Abandoning austerity is no solution to public sector pay
Big falls in govt. spending associated with positive outcomes
Government should re-gear priorities or regionalise pay to increase wages
In 2011, public sector pay was 18% higher than private sector pay. At that time the UK had the highest structural budget deficit in the OECD. Public sector pay restraint was essential.
Tories plan to balance the books by 2025-26, which would mean the UK is due to be in deficit for 25 years. Softening this programme would be dangerous.
A big increase in taxes should not be the way forward either. The UK’s tax burden is the highest in nearly four decades.
For OECD countries with high budget deficits in 2010, a larger fall in government spending has been associated with larger deficit reductions, higher economic growth, higher wage growth and lower unemployment.
Ireland’s fiscal consolidation has been 2½ times as large as the UK’s, yet Ireland has seen unemployment fall by twice as much proportionally.
If public sector pay is to be eased, this should involve re-gearing government priorities or examining ways of regionalising pay.
Daniel Mahoney and Tim Knox - Thursday 13th July 2017
Daniel joined the Centre for Policy Studies as Head of Economic Research in November 2015. He was promoted to Deputy Director in March 2017. Prior to joining the CPS, he worked in research roles for a number of parliamentarians.
Before his appointment as Director of the Centre for Policy Studies, Tim Knox was the Editor at the CPS - a position in which he was responsible for publishing papers by every Conservative leader since Mrs Thatcher as well as by hundreds of leading academics and opinion formers.