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Chancellor signals further public sector pay restraint

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The chancellor today used his Autumn Statement to warn of public sector pay restraint beyond 2015.

George Osborne’s full statement, published shortly after he addressed the Commons, said the Treasury would explore how “to get the best value for money from the pay bill” and “continuing reform of public sector pay policy can best contribute to consolidation [of the economy] beyond 2015-16”.

The document pointed to the fact the public sector pay bill still accounts for about half of department budgets.

It added: “This government has introduced public sector pay restraint up until 2015-16, which has played an important role in consolidation.

“However, the next government will need to continue to reform and take tough decisions on public sector pay and workforce beyond 2015-16.”

The Treasury also revealed plans to pilot “pay bill control” for a “small number of government organisations”.

This would involve organisations setting their pay bills within a predetermined budget from 2014. This will replace the 1% pay rise.

No details of which organisations will be involved in the pilot have been released.

The coalition has already sought changes to the Agenda for Change pay framework for almost one million NHS staff in a deal which was agreed with unions in February.

But the deal did not go far enough for many employer bodies which are calling for further reforms to pay, terms and conditions.

In its latest submission to the NHS Pay Review Bodies, the Department of Health called for the 2014 1% pay rise for NHS staff to be effectively frozen for one year unless unions and NHS Employers demonstrated progress on reforms. A 1% pay rise went ahead in April after a two year pay freeze.

Dean Royles, chief executive of the NHS Employers organisation, said: “The health budget remains protected, which is good news, but it nevertheless continues to present an enormous efficiency challenge for the NHS.

“I’m keen to understand the potential implications for the government’s plan to pilot ‘pay bill control’ in a small number of government organisations, which will involve setting a new financial control to keep the organisation’s pay bill within a pre-determined budget agreed with the Treasury.

“This new control will replace the 1% cap on pay awards for the organisations involved in the pilot. What we really need now is to agree how we can move out of a period of pay restraint in a sensible way.”


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