Spring Budget 2023

The spring budget is an opportunity to invest in our public servants and public sector, after a decade of austerity that has left them at breaking point.

The budget comes at a time when:

• real pay is falling steeply, by -3.8 per cent on CPI and -6.3 per cent on RPI, as inflation, driven by global factors, has reached a 40-year high.
• the threat of a two-year recession, and a rise in unemployment between ½ million and 1 million, according to forecasts from the Bank of England and Office for Budget Responsibility.  
• there is a recruitment and retention crisis in public services, with vacancy rates of over 10 per cent in health and social care, and one third of public sector workers actively seeking to leave their profession citing pay cuts as the determining factor.[1]

Workers are taking industrial action across the public and private sectors, in response to 12 years of falling pay and an environment that has repeatedly asked workers to pay the price while dividends and executive pay have soared. 

Strong and resilient public services are the backbone of a strong and robust economy. But in the Autumn Statement 2022, the Chancellor failed to mitigate the impact of soaring inflation on departmental budgets, first set out in the 2021 comprehensive spending review, forcing public services to provide the same level of service on far less than originally intended. Calculations by the new economics foundation suggest that, at the Autumn Statement in November 2022, the Chancellor introduced cuts provisionally estimated at £80bn, by the end of the forecast period 2027-28.[2]  

This amounts to an impossible task for our public services and the workforce. The scale of the challenges facing our public services are immense, from record backlogs in health and justice, soaring levels of unmet care needs to crumbling school buildings and acute staffing shortages. The latter challenge has been made worse by the government’s intransigent approach to public sector pay.

The decision to hold down public sector pay for 12 years has led to the recruitment and retention crisis in public services and a race to the bottom on public sector wages. Key workers are voting with their feet, leaving in droves, in search of better paid jobs. Vacancy rates in health and social care have reached record highs at 10.5 per cent[3] and 10.7 per cent respectively[4]. In education, retention rates have reached a historic low – just two-thirds of early-career teachers (67 per cent) remain in the profession after five years.[5] 

The focus of the Chancellor’s Spring Budget should be investing in public services and the workforce that deliver them. Through plans laid out in the Budget, the Chancellor should empower Ministers to resolve the public sector pay disputes of 2022-2023, providing sufficient funding to deliver fair pay rises, adjust spending plans to account for the impact of inflation on departmental budgets, and deliver fully-funded pay rises that enable us to recruit and retain the skilled staff we desperately need. 

Yet, once more the Treasury seem determined to pick a fight with workers rather than address the disaster of the economy and public services, of broken Britain. Rather than pay key workers what they are owed, the government are threatening to sack them with the Minimum Service Bill. The wealthy are yet again exempt, with city bonuses at an all-time high and new tax breaks for banks. There is no ownership of the severity of the crises that have led to this point. Repeating the mistakes of the last decade, when public spending and public sector pay was held down, will place further pressure on the economy. While inflation continues to put immense pressure on households, the threat of a prolonged recession is looming large. Just as workers need higher pay and better social protection to support a standard of life that has fallen behind and has pushed millions into poverty, higher wages are needed to protect the economy.

Government policies have engineered a doom loop of low pay, weak spending, low growth, and consequent pressures on the public finances. But rather than trying to reverse this cycle, the government is arguing once more that the state of the public finances is a reason to restrict economic growth, flying in the face of evidence to the contrary.

Public spending supports employment, drives economic growth and ensures we have a healthy and skilled workforce.[6] Conversely, failure to invest and create a more equitable tax system, drives the opposite results, particularly in the context of high inflation and an economic recession.

Without a change in direction, the economy will continue to go backwards not forwards. At the Budget, the Chancellor must set out a genuinely new approach that builds for fair growth and decent jobs – recognising that rewarding the workers who keep the country running is the best way to ensure that growth benefits everyone.