As long anticipated, the government has announced that the public sector pay cap will be abolished from next year. “The government recognised in some parts of the public sector, especially in areas of skill shortage, more flexibility may be required, to deliver word class public services,” a No10 spokesman said (pay rises are presently capped at 1 per cent). But for the current financial year (2017-18), police officers will receive a 2 per cent rise and prison officers a 1.7 per cent rise (teachers and nurses are likely to benefit next year).
The move represents an unmistakable softening of austerity. Public sector pay was frozen by the coalition government from 2011-13, with rises capped at 1 per cent thereafter. The public sector is also hiring at its fastest pace since 2015, having been cut to its smallest size since 1999.
The deficit, meanwhile, is forecast to rise from £46bn last year to £58bn this year. And Philip Hammond is expected to announce in his autumn Budget that that the deadline for eliminating the deficit has been extended from 2025 to 2027 (having already been extended from 2022). His predecessor George Osborne had, of course, vowed to eradicate the deficit by 2015.
But though softened, austerity has not ended. As Labour and the trade unions will be quick to note, inflation is currently running at 2.9 per cent (with the RPI measure at 3.9 per cent), above the pay increases awarded to the police and prison offices. As a result, though the public sector pay cap is over, wage cuts are not.