NUT Briefing on Pay Issues: the arguments against the public sector pay cap and regional pay.
On 29 November 2011 the Chancellor of the Exchequer gave his Autumn Forecast Statement. In it he talked about the need for “savings from further restraint on public sector pay.” In particular he referred to a cap on public sector pay increases in the years 2013-14 and 2014-15 and to moves towards regional pay.
Public sector pay cap
The Chancellor said that the country “could not afford“ the 2% public sector pay rise Government departments had assumed for the period after the end of the current pay freeze in August 2013. He said that public sector pay awards would be set at an average of 1% for each of the two years after the pay freeze ends. In his letter to public sector Review Bodies in December 2011, the Chancellor reaffirmed his intention to impose a 1% pay cap.
The Chancellor said that he would ask the various Pay Review Bodies to “consider how public sector pay can be made more responsive to local labour markets” and for them to report back by July 2012. He claimed that regional pay would create “a more balanced economy in the regions of our country that does not squeeze out the private sector”. Again in his letter to the Review Bodies, the Chancellor directed them to take private sector pay rates into account when making recommendations on school teachers’ pay and ‘consider’ making public sector pay “more market-facing” in local areas for teachers.
Arguments against public sector pay cap
- Teachers' pay increases have been consistently below inflation and average earnings in recent years. The Government’s two year pay freeze covering the years 2011-12 and 2012-13 is costing teachers even more.
- With RPI inflation having hit its highest level for more than 20 years, teachers’ pay is not keeping up with the cost of living. Taken alongside the proposed increase in pension contributions, the current pay freeze could cut take-home pay by more than 10% in real terms. The proposed pay cap of 1% for 2013-14 and 2014-15 would see teachers’ take-home pay decline further as compared with inflation and average earnings.
- The most recent Treasury average of forecasts shows a continued high level of inflation, with RPI projected to be 5.4% in late 2011 and 2.7% in late 2012. The latest average earnings data at the time of writing showed increases for the whole economy of 1.7%. The most recent Treasury forecasts show increases in average earnings of 2.5% for the whole of 2011 and 2.7% for the whole of 2012.
- In its latest Forecasts for the UK Economy (November 2011) the Treasury also set out 14 new medium-term projections for inflation for the calendar years 2011 to 2015. Independent average forecasts for both RPI and CPI show inflation significantly higher than 1% for the two years of the proposed pay cap.
- For RPI the projections are 2.6% (2013) and 3.2% (2014). For CPI they are 2.0% (2013) and 2.2% (2014). Clearly, the outcome of the imposed two-year pay cap will be a further decline in teacher’ take-home pay.
- The NUT is strongly opposed to any caps on public sector pay. The situation is clearly becoming ever more urgent in view of inflation and of pay increases elsewhere.
Arguments against regional pay
- This is not the first time that proposals for localised or regional pay determination have been put forward. The STRB took evidence on the issue of localised pay in both 2002 and 2003. In its March 2004 Report the STRB noted that: “most of (the parties) strongly opposed regional or local pay, wanting to retain a national framework”.
- There are a number of key difficulties with local or regional pay, set out below.
- The Evidence The claim that there is insufficient scope for pay differentiation in the current salary structure is false. There is already significant scope in the salary structure for pay differentiation – but discretion in the current pay structure has actually made problems of recruitment and retention worse. Moving towards regional pay, making the pay structure even less transparent, will make it much more difficult to attract graduates into the profession – it won’t be possible to tell them what their pay prospects as a teacher would be.
- Equal Pay and Equal Opportunities The principle of equal pay for equal work, a key feature of a national system of pay determination, would be undermined by regional pay. Teachers doing the same job could receive significantly different salaries. There would be major equal opportunities issues including issues of equal pay within geographical pay systems where different rates were not fully justified.
- Inter School Competition Regional pay would intensify inter-school competitive recruitment problems, raising serious questions about funding and the extent to which better off schools would use their own resources to secure a competitive advantage over other schools.
- Staff Mobility Regional pay would inhibit the natural movement of teachers between schools. That would have an adverse impact on teachers’ careers, individual schools and the education service as a whole.
- The School System Nationally there are more than 25,000 schools. National pay arrangements are essential for a system of over 25,000 pay sites. Research has shown that private companies with more than 50,000 employees are unlikely to bargain at the local level due to cost and administrative problems. Any move to regional pay for schools, with closer to half a million employees, is likely to result in such problems.
- Funding Given the critical importance of funding to the successful operation of any pay structure, national, local or a hybrid, it is grossly irresponsible to make any decisions on an issue as contentious as this without a prior and very thorough study and examination of how any such change would be funded. Funding transparency would be undermined by regional pay.
- The NUT continues to believe strongly, therefore, that a national pay structure for teachers is essential to the efficient functioning of a system comprising over 25,000 schools and close to half a million teachers. It puts in place a rate for the job and a framework within which serving and potential teachers can identify a career path, with consistent recognition of differing levels of responsibility.