, and I thank you for allowing me to correct the record now.