This week public sector unions went on strike over pensions cuts, while the government announced an average one per cent public sector pay cap for the two years after the existing pay freeze expires in 2013.

Speaking in his Autumn Statement, chancellor George Osborne said: “While I accept that a one per cent average rise is tough, it is also fair to those who work to pay the taxes that will fund it.”
The government also plans to ask pay review bodies to consider by July 2012 how to vary public sector pay by region to make it “more responsive to local labour markets.”

Osborne said that “this is a significant step towards creating a more balanced economy in the regions of our country that does not squeeze out the private sector.”

The Office of Budget Responsibility said that the plans mean that a total of 710,000 public sector jobs will be lost by 2017. Previously, it had predicted 400,000 public job losses by 2016.

Unions reacted angrily to Tuesday’s announcements, which came on the eve of Wednesday’s strikes over changes to public sector pensions.

The general secretary of the Prospect union, Dai Hudd, called the package “an act of provocation,” and said it jeopardises the prospect of reaching a deal on public sector pensions. “The chancellor’s statement has put a major, major question mark over where those discussions can go,” he told CSW. “The pay freeze in particular is going to make it nigh on impossible for our members to see their pay move in a way that at least compensates for the [pensions contribution] increases over the next three years.”

He added that “the economics of it are madness. Simply taking more money out of the economy, when one of the reasons that our economy is suffering is a lack of demand, will certainly prevent our six million public sector workers from investing or doing anything with their finances that may stimulate the economy.”

Cabinet Office minister Francis Maude told the House of Commons yesterday that 135,000 civil servants had gone on strike. “There is disruption caused by the action, but there are constructive talks ongoing,” he added. Jonathan Baume, general secretary of the FDA, told CSW that talks had indeed been making progress.

The chancellor’s Autumn Statement also announced £5bn for public infrastructure, and the formation of a cabinet committee with the aim of encouraging pension funds to make similar investments. Plans include an extra £1.4bn for electrifying railway lines, and £100m for broadband in 10 cities.

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Written by CSW