Public sector faces pay cuts, says Alistair Darling

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ALISTAIR DARLING, the chancellor, today warns public sector workers they need to follow the example of the private sector and accept wage cuts if they want to hang on to their jobs.

Signalling an assault on public sector pay and bonuses, starting with the highest-paid employees, Darling said it was time for a change of culture.

“What is being paid has sometimes lost the relationship it ought to have with what someone actually does. Once that happens, it’s not only unfair, it’s actually grossly inefficient,” he said in an interview with The Sunday Times.

He cited the example of private sector firms, two-thirds of which are planning wage freezes or cuts this year as an alternative to redundancies.

“There’s a lot of evidence that people in the private sector have taken pay cuts and held on to their jobs,” he said.

He is drawing up plans to slash remuneration for some posts and end the routine awarding of extra “performance” payments.

It follows an outcry over bonuses in Whitehall and among council and quango staff. Opposition politicians have condemned them as “back-door pay rises”, claiming they make a nonsense of government pay restraint. Official figures show public sector pay rose 3.8% in the past year, while in the private sector salaries fell 0.1%.

Public sector workers already face a 1% cap on pay rises, announced in the pre-budget report last month. However, Darling has ordered a wider study of public pay, by the Senior Salaries Review Body, which will report by the budget.

In a move that would change pay and perks for NHS trusts, the Royal Mail and town halls, he wants to review whether public sector salaries should be linked to private sector pay. High public sector wages are often justified on that basis. That link could be scrapped.

“In some quangos, local authorities and other organisations, the level of pay, especially at the top end, and bonuses have reached the stage where they don’t pass what I call the next-door neighbour test. If you can’t justify them to your neighbour, you’ve probably got it wrong,” Darling said.

Signalling pay cuts for some posts, likely to be phased in as positions fall vacant, Darling claimed people would be willing to do the jobs for less.

“It is not altogether clear to me why we pay very large salaries to people to do the same jobs as were being done 10 years ago for rather less,” he said.

Darling is also concerned by “special performance” awards in Whitehall. He admitted the payments were not always a reward for exceptional work.

Embarrassingly, the practice is rife in the Treasury. Figures in a parliamentary answer show 73% of Treasury staff had “special performance” awards, averaging £8,030, last year.

Lord Oakeshott, the Liberal Democrat Treasury spokesman, said: “How can the Treasury control the bonus gravy train when most are riding it first class?

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However, Darling has ordered a wider study of public pay, by the Senior Salaries Review Body, which will report by the budget.

In a move that would change pay and perks for NHS trusts, the Royal Mail and town halls, he wants to review whether public sector salaries should be linked to private sector pay. High public sector wages are often justified on that basis. That link could be scrapped.