Would pay demands cost an extra £28bn?
- Published
Faced with a wave of strikes this winter, Prime Minister Rishi Sunak was asked what more he could do to head them off.
Mr Sunak said the government had accepted the recommendations of the public sector pay review bodies but added: "What I'm not going to do is ask ordinary families up and down the country to pay an extra £1,000 a year to meet the pay demands of the union bosses."
Health Secretary Steve Barclay has also used this figure, telling BBC Breakfast on 7 December: "If everyone in the public sector had a pay rise in line with inflation, it would cost an extra £28bn, an extra £1,000 per household."
But, in terms of the current dispute, these figures look too high.
The public sector pay bill for all 5.7 million employees was around £233bn last year.
The Office for Budget Responsibility (OBR) forecasts average inflation for 2022-23 of about 10%. A rise for public sector workers in line with this would cost about £23bn.
There are 28 million households in the UK, so that's about £820 per household.
But there's something else to consider, as Ben Zaranko from the Institute for Fiscal Studies (IFS) has pointed out.
"The government was already planning to give non-zero pay awards when it set out its spending plans last autumn," he told Reality Check.
It was already budgeting for a 3% average pay rise for the public sector for 2022-23 - remember, both the prime minister and the health secretary talked about how much "extra" would have to be paid.
Once this is factored in, the IFS estimates that increasing it to match inflation of 10% would cost about £18bn - around £640 per household.
And there's also the question of the tax public sector workers would be paying if they got an inflation-linked pay deal.
If it cost the government £18bn, it would be getting some of this back through tax - roughly a third - bringing the bill down further.
How did the government come up with its figures?
On 7 December, we asked the Treasury how it came up with the £28bn and £1,000 per family (or household) figures.
On 9 December, it said they were calculated for an inflation-linked pay deal in 2023-24, whereas our calculations are for 2022-23.
The government got to its higher figure by:
- Taking the public sector pay bill for 2021-22 (as we did) of £233bn
- Increasing that by around 5% to reflect pay deals for 2022-23, which gives a figure of £245bn
- Taking 11% of that figure reflecting the most recent CPI inflation figure for October
- That gives £27bn - the other £1bn comes from "assumptions on pay drift and workforce growth", which have not been specified
- Dividing the £28bn by the 28 million households in the UK, giving the £1,000 per household.
We asked the government why its figures were for 2023-24, when the strikes and disputes are over pay settlements in the current year?
It said these were appropriate given that pay has been set for this year and we are nine months through the pay year for most workforces.
But some questions remain:
Why is the government taking an inflation figure from October 2022 and applying it to a pay deal in 2023-24?
Ben Zaranko, from the IFS, points out that CPI inflation is forecast by the OBR to average 5.5% in 2023/24.
"So it doesn't make sense to apply the current rate of CPI inflation to a pay award next year", he told us.
He suggested that the right number to use, under the government's methodology, would be "more like £14 billion".
And why would families be asked to pay "an extra £1,000 a year"?
We don't know quite what Mr Sunak means by this.
If he means an extra £1,000 in tax to fund this pay deal, it's worth pointing out that taxes such as income tax and national insurance are not evenly distributed throughout the population.
Some families don't pay any and the amount of tax paid by those who do, varies widely.
This article is based on a live page post that was published at 11:58 on 7 December
