Tory cap on public sector pay rises 'could worsen recruitment problems'

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Tory plans for a 1% cap on public sector pay rises over the next two years could exacerbate recruitment problems, an independent economic think tank has warned.

Analysis of the main parties' plans for public sector pay by the Institute for Fiscal Studies (IFS) found that the Conservative policy could lead to a reduction in the quality of public services as pay growth would fall behind the private sector. 

The Tory Government's current policy is for public sector pay scales to rise by an average of 1% each year until 2020. 

Labour and the Liberal Democrats have proposed increasing the pay compared to the Government plans.

The Liberal Democrats would increase public sector pay in line with inflation, while Labour would delegate to pay review bodies.

An increase would boost the earnings of more than five million public sector works, according to the IFS.

Their analysis of the Labour pledges found it would cost an extra £9.2 billion a year to pay for the higher costs of employing public sector workers, while the Liberal Democrats' plans would cost an additional £5.3 billion a year.

It cautioned that increasing public sector pay involves "large increases in costs for government departments", but said if salaries continue to fall in comparison with private sector pay then the public sector would "struggle to recruit and retain the workers it needs to deliver public services, and the quality of those services will therefore be at risk".

The IFS has previously said the cap could cause the difference between public and private wages to fall to a level not seen in the last 20 years.

Report author Jonathan Cribb, senior research economist at the IFS, said: "Recruitment and retention problems are beginning to emerge in the public sector following successive years of public pay restraint.

"The main parties' plans for future public sector pay settlements differ significantly.

"The Conservatives' plan of 1% increases for the next two years risks exacerbating recruitment problems - and ultimately reducing the quality of public services - as public pay growth would fall markedly behind growth in private sector pay."

He added: "Labour's plans to return to the recommendations of Pay Review Bodies would boost public sector pay but require significant extra resources (around £9 billion per year in 2021-22) for government departments to pay for the higher wage costs, unless departments make cuts elsewhere.

"The Liberal Democrats' plans imply public pay increases larger than the under the Conservatives and smaller than under Labour."