CBI demands two-year public sector pay freeze

CHANCELLOR George Osborne was today being urged by the CBI  to freeze public sector pay for the next two years.

Mr Osborne is to address the CBI Annual Dinner tonight, but this morning the employers’ organisation said the pay freeze and other measures were urgently needed to save £18billion.

Despite the recession, average pay grew by 2.8% in the public sector in 2009, while it fell by 0.9% in the private sector.

The CBI said a radical re-engineering of public services was vital to help get the public finances under control. This needs to go hand-in-hand with measures to allow businesses to foster economic growth and job creation.

After a decade in which the economy has been driven forward by Government spending and unsustainable growth in the financial sector, the CBI argues that the growth engine for the future has to be powered by private sector investment and trade.

Spelling out its priorities for the new Government in a report ‘Time for action: Reforming public services and balancing the budget’, the business group highlighted the areas where immediate cost-savings could be made, while maintaining frontline services.

For example, freezing the total public sector pay bill from 2010-11 for two years through selected pay and recruitment freezes could save £18billion.

The CBI emphasised that far bigger savings could be achieved through a fundamental re-shaping of public service provision, including using the private and third-sector to deliver better outcomes more efficiently.

It claims that through re-engineering health and social care to treat patients in their homes and in the community, more than £8billion could be saved by 2015-16.

Richard Lambert, CBI Director-General, said: “We have a new Government with a determination to get a grip on the public finances and the political will to do it. We need to see a detailed plan for achieving this in the Budget.

“Experience suggests that the best way of bringing down a substantial deficit without damaging growth is through spending restraint rather than raising taxes.

“With a public-sector squeeze looming, the new Government must also do everything it can to create the right conditions for the private sector to sustain and create new jobs.

“That means providing certainty around taxation and energy policy, sustaining capital investment, and strengthening our skills base. Above all, we need to send a strong message to the world that the UK is open for business.”

Other areas for short-term action include cutting waste and duplication by sharing support services such as payroll and human resource functions; combining purchasing power to deliver savings in procurement; and opening up public services to greater competition to allow the best provider to do the job.

A copy of Time for action: Reforming public services and balancing the budget is available at: publicservices.cbi.org.uk

The CBI’s 12-point growth strategy for Government called New Government in Action: The Business Agenda can be downloaded at cbi.org.uk.