Spending Review: Public sector to lose automatic rises in pay


Andrew Neil has the headline announcements from George Osborne's Spending Review

Millions of public sector workers face losing automatic annual pay increases as part of an £11.5bn cuts package unveiled by Chancellor George Osborne.

He also announced a cap on total welfare spending and axed winter fuel payments for expatriate pensioners in hot countries from 2015.

Welfare changes mean most unemployed people will have to visit a JobCentre every week instead of fortnightly.

The cuts package will cover a single financial year - 2015-16.

It was forced on the chancellor by slower than expected economic growth and deficit reduction, but he insisted the economy was on the right track, telling MPs: "Britain is moving out of intensive care and moving from rescue to recovery."

But shadow chancellor Ed Balls, for Labour, said the new round of cuts represented a "comprehensive failure" of Mr Osborne's economic strategy.

Other key announcements from the chancellor's statement include:

  • Total annual spending on welfare, including housing benefit, disability benefit, tax credits and pensioner benefits - but excluding the state pension - will be capped for the first time, from April 2015
  • Local government will take the biggest hit, with cuts at the Department for Communities and Local Government of 10%
  • The Home Office must save 6% from its budget, but the police budget will be cut by a lower 4.9% and counter-terror policing will be spared
  • The culture department escapes the worst of the cuts with expected savings of 7%
  • Science and research funding will remain flat
  • The NHS, schools in England and foreign aid will continue to be protected from budget cuts
  • The security services were the biggest winners, with a 3.4% boost to funding and Mr Osborne praising their "heroic" efforts to "protect us and our way of life"

Mr Osborne said the cuts, which will kick in just before the next general election, would ensure Britain "lives within its means", but they would be guided by fairness, economic growth and reform.

Public sector pay rises are frozen at 1% until 2015-16 but Mr Osborne is to scrap so-called progression pay, where civil servants automatically move up through pay grades.

In addition, the Treasury says "substantial reforms" to progression pay will be taken forward, or are already under way, for teachers, the health service, prisons and the police, "ensuring that public sector workers do not receive pay increases purely as a result of time in post".

The armed forces will be excluded from the changes.

Guide to the Spending Review

  • Government departments set out spending for set period
  • George Osborne needs to find £11.5bn in savings
  • The 2015-16 timetable is designed to last a little while beyond the next general election

Mr Osborne told MPs: "Progression pay can at best be described as antiquated; at worst, it's deeply unfair to other parts of the public sector who don't get it, and to the private sector who have to pay for it."

And he announced a tougher regime for jobseekers, saying they will have to visit a JobCentre every week to spend more time with advisers. There will also be a seven-day wait before people can initially claim benefits.

"Those first few days should be spent looking for work, not looking to sign on," said Mr Osborne.

"We're doing these things because we know they help people stay off benefits and help those on benefits get back into work faster."

In a further change, claimants who cannot speak English "will have to attend language courses until they do".

Frozen grants

The "temperature test" for winter fuel allowance will apply to expatriate pensioners living in Portugal, Spain, Greece, France, Gibraltar and Cyprus.

With health, education and aid ring-fenced, all other departments will have to take a bigger hit - average budget cuts for 2015-16 of between 8% and 10%.

Start Quote

This is a chancellor with his eye firmly set on 2015 - not just the year of the next set of spending cuts but of the next general election.”

End Quote

The Department for Communities and Local Government, the Treasury and the Department for Environment, Food and Rural Affairs were among the hardest hit, with 10% budget cuts.

Vince Cable's Department for Business, Innovation & Skills, the last to reach a deal with Mr Osborne after tough negotiations, got off relatively lightly with cuts of 6% and a commitment to keep money for more apprenticeships, but student grants will be frozen.

The Ministry of Defence will face further cuts to its civilian workforce as its budget was maintained in cash terms at £24bn - representing a real-terms cut.

The Department for Transport will be forced to make savings of 9% in day-to-day spending, but will get the largest boost of any department in its capital spending, which rises to £9.5bn in 2015-16.

Mr Osborne also said the government would spend £2m to "look at the case for" a £12bn Crossrail 2 project in London, which is backed by London Mayor Boris Johnson, and announced £3bn more for affordable housing in 2015. Further details of capital spending plans are expected on Thursday.

Start Quote

Looking at what the chancellor has announced today - and the political environment in which he and everyone else in Westminster is now operating - you would have to say that it is... a reflection of the chancellor's political success”

End Quote

Capital spending is down in real terms but is falling at a slower rate than forecast by the previous Labour government, Treasury sources insist.

The chancellor announced that the council tax freeze, due to come to an end next April, would be extended for the next two years. He said that would mean nearly £100 off the average council tax bill for families.

But he warned of 144,000 further public sector job cuts and said local councils would have to make "the kind of sacrifices central government is making".

Sir Merrick Cockell, chairman of the Local Government Association, said further cuts would "stretch essential services to breaking point in many areas".

But he welcomed a plan by Mr Osborne to transfer £2bn from the NHS budget to fund social care, which has been badly hit by council cuts in some areas.

'Out-of-touch chancellor'

Labour has said it will not reverse the spending cuts announced for 2015-16, although it will borrow money to invest in building more houses.

Spending Review Documents

PDF download Spending Round 2013[1.9 MB]

Most computers will open PDF documents automatically, but you may need Adobe Reader

Mr Balls launched a fierce Commons attack on the "out-of-touch chancellor" who, he said, had "failed on living standards, growth and the deficit, and families and businesses are paying the price for his failure".

"If the chancellor continues with his failing economic plan, then it will fall to the next Labour government to turn the economy round and to take the tough decisions to get the deficit down in a fair way," added Mr Balls.

But he struck a more cautious note in a later interview with the BBC, saying he backed English language tests for migrants and would "look at the detail" of the benefit changes, adding: "If it saves money and it works, fine."

He also pledged to study the pay progression proposals to see if it would work out cheaper than performance-related pay, which will be replacing it.

The trade unions reacted angrily to the public sector pay squeeze. Prospect, which represents 34,000 specialist civil servants, said the Spending Review was a "kick in the teeth" for its members.

Deputy general secretary Leslie Manasseh said: "The chancellor obviously isn't aware that his government have scrapped progression for most civil servants already, apart from where it is part of an employee's contractual rights.

"Our members have already put up with two years of pay freezes followed by pay caps alongside pension contribution increases of over 3%. Many members have seen the real value of their pay plummet by up to 15%."

But business lobby group the CBI said the squeeze was "tough but necessary" at a time of tight public finances and it was also "encouraging to see that government will have greater control of the welfare budget through the new cap".

Cuts chart
Cuts chart

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  • rate this

    Comment number 117.

    Millionaires attacking the workers again, this man is clueless. Why doesn't he call it what it is, a pay cut. Why doesn't he punish the people who caused this crises, the same people who walked away with massive pensions. Chase the tax avoiders, I think not, it's easier to attack the working class.

  • rate this

    Comment number 116.

    Abandon Trident replacement & save a further £20billion

  • rate this

    Comment number 115.

    This may be necessary, but ultimately this is, like everything else, is eventually going to be abused.

    Everything our parents fought long and hard for is being taken away with the stroke of a pen.

  • Comment number 114.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 113.

    Grumble,carp,moan and whine...some of you lot want to get a reality check...we live in a great country finding its way in the modern world.Try living in North Korea...

  • rate this

    Comment number 112.

    Not all public sector pay is automatic. Ours is linked to performance and you only go up a scale if you succeed your targets. Also these scales are banded so you are restricted to no more than 4 rises then you reach the top. Again Osborne out of touch. Voted Tory all my life, never again

  • rate this

    Comment number 111.

    What will be classed as a 'hot country' in order to scrap winter fuel allowance? I lived in Spain for two years; yes, it was hot in the summer but in the winter it was regularly below freezing as it is in many so called 'hot countries'. Are we talking the Seychelles here?

  • rate this

    Comment number 110.

    If I didn't know better, I'd think Osborne had shares in a number of payday loans companies. Fracking and Nuclear, War and Security/Intelligence, you can see where his sympathies lie. The only reason Camoron is bleating about tax havens is to remove the competition. City of London will be a Tax haven fortress and the rest of the country will become the worlds biggest open prison

  • rate this

    Comment number 109.

    Well it seems civil servants have plenty of time on their hands judging by how many peoples comments are being marked down for saying get rid of automatic pay rises. Get back to work and earn them you lot! :)

  • rate this

    Comment number 108.

    The real problem is that huge amounts of state expenditure goes on paying the incredibly generous public sector pensions - and it is these that need to be frozen, not salaries. For example, GPs are retiring on £60K+ a year with inflation proofed pay rises! This madness must stop. If public sector pay is to be frozen, likewise should public sector pensions.

  • rate this

    Comment number 107.

    Sorry if i'm restating the bleedin obvious but....are MPs salaries and titbits going to have the brakes slammed on them the same as other Public Sector workers salaries...just askin..?

  • rate this

    Comment number 106.

    regarding expat winter fuel allowance, it will make very little difference as most expats living in spain use a uk address to claim their pension and winter fuel allowance. about time that was dealt with. !! similar to Brits using UK EHIC cards in spain when they live in Spain permanently.

  • rate this

    Comment number 105.

    Public sector pay bans are about 10% of wage so someone on 20k would expect to end up on 22k after 5 years, all that will happen is the bands will be removed (re-graded) and replaced with a single salary at the top of the band by 2015\16. I work for a local authority and trust me pay bands is the last place they should be looking at to save money it's the long term mind set that is the problem.

  • rate this

    Comment number 104.

    Let's bash the public sector. I am a qualified social worker of 5 yrs; I trained for 7 yrs in total (3yrs degree + 4 yrs masters) + a lot more besides. My salary is £27,000 and I have not had a pay rise for 3years. Progression has already been "frozen this year". The coalition are doing a great job of divide (public and private) and rule.

  • rate this

    Comment number 103.

    A national strike looms ever nearer. Dark days indeed.

  • rate this

    Comment number 102.

    All I will say is you will all be complaining when you have to wait in A+E 8hrs to be seen because of no staff, but at least you will have a new high speed rail link, now THAT is forward thinking!

  • rate this

    Comment number 101.

    Maybe the trade unions will rise up to the challenge and divert the money they give to the failed politicians back to their members when they lose their jobs to compensate for the loss of the first weeks JSA?

  • rate this

    Comment number 100.

    Increments are already used to save cash by , for example, paying police officers a pittance(less then the barman at the house of commons) until they are a few years into the job.at which point they are earning the sort of rates they could reasonably expect right away in most of the developed world - they are NOT an inflation-defeating pay rise and now there will not be any further rises.

  • rate this

    Comment number 99.

    I don't think I can bring myself to read these comments from the 'not in my back yard' crew. Will just go back to crossing my fingers the fickle public don't put back in the party who created the mess by spending all your money.

  • rate this

    Comment number 98.

    We are not all in this together . I have worked in both private and public sectors and owned my own business . The public sector have become the whipping-boy for the right when in fact they did not cause the problems we face. Many public sector jobs are important and not all have it cushy. Its been a clever trick to blame local authorities whilst the rich get richer . Currently 1% pay rise = cut


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