This country is indebted to the heroism of the police and emergency services, and recent events have highlighted just what an excellent job they do. However, this amendment was a political game from Labour and it hasn't been properly worked out. The Institute for Fiscal Studies (IFS) has said that income tax or VAT would have to go up to pay for ending the public sector pay cap. Our pay policy has to be fair to our public servants, and fair to those who pay for them.
The IFS said that lifting the public sector pay cap would cost double the amount that Labour think it would. Labour estimated that this would cost £4 billion, however the IFS said that by 2021-22 Labour would need to provide £9.2 billion per year to pay for the higher costs of employing public sector workers.
The IFS has said that raising the top rate of income tax, corporation tax, or inheritance wouldn't raise the amount of money needed; all rates of income tax or VAT would have to go up too. Paul Johnson, Director of the IFS, said: 'you have to do something that hits everybody which puts a penny or two on all of the rates of income tax or VAT or something like that, you can't make a big difference just from the rich'.
Dealing with the debts we inherited from the last Labour government and restoring our public finances has meant hard work and sacrifice, including for public sector workers. That hard work, and those tough decisions, have helped our country get the deficit down by three quarters. And the public sector pay restraint has helped us protect those public sector jobs over the past number of years. The Independent Office for Budget Responsibility estimates that 200,000 public sector jobs have been protected thanks to our average 1 per cent pay increase policy so we can continue to deliver vital public services. Without the cap, many workers would have had to be laid off.
Government policy has not changed. There is a process by which public sector pay is reviewed across workforces. At the moment, we are going through the work of the independent public sector pay review bodies and will respond later in the year. We will set out our responses in detail and on a case-by-case basis, as is normal practice. While we understand the sacrifice that has been made, we must also ensure we continue to protect jobs and deal with our debts.