How Osborne's public sector pay cuts could harm services

The IFS warns that further cuts to pay could make it "increasingly difficult" for public sector employers to "retain and recruit high quality workers".

While average wages are forecast to finally rise faster than inflation next year, there'll be no end to the squeeze for public sector workers, who have had their pay increases capped at 1% until at least 2015-16 (a real-terms cut). The average worker is already £2,000 a year worse off compared with 2010 after the two-year pay freeze. (In the most recent quarter, their pay fell in nominal terms by 0.4%.) 

Based on current trends, the OBR forecasts that public sector will fall by 8% relative to private sector pay between 2012-13 and 2018-19. In a new analysis today, the IFS warns that, as a result, "some public sector employers may well find it increasingly difficult to retain and recruit high quality workers". it adds: "both the government and pay-review bodies need to pay great attention to indicators of whether the public sector is facing any difficulties in recruiting and retaining high-quality staff, and decide on settlements in light of any such evidence." 

Alternative, it says, the government could increase the level of public sector job cuts beyond the (remarkable) 1.1 million planned by 2018-19. But this, too, would risk harming services. The longer austerity continues, the clearer the consequences for public services (and those most reliant on them) will become. The IFS has forecast that merely to maintain the current level of cuts, taxes or welfare cuts will need to increase by £12bn. If Labour and the Lib Dems intend to avoid sticking to Osborne's plans, the urgent question is how they will fill this fiscal gap. 

For Osborne, public sector pay restraint is an essential component of his deficit reduction programme (which, even after recent improvements, remains £51bn offtrack) but if the Tories want to expand their support, they would be wise to offer some relief. As Renewal, the Conservative group aimed at broadening the party's appeal among working class, northern and ethnic minority voters, has noted, the majority of Tory target seats have a higher than average share of public sector workers, including 60% of Labour-held targets and half of the top 20 Lib Dem-held targets. While the Tories are likely to pledge to cut taxes for all workers, in the form of a £12,500 personal allowance, they should also consider easing the squeeze on the public sector.

George Osborne and Danny Alexander leave the Treasury for the House of Commons on December 5, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

However Labour do on Thursday, Jeremy Corbyn's still the right leader

When the Blairites talk about winning by appealing to the country, what do they mean?

Commentators have spent the last few weeks predicting exactly what will happen on Thursday and, more importantly, what the results will mean. One thing is certain: no matter what the Labour party achieves, Jeremy Corbyn’s position is safe. Not only is the membership overwhelmingly supportive of the leader, but also Blairites would be foolish to launch an attack with the European referendum just over a month away.

So whatever happens on Thursday, Jeremy Corbyn’s position will be as secure as it is at this exact moment in time. I want to go further than explaining simply why whatever happens on Thursday will not spell the end for the Labour leader by arguing why, in any case, it should not.

Jeremy Corbyn was elected leader of the Labour party with an astonishing mandate. Paid-up Labour party members, Labour supporters and Labour affiliates gave this to him. Polling consistently showed that the ability to ‘win’ elections was not the reason people voted for Jeremy. I don’t think that the Labour leader’s opponents are accurate in suggesting that this is because Labour supporters are self-confessed losers. In many ways we are the realists.

I am perfectly aware of the current political ground. The country is largely opposed to accepting more refugees. People who rely on state benefits have been stigmatised. Discrimination is rampant within our society. A majority of people are found to oppose immigration. So when the Blairites talk about winning by appealing to the country, what do they mean exactly? I’m sure that even Liz Kendall would not have mounted an election campaign that simply appealed to the way issues were seen in the polls.

Jeremy Corbyn inherited an uphill battle; he didn’t create it. Anyone who suggests so is shamelessly acting so as to discredit his leadership. Labour’s message is of equality and solidarity. Our party proudly stands as an institution that seeks to pull down the barriers that bar the less privileged from achieving. But when the nation is gripped by the fear of the ‘other’ and man has been pitted against woman in a war of all against all how can Labour’s message break through?

The answer is time. Labour needs time to rebuild and assess the situation on the ground. Labour needs time to talk to people. Labour needs time to change the frame of the debate and the misleading narrative that the Tories are proud to spout because it wins them votes. The Labour party is better than that. We have to be better than that. If we are not then what is the point in the Labour party at all?

The idea that Jeremy Corbyn could possibly change the entire narrative of the nation in 8 months is laughable. But he has started to. People have seen through the Tory lies of helping those in work get on. People have seen the government cut support for the poor while giving to the rich. At the same time they have been fed lies about the Labour leader. Jeremy Corbyn is an extremist. Jeremy Corbyn is too radical. Jeremy Corbyn is a friend of terrorists. Jeremy Corbyn wants to disband the army. Jeremy Corbyn wants to talk to ISIS. Jeremy Corbyn hates Britain. And so on.

In such an environment how is it surprising that after just 8 months Labour may not make huge gains across the country? It is likely that people will call for Jeremy to resign. When they do, ask what Andy, Liz or Yvette would have done differently. They would have needed time too.  

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.