Will public sector pay freeze be good for UK or just cause misery?

Business leaders have called for an immediate two-year freeze on public sector workers’ pay to help cut the UK’s budget deficit despite union protests that such a move would cause “misery” as inflation hits 5.3%.
 

Richard Lambert, director general of employers’ lobby group claimed that selected public sector pay and recruitment freezes could save £18 billion in the next two years, but that such a move must be coupled with measures to help private sector businesses maintain and create jobs.
 
Such measures should include providing certainty about tax and energy policy, sustaining capital investment and boosting the UK’s skills base, Lambert added.
 
He also attested that the government could save a further £8 billion by fiscal year 2015-2016 as a result of increased private and third sector involvement in the provision of non-core public service activities.
 
Lambert was outlining the CBI’s priorities laid out in a new policy paper, published only hours before new Chancellor George Osbourne gives a keynote speech at the lobby group’s annual dinner this evening.
 
Osbourne is expected to emphasise his desire to improve the UK’s tax competitiveness and to address proposed reforms to corporation tax, about which the manufacturing industry has raised concerns.
 
But Brendan Barber, the general secretary of the Trades Union Congress, accused the CBI of “special pleading” as it was keen for public sector staff to bear the “full brunt” of spending cuts rather than lose any of the billions spend by government on public sector goods and services, including consultants.
 
He also warned that public sector pay cuts would also hit the private sector as staff would have less money in their pocket to spend.
 
The CBI’s call for public sector pay freezes came as UK inflation hit 5.3%, the highest level since July 1991. The Retail Prices Index - the measure most commonly used by pay negotiators - rose from 4.4% in March, according to the Office for National Statistics.
 
It attributed the rise to price increases in clothing, food, drink and tobacco compared with the same period a year ago.
 
As a result, Dave Prentis, general secretary of the Unison union, called on local government employers to “get real” in pay talks. “Inflation hitting more than 5% means misery for local government workers and their families. In England alone, councils have billions in unallocated reserves, just sitting in their bank accounts. There’s money available to give staff a decent rise, but not the political will,” he said.