GEORGE Osborne yesterday pledged to cut public sector wages by putting an end to automatic pay rises for civil servants, as he set out plans to shave another £11.5bn off some departmental budgets.
In an admission that he has struggled to control public sector wages during his first three years in office, the chancellor used yesterday’s spending review to announce an end to the practice of so-called progression pay – bumping workers up a pay grade simply for staying in their job.
Osborne also said he will cut 144,000 public sector jobs by 2015-16 while maintaining the cap on future public sector pay rises at just one per cent.
Although private sector wages continue to flatline, public sector workers received an average 1.4 per cent pay increase in the twelve months to March.
“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,” Osborne told the Commons. “And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police.”
Mark Serwotka, head of the public sector PCS union, claimed the move would hit the “living standards of hard-working public servants for many years to come”.
Despite Osborne’s bold pronouncements yesterday he revealed total government spending will still be £715bn in 2015-16 – down just 1.7 per cent in real terms on when the coalition took power in 2010.
In a speech that sought to set the political agenda in the run-up to the 2015 general election, Osborne also announced tough new plans that will require welfare claimants to speak English before receiving support. The newly unemployed will also have to wait seven days before claiming jobseeker’s allowance in an attempt to encourage them to find a new job.
There will also be a cap on around half of the welfare budget. Osborne’s aides later indicated that they wanted to cut the benefits bill further but were blocked by their Lib Dem coalition partners.
But business groups were disappointed by heavily-trailed plans to allocate billions of pounds of cash for infrastructure schemes. Instead Osborne simply confirmed the infrastructure spending limit set out in last year’s Budget, leaving Treasury chief secretary Danny Alexander with the task of unveiling which projects will receive funding in a speech later today.
But last night the coalition’s message of careful investment was dealt a blow when it was revealed to MPs that the budget for the new High Speed 2 railway has jumped by £8bn to £42.6bn.
Whitehall departmental spending, which accounts for around half of all government spending, has been slightly reconfigured towards capital projects – but their total value remains exactly as previously announced.
Local government was the biggest loser in the spending review, with councils having to shoulder a 10 per cent reduction in their central grant, although they have been offered funding to freeze council tax.
At the same time the ringfenced health and international aid budgets will continue to rise, in the face of opposition from Tory backbenchers.
THE KEY POINTS
PUBLIC SECTOR PAY REFORM
■ Automatic pay rises for civil servants will be cancelled, and a total of 144,000 jobs will be cut from the public sector by 2015-16
WELFARE RULES TOUGHENED
■ The newly unemployed will have to wait seven days before signing on, while non-English speakers will have to take language courses to claim benefits
■ Danny Alexander will unveil today which projects will receive funding, after the chancellor fails to commit to new spending on infrastructure plans
- George Osborne’s comprehensive spending review
- The cabinet’s winners and losers
- Our panel of experts delivers its verdict on Osborne’s spending plan
- Cuts will have to keep on coming
- Osborne only moved us a fraction of an inch towards real budget restraint
- An incomplete cap on welfare spending risks long-term fiscal ruin
- Railways and shale gas to get Treasury boost
- Transport for London secures investment despite budget cut
- Council tax to be frozen for two more years
- Government pledges national funding formula for schools
- Tax collectors told to find £1bn more in revenue despite cuts
- No dole for first seven days of unemployment
- Heseltine’s local growth funding initiative gets fraction of budget
- Defence budget cut modestly as Libor fines pledged for covenant
- Stubborn deficit threatens tax hikes from 2016
- NHS budget raided to pay for new social care services fund