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• Bristol and Devon regions to suffer the biggest losses to their local economies
• Cutting pay is “no way to thank key workers” and will bring down pay for all workers, says TUC

New analysis published today (Friday) by the TUC reveals the economic hit to South West as a result of government plans to cut pay rises for key workers in the public sector. 

In total, the South West is set to lose £142million following announcements made by the chancellor in November 2020.

It also means thousands of key workers who kept the country going through the pandemic will see a direct hit in their pay.

The impact for the South West

The analysis by the trade union federation has calculated the expected hit to the South West economy by looking at the difference in economic activity if key worker pay settlements go ahead in full, compared with the decline in economic activity if the Chancellor implements the planned pay cuts. 

This means that for the year April 2021 to March 2022:

  • The total economic hit for the South West region is £142 million
  • The wider Bristol economy is set to see a loss of more than £25.6million
  • Including the cities of Exeter and Plymouth, Devon is also set to lose over £26million
  • Gloucestershire and Somerset will also each suffer from £15million loss
  • The hit for England is -£1.7 billion

Click here for a further breakdown of losses by constituency and area. 

Fairness for key workers

Despite assurances from ministers that key workers would be recognised for their enormous contributions and sacrifices throughout the pandemic, millions of key workers will lose out. 

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:

  • Guarantee that all outsourced public service workers get a pay rise so that they earn at least the real Living Wage
  • Action to ensure that every key worker in every sector gets a pay rise, including raising the national minimum wage to at least £10 per hour 
  • Fair pay rises for key workers in the public sector – with a plan to restore wages to their levels before austerity
  • Ban zero-hour contracts – and use the long-awaited employment bill to strengthen rights to fair working conditions for key workers

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, with many workers today still suffering a real loss in their wages as living costs soared. The knock-on impact also saw workers’ salaries fall right 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 restricting pay rises for key workers will increase existing inequalities and household poverty.

TUC Regional Secretary Nigel Costley said:

“Key workers have kept us going through the pandemic. MPs clapped for them, but their applause will ring hollow if they support the Chancellor as he continues cuts to their pay. That is no way to thank them.

“For too long, key workers have been poorly paid, on insecure work contracts and rarely recognised by the government for the vital role they play in our communities. 

“But we also know that boosting key worker pay helps everyone. 

“When a key worker spends their wages, it goes straight into the local economy, and comes back into other people’s pay packets. 

“From shop staff, factory workers, delivery drivers, care workers, childminders, hospitality workers – right across our economy, we are all connected. 

“So if the Chancellor is serious about getting the country back on its feet, and levelling up our communities, he needs to significantly improve the pay and conditions of all our key workers. Not cut in a time when we need it most.”

Editors note

Full data: This links provides the full data of all England constituencies 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 rankings: LINK TO FULL DATA

NB: 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.

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.

- Some constituencies will be rank higher due to the unusually high proportion of public sector workers relative to residents compared to other constituencies. This also applies to regional comparison where numbers of low numbers of directly employed public sector workers may hide a higher rate of outsourced workers in public services.

- 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.

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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