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The public sector pay squeeze has dramatically reduced English spending power

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£8.5 billion – just for 2017.

That's how much more could have been spent in local economies across England this year if public servants’ pay hadn’t been artificially restricted.

Our new analysis on public sector pay in England’s constituencies has shown that on average, public sector workers are earning over £2,000 less today than if their pay had risen in line with inflation (CPI).

Year on year, this amounts to an overall reduction of £48bn in spending power across England since 2010.

Every region has seen big falls in spending power because of the pay cap. The North East and North West – which have the highest share of public sector workers in their total workforce – have seen falls of £2.1 and £7bn respectively since the start of the decade. 

And England’s 50 poorest parliamentary constituencies have seen a combined loss of spending power of three billion pounds since 2010.

That's less money being spent in local businesses and on high streets, suppressing regional wealth growth and jobs.

A recent report from the Institute for Public Policy Research (IPPR) shows that increasing NHS pay could help narrow regional inequalities as the impact would be higher in regions outside of London and the South East, where pay is lower. The impact in cash terms is nearly twice as high in Yorkshire and the Humber as in the South East.

As Jill a physio in the NHS says, “I live within my means, but my means keep getting smaller. I’m careful with my weekly shop, I’m always renegotiating my utility bills, but it’s getting harder to make ends meet”

Lifting the cap on public sector pay would also have an impact on the global economy. A significant portion of the costs of increasing public sector pay would be returned to the Treasury almost immediately. Higher wages mean more taxes are collected and less is spent on means-tested benefits.

Lifting the cap on public sector pay is the right thing to do – for public servants and for local economies across the country.

Image: Matt Cardy/Getty Images

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