England’s economy would get a £3.3bn ($4.5bn) boost if cuts made to the salaries of public sector key workers over the past decade were reversed in line with consumer price index (CPI) inflation, according to new data.
A report by Trades Union Congress (TUC) and Landman Economics said 4.3 million public sector workers would be better off, in some cases by thousands of pounds a year, if this was to happen.
This financial boost would not only speed up economic recovery from the pandemic but make pay rises for other workers more likely too.
The analysis modelled the economic impacts of reversing cuts to the value of public sector pay that took place over the period 2010/11 to 2020/21.
The £3.3bn figure is based on restoring median public sector pay by 3.2% in line with CPI inflation.
But the TUC said CPI can underestimate the degree to which the cost of living is rising and in pay negotiations, retail price index (RPI) is often a better guide.
It said if the chancellor restored median public sector pay by 10.1%, in line with RPI inflation, the economy would get a £10.5bn boost.
This analysis is part of a policy briefing sent by the TUC to all MPs, which sets out the importance of protecting the "pay circle" – the chain of spending that connects workers’ wages around the whole economy.
The TUC said that when nurses, care workers, teachers and other public sector key workers are forced to cut their spending, it impacts on the wages of other workers too.
“It is up to government to keep the pay circle moving," said TUC general secretary Frances O’Grady.
"If the chancellor gives key workers the pay rises they’ve earned, it will protect the spending businesses need to recover. And that will help other workers get pay rises too."
"But if the chancellor attacks the pay circle in his spending review, everyone will suffer. And we could have another slump in living standards across the whole economy.”
UK chancellor Rishi Sunak has put in place a pay freeze that is affecting the majority of public sector key workers, such as police, teachers and civil servants.
He has defended his position, stating the cuts will result in more money for health, education and the police.
Last year, then-shadow chancellor Anneliese Dodds criticised the decision, telling the BBC that if "firefighters and teachers are told they'll have less spending power in the future, then they will be spending less".
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