National, regional and local impacts
A total of £1.3 billion will be cut from key worker pay settlements in England this year, following announcements made by the chancellor in November 2020.
The analysis calculates the hit to the economy from the difference in economic activity expected if pay settlements go ahead in full, compared with if the chancellor implements the cuts.
To allow comparison between regions and constituencies, the TUC calculated and ranked the loss of spending power per head compared to the previous year.
For the year April 2021 to March 2022:
The specific hit for each North East constituency is given in the data linked to in the notes.
Fairness for key workers
Millions of key workers who kept the country going through the pandemic will lose the pay rises they were expecting.
The TUC is encouraging the chancellor to reconsider, and to commit to policies that will improve pay and conditions for all key workers.
These should include:
Impact on other workers and local economies
The TUC argues that cutting key worker pay weakens wage growth for other workers too – especially those in jobs that directly depend on consumer spending.
If public sector key workers are forced to tighten their belts, the reduced spending hits businesses too. And that impacts on other workers’ pay.
The TUC says that the chancellor must not repeat the mistakes of the 2010s. Millions of public sector workers saw their pay capped by George Osborne. They lost thousands of pounds – and the knock-on impact was wages falling across the economy and the worst slump in living standards in more than 200 years.
This is particularly important for parts of the country that the government has promised to level up, as the analysis shows that restricting pay rises for key workers will increase existing inequalities.
Key workers have kept the North East going through the pandemic. The Prime Minister clapped them, but his applause will ring hollow if he cuts their pay. It’s no way to thank them.
We’re all part of the same pay circle. When a key worker spends their wages, it goes into other people’s pay packets. Shop staff, factory workers, delivery drivers, childminders, bar staff – right across the economy, we are all connected.
If our key workers get the pay rises they’ve earned, it will benefit everyone. The spending boost will help our local businesses and high streets recover quickly. And it will help level up our unequal economy.
Notes to editors:
- Headline data for regions and constituencies: This link provides the main headline results from the analysis for all English constituencies and regions. It includes (1) financial amounts for the economic impact, and (2) national ranking for severity of impact: LINK TO HEADLINE DATA
- Guidance on constituency data: The key headline data for constituencies is the economic hit. While the national rankings for loss of spending power can reveal clusters within regions that help indicate the parts of England most severely affected, the TUC cautions against reading too much into the relative rankings of neighbouring constituencies due to the effects of people travelling outside of their residential constituency to centres of employment and commerce.
- Full data: This links provides the full data used in the analysis, including calculations for the loss of spending power as a percentage of gross domestic household income, which is used to produce the rankings: LINK TO FULL DATA
- Explanatory note on analysis:
- The TUC’s analysis calculates the hit to the economy by comparing the economic activity expected if pay for public sector workers subject to the pay freeze had grown at the same rate as in the last 12 months, with the reduced activity expected from the cuts.
- The TUC’s calculation used ONS data for the number of employees working in the public sector, public sector pay, population and gross disposable household income; and OBR data to project gross disposable household income. Our calculations use median pay to calculate lost wages and as a result, the final figures will likely be an underestimate as the median pay figure will include many who will get a pay rise.
- Detailed sources can be accessed in the ‘full data’ spreadsheet (see above).
- To show the impact an increase in spending power has on demand and on local economies, a multiplier of 1.3 was applied to the loss of public sector earnings based on the midpoint of the multiplier range identified by IMF research in the last recession.
- The Cities of London and Westminster constituency is an outlier due to the unusually high proportion of public sector workers relative to residents compared to other constituencies.
- Although topping the regional ranking for the worst hit, the North East only has three constituencies in the top 30 as it has a smaller population and fewer seats than other regions.
- Pay cuts for key workers in the public sector: In November 2020, the chancellor announced a pay freeze for all public sector workers apart from healthcare workers and people who earn less than £24,000 a year. Based on data provided by HMT, the TUC estimates that 2.6 million public sector workers will be subject to the freeze in 2021.
- ‘Winning a pay rise for key workers’ campaign: The TUC is running a campaign for fair pay for key workers, including those in both public and private sector employment. Further details of the campaign are here: https://www.tuc.org.uk/campaigns/winning-pay-rise-key-workers
- About the TUC: The Trades Union Congress (TUC) exists to make the working world a better place for everyone. We bring together more than 5.5 million working people who make up our 48 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.
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