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The government's real public sector pay test comes in the autumn

Low-paid families on frozen tax credits also feel squeezed. 

One of the main talking points as people digested the shock election result in June was whether years of pay restraint had finally taken its toll on public sector workers, who were making their feelings known at the ballot box. The fate of the pay cap was sealed a few hours after the polling stations closed.

Yesterday, 96 days later, the government confirmed the lifting of the cap. This is welcome news for millions of public sector workers.

Yet while the political pressure to end the cap started on 9 June 2017, the economic pressure has been building for years.

Since 2010, pay rises have consistently failed to keep up with the rising cost of living. A period of ultra-low inflation provided brief respite in 2015. However, that same year the government announced that public sectory pay rises would be capped at 1 per cent for four years, ensuring the pay squeeze would continue through to 2020. The latest pay figures out today show that average public sector pay is now £1,000 a year lower than it was back in 2008.

Of course, the pay squeeze was hardly unique to public sector workers – Britain is on course to experience the worst decade for pay in over two centuries – but it has been longer and deeper than in the private sector. Crucially, this part of the pay squeeze has always been something that, if it so wished, the government could do something about.

Lifting the cap is big news. Millions of public sector workers will enjoy higher pay rises in the coming years because of this decision, with police and prison officers being the first to benefit. Police officers will receive a 2 per cent pay rise in 2017-18 (half in the form of a one-off bonus). Prison officers will get a 1.7 per cent pay rise too.

But while the announcement is good news, far bigger tests lie in the coming weeks and months.

First, police and prison officers will still be experiencing falls in their pay this year once we account for inflation, which is currently running at 2.7 per cent. A prison officer on £19,000 this will still see their basic real pay fall by around £100.

Second, it only applies to around one in 20 public sector workers. We don’t know how the cap will end for almost all of the public sector.

As well as responding to other pay review bodies, the government will need to announce how it will replace the current policy from 2018-19 onwards (today’s announcement was a backdated pay rise for 2017-18). For that we will have to wait until the Budget on 22 November. So attention now turns to the Chancellor to see how much new money will be available.

Unfortunately for him, public sector workers aren’t the only people who feel they deserve some fiscal slack. The latest inflation figures will have also reminded millions of low and middle income families that their frozen tax credits aren’t stretching as far in the supermarket. Students too are expecting some relief on their debt.

Today marked an important milestone in a change of approach to public sector pay. But the big decisions – and big money – on public sector pay will really get going in the autumn.

Dan Tomlinson is a policy analyst at the Resolution Foundation

Photo: Getty
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The Universal Credit nightmare shows there’s nothing more dangerous than a good idea

The hardest thing to build into any benefits IT project is common sense.

The trouble with Universal Credit is that everyone thinks it’s a good idea. Labour has long backed the concept of rolling multiple benefits into one payment but studiously refused to implement it when in power. Why? Because it takes all the mess and complication that claimants have to navigate and transfers that to the government. It’s like Whitehall volunteering to find your next house, sort out the survey and fix the best mortgage for you. It sounds brilliant – and that should make you suspicious.

“I think it’s quite a good idea, having it all in one go,” says Jo Whitaker when I speak to her at home in Moulton, North Yorkshire. Unfortunately, the reality fell short. Diagnosed with breast cancer in late 2016, Whitaker had to give up her cleaning business as she underwent chemotherapy. She was told – oh, happy day! – that her local jobcentre was one of those testing Universal Credit ahead of its countrywide roll-out.

There was a catch. In order for her to claim Universal Credit, her existing child and working tax credits had to be stopped for six weeks, while her eligibility for the single monthly payment was assessed. She created an online “journal” to record her income and provide supporting evidence and was told that she could apply for an advance, which would have to be paid back later, to cover the time she spent waiting.

She received her payments in November and December, then ran into a problem. Whitaker, a mother of three, owns a house jointly with her ex-husband, but it was on the market and had no tenants. (She was renting elsewhere.) This seems to have given the jobcentre computer conniptions: did Whitaker have an asset that meant her housing benefit should be reduced, or not?

She received a demand in her “journal” a few days before Christmas: show us that you’re paying rent, or we’ll stop your benefits. “I was on my fifth round of chemo and I wasn’t well at all,” she says. “After Christmas, I couldn’t get hold of anyone to give me a straight answer. This went on for about a month.” The January payment didn’t come. Whitaker spent hours on the phone – her mother, listening to our call, chimes in to amplify this point – and she eventually received a letter admitting that it was a mistake to withhold her benefit. “I can remember being on the phone, crying my eyes out,” she says. “Chemo, it does your brain in. It was the last thing I needed. It was an absolute nightmare.”

Yet Jo Whitaker’s story is not a particularly extreme one. She is, she says, lucky to have a great support network, and she never felt truly helpless. Her business experience helped her budget and cope with rectifying the jobcentre’s error. I’ll also admit that when I heard she had a house, I thought: hang on, why is she claiming benefits when she has an asset? As she talked, the situation became clear. But this is the kind of detail that computer systems struggle to deal with: the hardest thing to build into any IT project is common sense.

Many aren’t as resilient as Whitaker. New figures from the Department for Work and Pensions show that around a quarter of new claimants wait more than six weeks for their first payment. And because Universal Credit is paid to tenants, rather than directly to landlords, it has significantly increased the number of people falling behind on their rent.

There’s a cruel double bind here. Most people claim benefits precisely because they are in difficult personal circumstances. They have lost their job, got sick, or broken up with a partner and had to move house. Those same circumstances make dealing with bureaucracy more challenging. When the computer says no, it doesn’t just take away one of half a dozen benefits; it can disrupt the only assistance people are getting.

The quiet unhappiness of Jo Whitaker’s story should worry the government. In 2015, the possibility of cuts to tax credits caused enough concern on the doorstep and in constituency surgeries that even Tory MPs quailed. George Osborne’s resulting fudge was to kick back the cuts, promising that “savings” would be found anyway as more people moved to Universal Credit.

The idea that this can be accomplished without people feeling noticeably poorer is optimistic. That it can be accomplished using the existing IT system is even more so. Universal Credit should be a pragmatic project, but it has always been politicised: first by Iain Duncan Smith’s evangelical insistence that he would “make work pay” (even though 60 per cent of UK households in poverty have at least one member who works) and then by his flouncing anger that the project was being used as a cover for “salami-slicing” the welfare budget. IDS must have been the last man in Britain to work out that Osborne wasn’t just pretending to be into austerity; he really loved it.

In 2013, the National Audit Office found that the Universal Credit programme was struggling with a “tight timescale, unfamiliar project management approach and lack of a detailed plan”. The Labour MP Margaret Hodge, then the chair of the public accounts committee, concluded that most of the £425m spent so far would have to be written off. The programme was “reset”.

That, in effect, is what Citizens Advice wants to happen again. The organisation is calling for a pause on the roll-out, which is scheduled to accelerate next month. “[It] is a disaster waiting to happen,” says its chief executive, Gillian Guy. “People face severe consequences, like visits from bailiffs and eviction, when they can’t pay their bills.”

Like Jo Whitaker, she believes that the “principles behind Universal Credit are sound”. But that won’t be a consolation to anyone left cold, hungry or homeless over Christmas. In politics, there’s nothing more dangerous than something that everyone thinks is a good idea. 

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 21 September 2017 issue of the New Statesman, The revenge of the left