Public sector pay 2009

The worsening economic situation put pressure on the public sector in the 2009 pay round, with the Government imposing restraint, and settlement levels under scrutiny from all sides.

On this page:
Public sector pay policy under the spotlight
2010 and beyond
2009 pay round
Local government
Opted-out councils
Fire service
Police
Central government departments
Prison service
Schoolteachers
School support staff
Higher education
Further education
Sixth-form colleges
NHS deal confirmed
Table 1: Example local government pay settlements, 2009
Table 2: Pay awards at opted-out local authorities, 2009
Table 3: Example central government pay settlements 2009
Table 4: Education pay settlements, 2009
Additional resources on XpertHR.

In theory, the 2009 pay round should have been relatively straightforward. At the start of 2008, the Government expressed a preference for bargaining groups in the public sector to enter multi-year deals (on the Number 10 website), with the Prime Minister saying this was "the key to stability" that would "help control inflation and make it easier for workers to budget for the long term".

This resulted in several of the groups covered by the pay review bodies entering long-term deals, with the increases for subsequent years set at an absolute level, rather than having any direct link to an inflation measure, and having limited provisions for the agreed increases to be reviewed. These included the NHS Pay Review Body and School Teachers' Review Body, as well as the Police Negotiating Board. In addition, many large government departments were covered by multi-year deals going into the 2009 pay round, including the Ministry of Justice, the Ministry of Defence, the Home Office and the Department for Work and Pensions.

However much stability these arrangements may have brought, the wider economic environment was to prove far less predictable. At the start of 2008 the Government had been concerned about its target measure of inflation - the consumer prices index (CPI) - being well above the 2% target. But by the end of the year inflation on all measures was forecast to fall, with retail prices index (RPI) inflation expected to be negative for much of 2009 - as proved to be the case. Although the Government emphasises that pay awards in the public sector must be consistent with the Bank of England's CPI inflation target, most pay negotiators in all sectors prefer to use the RPI inflation measure, and the prospect of deflation made 2009 "an unusual and difficult pay round", according to Geoff Lewtas, national pay coordinator at the Public and Commercial Services Union (PCS).

Public sector pay under the spotlight in 2009

As pay awards across the economy followed the downward path of inflation, attention was focused on the relatively positive situation in the public sector. In February 2009, the Chartered Institute of Personnel and Development (CIPD) said that in view of the low level of RPI inflation the Government should consider freezing public sector pay (on the CIPD website), and some of the long-term deals were called into question (on the Times website) in March. The Government rejected the suggestion that the deals would be broken, but decisions on the pay of other public sector groups were clearly made against a very different economic background.

Of the pay review bodies that were due to recommend increases for April 2009, the Prison Service Pay Review Body had delayed its consideration of a pay award while negotiations on workforce modernisation continued. The reports of the remaining pay review bodies, the Review Body on Doctors' and Dentists' Remuneration (DDRB), the Review Body on Senior Salaries (SSRB) and the Armed Forces Pay Review Body were published on 31 March 2009.

The Government's response to the SSRB report set the tone for the 2009 pay round. In a statement on the SSRB report, the Prime Minister said: "It is important in the present economic climate that senior staff in the public sector show leadership in the exercise of pay restraint." Although the SSRB's recommendations on pay for the senior military were accepted, the awards for the other groups were restricted to 1.5% on basic pay.

The civil service accounts for around one in 10 of the overall public sector workforce and paybill. The "Civil service pay guidance for 2009-10" published by the Treasury at the end of March 2009 reiterated the need for pay restraint, saying: "Departments are … required to consider value for money and affordability as an even greater priority when planning their business case for pay awards in this remit round." The guidance introduced an "average basic award across the civil service… in the region of 1.5%".

The environment of negative RPI inflation and the broader economic situation appeared to soften the impact of low pay offers in the public sector, but there were signs of worse to come as the issue of public sector pay was never far from the headlines and the extent of the public spending cuts that would be needed became clear.

In July, Steve Bundred of the Audit Commission (on the Guardian website) suggested: "At a time when inflation is likely to be between 2% and 3%, a pain-free way of cutting public spending would be to freeze public sector pay, or at least impose severe pay restraint. This is especially true if real wages in the private sector are still falling. Health and education will not be immune from pay restraint, partly for reasons of fairness to others, partly because the NHS is the world's third-largest employer, and also because ministers will correctly assume that as public sector workers have done well over the past decade, they will tolerate some modest real reduction in earnings."

The Prime Minister described the need for pay settlements in the public sector to be "realistic" when he addressed the TUC in September (on the Labour Matters website), and in October the Government announced that many senior public sector staff would have their pay frozen in 2010 (on the Guardian website), with others having their pay increases kept to below 1%.

2010 and beyond

A key factor in the run-up to the 2010 general election is the battle about how much, and how soon, to cut public spending. Regardless of who is in government after the election, the public sector can expect severe restraint on pay as well as job losses.

Chancellor Alistair Darling outlined in the Pre-Budget Report in December 2009 the "tough choices on public sector pay" that a Labour Government would make. In addition to the restrictions on pay already announced for 2010, the Chancellor said that basic pay awards across the sector would be capped at 1% in 2011/12 and 2012/13, although the "special circumstances" of the armed forces would be recognised. In an interview with the Sunday Times in January 2010, Darling warned that it was time for a "change of culture" in public sector pay. He signalled that there could be pay cuts for some senior posts and an end to routine performance payments (on external website). The Government has ordered a wider review of senior remuneration in the public sector (on the Office for Manpower Economics website), due to report before the 2010 Budget.

The Conservative Party has proposed a pay freeze for all public sector workers in 2011 (external website), except for those earning less than £18,000 a year. However, the Party has pledged that it would introduce a change in its first Budget to double the operational allowance for members of the armed forces serving in Afghanistan.

Vince Cable announced Liberal Democrat proposals for "restraint and fairness in public sector pay" (on the Liberal Democrats website) in December 2009, which would cap the pay rises for individuals at £400 for two years. The Party has proposed to increase the pay of the lower ranks in the armed forces so that "no service personnel would receive less basic annual pay than a new-entrant police constable or development-level firefighter."

The Government published the "Civil service pay guidance 2010-11" in December 2009, which repeats the emphasis on value for money and affordability when departments consider the business case for the next pay round. The guidance restates the position that basic awards should fall in the range of nil to 1%.

TUC general secretary Brendan Barber said: "With an election looming, public servants cannot afford to have their pay treated like a political football. The TUC believes the Government was wrong to try and set an arbitrary cap on public sector pay awards.

"As we move forward it's essential that Government respects the recommendations and outcomes of independent pay review bodies and existing pay bargaining machinery. It would be completely unfair to make public sector workers pick up the tab for the mistakes made by super-rich bankers."

Confirmation of the tough approach to pay came in January 2010, when the local government employers announced that 1.4 million services employees in England, Wales and Northern Ireland would not be offered a pay rise for 2010/11, with chief executives, chief officers and craftworkers also having their pay frozen.

However, the following groups will still be covered by stages of long-term deals in 2010:

• 1,400,000 employees covered by the NHS Pay Review Body, who will receive a pay increase of 2.25% from 1 April 2010, with those on points 1 to 12 receiving a flat-rate increase of £420;
• 510,000 school teachers in England and Wales will receive a pay award of 2.3% from 1 September 2010;
• 165,000 police officers will receive a pay rise of 2.55% from 1 September 2010; and
• multi-year deals will still cover government departments including: the Ministry of Defence; the Ministry of Justice; HM Revenue and Customs; the Department for Children, Schools and Families; the Foreign and Commonwealth Office; and the Department of Health.

2009 pay round

IRS collected details of pay settlements for 107 bargaining groups in the public sector with effective dates in the year to the end of December 2009, together covering more than 5,250,000 employees. Among these, 80 provide a basic pay increase, in some cases with an additional element based on performance. The median basic award among these groups stands at 2%. The remaining 27 awards are either based on individual performance, or are so complex that they cannot be summarised using a single figure.

Although the median award has fallen over the course of 2009 (from a median of 2.7% in the year to December 2008), public sector pay awards have held up better than those across the private sector. The latest IRS analysis of pay settlements reveals that in the year to December 2009, the median increase in the private sector stood at 1%, down from a median of 3.5% in the year to December 2008. There have also been just a handful of pay freezes for groups in the public sector, with most of these being in councils that have opted out of the national bargaining agreement. However, it is clear that there will be significant pressure on public sector pay in 2010 - and beyond.

Local government

In local government, several bargaining groups had gone into 2009 with the 2008 pay increase still not settled. These included 1.4 million local government services employees in England, Wales and Northern Ireland whose pay is determined by the National Joint Council (NJC) for Local Government Services. Their pay award, which was due in April 2008, had been referred to arbitration. In March 2009, Acas-appointed arbitrators increased the pay award by 0.3 percentage points, to 2.75% on all spinal points, with those on the lowest three points receiving an additional £100.

Following the arbitrators' award to the main local government group under the NJC, local authority craftworkers made a supplementary claim for the additional 0.3 percentage points to be applied to their pay for 2008. The claim was rejected by the employers but they did, however, indicate that the claim could be considered as part of the 2009 negotiations, if the employees' side of the Joint Negotiating Committee for Local Authority Craft and Associated Employees would enter into discussions on transferring craftworkers onto the NJC group's "Green Book" pay, terms and conditions.

The Joint Negotiating Committee for Youth and Community Workers also referred its 2008 pay award to arbitration; but the employers made a revised offer, increasing the award from 2.45% to 2.75%, backdated to September 2008. Staff covered by the Soulbury Committee received the same additional increase as part of a package of revisions to their original award. Chief officers and chief executives did not have their 2008 award increased.

When negotiations on the NJC pay award for 2009 got under way, the initial offer of an increase of 0.5% on all spinal points was immediately rejected by the unions - Unison, Unite and the GMB. An improved offer was finally made in July, increasing spinal points by 1% except for the lowest points 4 to 10, which increased by 1.25%. The offer also increased the minimum annual leave entitlement for employees with less than five years' service. The unions agreed to consult their members, and the offer was accepted in September and backdated to 1 April 2009.

The pay offer to craftworkers for 2009 was similar to that for the main group, with an increase of 1.25% on the building labourer rate and 1% on other rates and allowances, again from 1 April 2009. The offer also confirmed that the extra 0.3 percentage points would be considered if the unions would enter a process of agreeing to transfer the craft bargaining group to the main NJC. Unite, Ucatt and the GMB accepted the 1.25% increase, but said: "The joint unions also remain fully committed to defending any further attacks by the employers on the joint negotiating committee agreement."

The employers wrote to the negotiating groups covering chief officers and chief executives of local authorities in September 2009 and advised them that it "would not be appropriate" to offer these employees any pay increase for 2009/10. Staff-side requests for the offer to be referred to arbitration have been rejected.

Local authority chief officials, service employees and craft operatives in Scotland received pay increases in 2009 as part of multi-year agreements (see table 1).

Opted-out councils

IRS has collected details of pay awards at 31 local authorities that have opted out of the main national pay agreement. The median basic increase among these is 2%, double the award received by those covered by the national agreement (see table 2). Comparing a matched sample of 29 awards reveals that the 2009 award was lower than the 2008 award for 24 groups, with just three higher and two the same.

Fire service

The pay award for principal fire officers from 1 January 2009 was an increase of 1%, while firefighters and control staff received a slightly higher award of 1.25% from 1 July. Principal fire officers have stated that they will not seek a national wage settlement from 1 January 2010 in light of the current financial pressures in the public sector, but authorities can still review pay locally.

Police

The Police Negotiating Board, which negotiates pay for police officers in the UK, agreed a three-year pay deal in 2008, which includes a reopener clause. This was not activated, and the second year of the agreement went ahead, increasing pay scales for police officers by 2.6% from 1 September 2009.

The main group of police support staff and PCSOs in England and Wales, represented by the Police Staff Council, agreed a three-year deal in December 2008, backdated to September 2008. The first year of the deal increased pay points by 2.6% from 1 September 2008, with the same increase applied from 1 September 2009. Police staff and PCSOs in the Metropolitan Police agreed a three-year pay award, effective from 1 August 2008, and received an increase of 2.575% on basic pay from 1 August 2009 as the second stage of the deal. Police staff in Scotland have entered into a three-year deal effective from September 2008, which increased salary scales by 3% from 1 September 2008 and by 2.5% from 1 September 2009.

Central government departments

The 2009-10 remit guidance for government departments instructed departments to set an "average basic award in the region of 1.5%", with increases for staff in post (ISP) ranging from 1% to 4%, with no average figure specified.

The guidance also gave details about the new flexibility for departments to use efficiency savings to improve pay. It stated that access to savings for pay purposes would be on an "exceptional, case-by-case basis" and would depend on "significant workforce reform" being undertaken. There was a tight deadline given for proposals, which had to be submitted by the end of May 2009.

The PCS had viewed the new flexibility as a positive development when it was announced at the end of 2008, but found that the tight timescale and the restrictions imposed by the Treasury effectively meant there was not sufficient time for proposals to be generated. In effect, according to national pay coordinator Geoff Lewtas, in spite of a lot of effort going into this, in practice it has been a frustrating exercise.

There were, as usual, delays in the process of getting remits cleared. This held up the start of negotiations for those departments involved and meant that several offers were not made until towards the end of 2009. There were additional complications where machinery of government changes took effect that combined departments: the Department for Business, Innovation and Skills had separate remits for former BERR and DIUS staff. Table 3 gives details of some of the main central government pay awards for 2009.

The civil service unions have also been involved in negotiations on changes to the Civil Service Compensation Scheme. At the same time as making a statement on the publication of the 2009 SSRB report (external website) on 31 March 2009, Gordon Brown announced that the Government intended to reform civil service severance and early retirement terms, to save "up to £500 million over the next three years". Following consultation, on 4 December 2009 Tessa Jowell set out details of the new scheme - set to come into effect on 1 April 2010 rather than 1 January as originally proposed. The Council of Civil Service Unions wrote to Jowell requesting an urgent meeting, and discussions continued. On 2 February 2010, it was announced that the Cabinet Office and five trade unions had reached agreement on the new terms (on the Personnel Today website). However, the PCS announced that it would hold a national strike ballot and lodge papers for a judicial review of the changes (on the Personnel Today website). The new arrangements will come into effect on 1 April. Dai Hudd, deputy general secretary of Prospect, said that the terms agreed are a significant improvement on those rejected by all the unions in December, offering additional protection for employees aged over 50, low-paid staff and tapered protection for those with reserved rights to pre-1987 redundancy terms.

Prison service

In 2008, talks on workforce modernisation in the prison service began. The proposals put forward were linked to a three-year pay deal, and additional funding of £50 million had been made available. The negotiations were still ongoing at the end of that year, and the Prison Service Pay Review Body agreed to delay its review of the pay award for 2009 while the talks were taking place. However, the proposals were rejected by members of both the Prison Officers Association and the Prison Governors Association in February 2009, and subsequent conciliation talks failed. In March 2009 the review body was asked to take evidence and make a recommendation for a one-year pay award effective from 1 April. The review body made its recommendations in July, and these were accepted in full by the Government.

The collapse of the talks on workforce modernisation also delayed the pay negotiations for those bargaining groups outside the review body's remit (industrial staff; administrative, secretarial and support staff; and professional, technical and specialist grades). The negotiations for these groups were completed in November 2009, with the awards backdated to the 1 April 2009 review date.

Schoolteachers

The School Teachers Review Body recommended a three-year pay award effective from 1 September 2008, with a remit to review the appropriateness of the indicative awards for subsequent years. The review body confirmed the increases in the second part of its 2009 report, so teachers received a pay award of 2.3% from 1 September 2009 (with higher increases for teachers in inner London) and will receive a further rise of 2.3% in September 2010.

School support staff

The School Support Staff Negotiating Body (SSSNB) held its inaugural meeting on 7 July 2009. The SSSNB was acting in shadow form until the Apprenticeships, Skills, Children and Learning Bill 2009 received Royal Assent on 12 November 2009, and it became established in statutory form on 12 January 2010. The SSSNB will determine the pay and conditions of service for local government support staff (non-teaching staff) employed by all maintained schools in England.

The Secretary of State has asked the SSSNB to produce a core contract of employment, national job profiles, a way of converting the profiles into a salary structure and a strategy to implement the national pay and conditions framework, by May 2010.

Higher education

A long-term deal in higher education came to an end in 2009, and the new Joint Negotiating Committee for Higher Education Staff (JNCHES) got off to a tricky start with the University and College Union (UCU) not participating in the new arrangements. UCU formally signed the agreement in March 2009 but negotiations were fraught with difficulty, with the new dispute resolution procedure being called into service. The Universities and Colleges Employers Association (UCEA) tabled an offer of 0.3% in April 2009, with an improved offer of 0.4% in May. A final offer of 0.5% (effective from 1 August for 12 months) was put forward in July, which "dismayed" the unions, who also expressed outrage at the employers' refusal to agree to enter into meaningful negotiations on a national strategy to protect jobs in the sector. Unison accepted the offer "through gritted teeth", but the remaining unions rejected it and the parties held meetings at Acas in November. After exhausting the dispute resolution procedure, Unite and the GMB accepted the final offer, with the UCU and EIS noting that pay negotiations were concluded. In January 2010, the UCEA disseminated information on the final offer to higher education institutions. The UCEA and the unions will establish three working groups: pay framework and data research; equality issues; and sustainability issues. A reference document on job security will also be distributed to employers.

Further education

In further education, the six unions submitted a pay claim for 6%, or £2,000 a year, from 1 August 2009. They rejected the initial offer of 1% from the Association of Colleges, and an improved final pay offer was made, increasing all salaries and allowances by 1.5%. Five of the unions - Unison, Unite, the GMB, the Association of Teachers and Lecturers (ATL) and the Association for College Management - accepted the final offer, but UCU rejected it and held a ballot for strike action. The result was a vote against, and in January 2010 the UCU formally accepted the offer.

Sixth-form colleges

Teaching staff in sixth-form colleges, represented by the ATL, NASUWT and NUT unions, made a pay claim that would give them an increase at least matching the pay award for teachers in schools, for whom an "indicative" increase of 2.3% from September 2009 had been set as part of a three-year deal. The employers made an initial offer of a staged increase, with pay scales increased by 1% from September 2009, increasing to 2.3% from 1 April 2010. The unions expressed disappointment at the offer, and in September 2009 the employers made an improved offer, which increased pay scales by 1.5% from September 2009 rising to 2.3% in April 2010. This offer was reluctantly accepted by the staff side in December 2009. Support staff in sixth-form colleges, who had made a claim for a "substantial increase on all salary scales and allowances", received the same staged increase for 2009. Examples of pay settlements in education are presented in table 4.

NHS deal confirmed

Staff under the remit of the NHS Pay Review Body (NHSPRB) (those working in the NHS in the UK other than doctors, dentists and very senior managers in the NHS) entered into a three-year deal in 2008. This set out an increase of 2.4% from 1 April 2009, with some pay scale restructuring, and an increase of 2.25% from 1 April 2010, with those on the lowest points receiving a flat-rate increase of £420.

The review body continued to play a role during this period, with the agreement stating: "In the event that the NHSPRB receive and identify new evidence of a significant and material change in recruitment and retention and wider economic and labour market conditions, they may request a remit from the Secretary of State to review the increases set out in this agreement for 2009/10 and/or 2010/11."

In December 2009, the review body announced that these criteria had not been met, so it could not seek a remit to review the increase due in April 2010. Andy Burnham, Secretary of State for Health, welcomed this decision, saying: "This means we can fulfil our commitment to implement the deal in full."

This article was written by Rachel Sharp, researcher/writer, pay and benefits.

Additional resources on XpertHR

• Public sector pay review bodies 2009: Government imposes pay restraint on senior staff This feature looks at the pay awards received by police officers, the armed forces, the judiciary, senior civil servants and "very senior managers" in the NHS, along with parliamentary pay rises.
• Public sector pay review bodies 2009: the NHS This feature looks at the second year of the three-year deal for workers covered by the NHS Pay Review Body, and the 2009 recommendations of the Review Body on Doctors' and Dentists' Remuneration.
• Annual review of pay trends 2008/09: pay freezes dominate Our review of the 2008/09 bargaining year exposes the dramatic effect of the economic crisis on pay.
• Public sector pay 2008 The combination of the Government's continuing restrictions on public sector pay and spiralling inflation made 2008 a difficult pay round. Here, we summarise the main decisions for each service.