Page last updated at 15:49 GMT, Sunday, 5 July 2009 16:49 UK

Spending chief urges pay freeze

Cash
Public sector pay has proved contentious

Public sector pay should be frozen or at least subject to "severe" restraint to help rebalance the public finances, says the head of a spending watchdog.

Audit Commission chief Steve Bundred told the Observer public sector workers had "done well" in the past 10 years and would "tolerate" modest reductions.

Chancellor Alistair Darling said public sector pay had to be "fair" to private sector employees as well.

Last year a policy to limit public pay rises to 2% prompted walkouts.

'Shroud-wavers'

Mr Bundred wrote: "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."

He said it could provide £5bn of the £50bn that would have to be found through tax rises or spending cuts.

He said health and education spending should not be shielded as efficiency savings could be made in both.

We have got to be fair with regard to people who work in the private sector, many of whom have seen their pay conditions somewhere near freeze
Alistair Darling
Chancellor

"Don't believe the shroud-wavers who tell you grannies will die and children will starve if spending is cut. They won't. Cuts are inevitable and perfectly manageable," Mr Bundred said.

Asked about his comments, Mr Darling told Sky News: "Public sector pay obviously has got to reflect prevailing conditions, and in particular inflation has come way down.

"Of course we have got to be fair with regard to people who work in the private sector, many of whom have seen their pay conditions somewhere near freeze."

He said pay policy would be decided "over the next few weeks".

"It has got to be fair to people who work for the public sector just as we have to be fair to the private sector."

Bonuses

Public sector pay has proved a contentious issue for the government. Gordon Brown faced union anger in 2007 when he said public sector pay rises had to be held down to prevent inflation.

A 2% cap on public sector pay rises in 2008, at a time of rising living costs, was criticised as "morally bankrupt" by the Public and Commercial Services union and prompted walkouts.

Responding to Mr Bundred's comments, Unison general secretary Dave Prentis, said the government should be cracking down on rich tax evaders and City bonuses.

Looking for constraint, you have got to decide whether that is really the best and fairest way of going about it
Ken Clarke
Shadow Business Secretary

He said: "Freezing public sector pay during a recession is not the way to steer people through it.

"Let's be clear, the recession was caused by bankers and speculators and the lack of regulation.

"Low paid public sector workers, who will be helping communities through the recession, shouldn't be expected to pay."

Shadow business secretary Ken Clarke said public sector pay had to reflect "the current low level of inflation".

He told Sky News: "When that is put to you by somebody like the head of the Audit Commission, you look at it as an option but you have got to put it alongside other options.

"Looking for constraint, you have got to decide whether that is really the best and fairest way of going about it."

Liberal Democrat Treasury spokesman Vince Cable said an "absolute across-the-board freeze" in public sector pay did not make a "great deal of sense" because of different contractual obligations.

But he told Sky News there should be "an absolute and complete stop immediately to bonuses".



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