PCS research shows inflation-matching pay rise is affordable


“Our members won’t be taken for fools and this research emphatically proves that the government’s insistence that inflation-matching pay rises are unaffordable is ludicrous.”

Mark Serwotka, PCS Union General Secretary

By the PCS Union

This week the reballot of more than 120,000 members in our national campaign began and on 1 of the key demands, pay, PCS research shows that a public sector pay rise matching the rate of inflation is affordable and would save the government money

Public sector workers have been told repeatedly by the government that it can’t afford an inflation-matching pay rise because it would cost tens of billions of pounds – the figure constantly repeated by ministers is £28 billion. Our research shows that this figure is not only nearly three times bigger than the actual cost, at £10 billion, but that a pay rise in line with inflation would be a major boost for the economy and could pay for itself.

To come to the £28bn figure, the government simply multiplied the total public sector pay bill by the rate of inflation at the time. This crude calculation was done without any serious economic analysis and our estimate puts the cost of an inflation-matching pay rise at nearly a third of the government’s, at £10bn. Further economic factors could eliminate this cost altogether, resulting in the cost of the pay rise being zero.

Tax Take Increases

Our research shows that £10bn can immediately be deducted from the government’s estimate, as a 4-5% public sector pay rise has already been included in the Budget for 2022-23. An inflation-matching pay rise means the government can also expect significant increases in the tax take. Higher returns through income tax and National Insurance could amount to nearly £4n in those two alone. On top of that, boosts to private sector supply chains linked to the public sector will result in further tax revenue increases of up to £2n.

We are also able to estimate the increase in tax revenue the Treasury would get if HMRC was given the resources it needs. HMRC’s budget fell in real terms last year and it is predicted the department will bring in £4bn less as a result, rising to £7 billion by 2025. There are also expected to be billions of more pounds generated through improvements linked to health and education. 

Separate from our research, the government’s own figures further highlighted the absurdity of the government’s unaffordability argument. It was announced in February that the government is forecast to borrow £30bn less than planned and recorded a surprise surplus in the billions. Despite this, there was no mention of public sector pay in last week’s Budget, with our members still feeling the crippling effect of the cost-of living crisis, with food inflation running at 16%.

PCS General Secretary Mark Serwotka said: “Our members won’t be taken for fools and this research emphatically proves that the government’s insistence that inflation-matching pay rises are unaffordable is ludicrous. Not only is putting more money in the pockets of our members the right thing to do morally but it would be a significant boost for the economy.

“The government’s defence on the crucial issue of pay never really had any credibility and what remains has been blown away. On the back of our sustained and all-out action, our members’ determination is stronger than ever, and this crucial research will bolster that even further.”

Vote in the re-ballot

To keep up the pressure on pay it is crucial all eligible members in the civil service and public sector vote in the postal ballot. Ballot packs are arriving in the post this week.

Our current 6-month legal mandate for strike action in 124 groups expires on 6 May, so to continue our industrial action campaign our national executive committee has agreed we need to ballot members again. 

We are balloting members 186 employers, across the civil service and public sector so they can continue to fight for fair pay, pensions justice and job security as part of our national campaign.

The new postal ballots run from 20 March until 9 May, so look out for your ballot pack arriving through the post next week and then use your vote and post it in the pre-paid envelope. The levy of members, which supports those taking strategic action, will remain in place for the duration of the dispute. HMRC members will not be balloted this time as they have a strike mandate which runs until 26 August.

Featured image: Strikers from the PCS Northern region outside the PCS Newcastle office on March 15th, 2023. Photo credit: PCS Union/Twitter

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