According to the Institute for Fiscal Studies, more than 100,000 public sector workers would lose their jobs this year if the government refuses to fund higher-than-expected wage awards for nurses, doctors, teachers and care workers.
The IFS said the chancellor, Kwasi Kwarteng, faced the choice of padding public sector budgets or accepting the likelihood of industrial action, more problems recruiting and retaining staff and a decline in quality of the services that were already under extreme strain.
The think tank added that if the government stuck to its current spending programme, its ambitious plans to clear the backlog of NHS operations, boost primary education and overhaul social care would be “almost impossible “.
While the average public sector wage settlement this year, at around 5%, was below inflation which currently stands at almost 10%, it was also higher than the 2% to 3% increase expected to the budgets drawn up a year ago, leaving a £5bn hole. to public sector budgets.
Bee Boileau, IFS research economist and author of the study, said there were no easy options. “Offering higher pay awards without additional funding puts enormous pressure on departmental budgets and requires painful cuts elsewhere. Not offering higher pay awards risks a wave of strikes and ongoing challenges with recruitment and retention.
“But providing extra funding to departments would mean offsetting spending cuts elsewhere, or a U-turn on some of the chancellor’s recent tax cuts if debt is serious about falling as a share of national income.” .
Staffing costs are the biggest element in services such as the NHS and local government. The public sector pay bill, covering 5.7 million workers, was £233 billion in 2021-22, more than a fifth of all government spending and a third of all public service spending .
Average pay this year is between 4% and 5%, with an increase of 5% for nurses, 4.5% for doctors and dentists, while the agreements for teachers and workers in local government vary, and lower paid staff receive more.
But even meeting average public sector pay may not be enough to prevent industrial action, the IFS said. Most workers will take a real pay cut at a time when energy prices and costs are soaring, leaving them behind private sector counterparts who are expected to receive an average of 6%.
The Royal College of Nursing is polling its 300,000 members on strike action this winter. Other NHS workers, including junior doctors and physiotherapists, are also threatening industrial action.
A 10-year fall in public sector pay relative to the private sector has exacerbated the problems facing the NHS, local authorities and care companies in recruiting and retaining staff, characterized by reports from workers low-paid social workers who leave to get better-paid jobs in supermarkets.