South West economy to get £288 million boost if the Chancellor reverses key worker pay cuts

TUC analysis published today shows the South West’s economic recovery would be boosted by £288 million if cuts to key workers’ pay are reversed.

The move would make 405,000 public sector workers in the South West better off by helping recover lost wages following the austerity years of pay freezes and real terms pay cuts. 

The analysis by the TUC and Landman Economics further breaks down the gains for each constituency if the Chancellor scraps the planned cuts in his upcoming Comprehensive Spending Review this Autumn (27 October). 

The average economic boost for a parliamentary constituency in the South West would be £5.2 million. Click here for specific data for every parliament constituency.

In total, England’s economy would receive a £3.3 billion boost, based on restoring median public sector pay by 3.2% in line with CPI inflation.

By providing local key workers with proper pay rises says the TUC, the local economy will recover faster and better. This is because workers spend locally which drives the local economy and helps support pay rises for other workers too – thus creating the ‘pay circle’ effect.

As this is a median figure, some workers would need a higher increase to restore the real value of their pay. For example, between 2010/11 and 2020/21:

• Maternity care assistants’ and nursery nurses’ pay was down by £2,000 (-7.6%)
• Nurses’ and community nurses’ pay was down by up to £2,500 (-7.3%)
• Firefighters’ pay was down by £2,600 (-7.4%)
• Teachers’ (M6, outside London) pay was down by £2,000 (-5.1%)

The TUC also cautions that CPI can underestimate the degree to which the cost of living is rising. And in pay negotiations, RPI is often a better guide.

If the Chancellor restored median public sector pay by 10.1% in line with RPI inflation, it would boost the South West economy by £908 million. 

Pay cuts for public sector key workers in 2021/22

The Chancellor has put in place a pay freeze that is affecting the majority of public sector key workers, such as police, teachers and civil servants.

Some pay offers have been made for some workers.

• Those currently earning less than £24,000 will receive a pay rise of £250 this year, but this is not permanent and will not be consolidated into their pay going forward.
• Higher education staff have been offered 1.5%
• Local government staff have been offered 1.75%
• And NHS staff have been offered a 3% pay award.

However, many key workers in the public sector remain excluded from these awards.

The pay awards also don’t include outsourced staff such as NHS cleaners and porters where wages are low and out of step with directly employed staff.

With CPI inflation currently 3.2% and RPI inflation currently 4.8% (the costs of goods), many workers are likely to find the value of their pay has been cut again this year.

The TUC says that, in addition to restoring the value cut from pay between 2010/11 and 2020/21, the Chancellor must make sure that in the current year – and the years covered by the forthcoming spending review – pay for all key workers rises each year at least in line with inflation.

TUC Regional Secretary Nigel Costley said:

“We’re all part of the same pay circle.

"When key workers throughout the South West spend their pay, it goes straight into other people’s pay packets. Nurses, carers, shop staff, drivers, local businesses – across the economy, we all benefit.

“But it’s up to government to keep this pay circle moving.

"After all that has happened with the Covid crisis, our key workers deserve a proper pay rise. And if it means our local businesses and workers in our communities also benefit, then that's a win-win situation.

“But if the Chancellor attacks the pay circle in his spending review, working people will suffer. And we will see yet another slump in living standards across the whole economy.”