Pay your way out of the recession

Do you think that workers in the public sector have been protected from the economic downturn?  The Institute of Directors (IoD) certainly thinks so. Most IoD members run small and medium sized businesses (SMEs) and its survey of 1,300 members revealed that nearly 50% of them have had their pay frozen or are on a ‘pay holiday’. In addition 40% of company bosses had cut their bonuses.

Look at official statistics on the public sector, says the IoD, which show that average earnings, including bonuses, increased by 4.0% in June 2009, compared with the previous year –  the public sector has so far been immune from the effects of the recession. It wants wage restraint across government.

Only last week came the news that 1,500 civil servants in the Isle of Man were due to be balloted about a pay freeze. ‘We are not calling this a pay freeze as it’s a pay cut of a minimum of one per cent in real terms,’ said a union negotiating officer.

How much does it cost the government to run public services? The wage bill accounts for roughly one pound in four spent by the Treasury, says an FT.com article. ‘Britain’s budget deficit is due to reach £175bn this year. Over the past five years, the public sector wage bill of £158bn has risen by an average of £7bn a year, so each year the pay bill is frozen puts a dent in the deficit of a significant 0.5 per cent of national income.’

Should government workers be prepared to pay for that dent in the national income? Drop us a line with your views.

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