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Spring Budget 2023

TUC submission
Report type
Policy proposal
Issue date

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.

[2] NEF (2023) ‘Austerity by stealth’ *publication pending; this figures includes an adjustment for what is regarded as an “implausibly low inflation forecast” on the part of the Office for Budget Responsibility. The estimate is then relative to the scenario where a) the government delivered against their original commitment to increase budgets by 3.8% a year in real terms for the duration of the current spending review period, and b) thereafter spending tracks nominal GDP (in line with the OBR’s baseline assumption).

2. Recommendation

In the Spring Budget, the Chancellor should take action to:

Boost pay across the economy

  • Fund decent pay rises so that all public service workers get a real-terms pay rise that protects them from the soaring cost of living and begins to restore earnings lost over the 12 years.
  • Get the UK on a path to a £15 minimum wage as soon as possible.
  • Follow the example of New Zealand and Australia by introducing fair pay agreements to allow unions and employers to negotiate minimum pay and conditions across sectors.
  • Ensure all outsourced workers are paid at least the real living wage and receive pay parity with directly-employed staff doing the same job.    
  • Strengthen the gender pay gap reporting requirements, and introduce ethnicity, LGBT+ and disability pay gap reporting, requiring employers to publish action plans on what they are doing to close the pay gaps they have reported.

Deliver a plan for strong public services and fair taxation

  • A new funding settlement for public services, with adjusted spending plans that mitigate the impact of high inflation on departmental budgets and provide for fully-funded pay rises that keep pace with the cost-of-living. 
  • Ensure those with the broadest shoulders pay their fair share in tax. Equalise capital gains tax rates with income tax to start ensuring the fairer taxation of wealth and tax windfall gains experienced by oil and gas giants at a higher rate, removing loopholes that allow businesses to avoid paying their fair share.
  • Deliver a new economic vision built on strong and robust public services, investing in key areas of our economic infrastructure that have historically been overlooked and underfunded including childcare, social care and local government.

Protect workers from hardship

  • Cancel the imminent hike in energy bills. The Energy Price Guarantee (EPG) must not be raised beyond the current £2,500 - government should either reduce the EPG to £2,000 or accelerate the introduction of a social tariff. Government should increase domestic energy efficiency spend by £6 billion over the next two years, funded by planned EPG spending coming in significantly under budget due to falling gas prices. 1
  • Implement a short-time work scheme to protect jobs in the event of economic downturn.
  • Set a path to significant and permanent improvements in the levels of social security.     
  • Commit to maintaining the State Pension triple lock for the rest of this parliament to help reverse increases in pensioner poverty rates and to reduce income inequalities among households in retirement, which has reached record levels. 2

Ensure decent jobs and growth for everyone

  • Ensure that businesses prioritise sustainable growth and jobs, reforming corporate governance to promote long-term sustainable investment rather than a short-term focus on shareholder returns.
  • Invest in a just transition to the secure green energy future we need, slashing dependence on volatile imported gas, and introducing public ownership to the energy sector.
  • Get productivity rising by rebooting our skills system through a new national lifelong learning and skills strategy.
  • Drop plans to threaten EU-derived employment rights through the Retained EU Law bill.
  • Scrap the Strikes (Minimum Service Levels) Bill that would undermine workers’ right to strike.
  • Introduce industrial and trade policies that promote good jobs and workers’ rights globally and ensures that businesses compete on a level playing field.
  • Institute the Green Jobs Taskforce with a long-term remit and regulatory capacity to co-ordinate planning for decarbonising our economy, between government, industry, unions, and skills sector, building on the work of the current Green Jobs Delivery Group.

The following sections outline the impact of government policies over the past decade, and the current situation facing workers. The final section outlines the new approach workers need in more detail.

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