More about Finance

The well-respected institute for Fiscal Studies has published a document highlighting the effects of the pay freeze on the public sector since the recession hit in 2008. https://www.ifs.org.uk/uploads/gb/gb2016/gb2016ch6.pdf

In relation to education, the IFS comments that ‘The Department for Education (DfE) is planned to see a budget cut of 1.9% over the period 2015–16 to 2019–20, a smaller cut than planned for most other departments.’ However, over the whole period since 2010–11, the total DfE budget is expected to be cut by 8.5%. This is still low in comparison to the cuts inflicted on some other government departments where results such as the recent jail riots suggest cutting too far can have serious consequences.

One of the issues for education, with this level of public spending, is around pay. After all, education is still a people intensive activity, with relatively low levels of capital expenditure and technology only recently starting to play a significant role in the delivery of learning.

As the IFS makes clear, part of the real-terms cut to public service spending over the last parliament was achieved by holding down public sector pay. Indeed, as the authors of the IFS document remind readers, pay was frozen in cash terms for all but the lowest-paid public sector workers in 2011–12 and 2012–13, and pay awards were limited to 1% across most of the public sector in 2013–14, 2014–15 and 2015–16.

They note that since private sector wages were also growing slowly over this period, such pay restraint did not have a particularly adverse impact on relative wages. By 2014–15, average pay in the public sector was about the same level relative to the private sector as it had been in 2010–11, and still well above its pre-crisis (2007–08) level.

However, the IFS authors anticipate that going forwards, private sector wages are expected to grow more rapidly. The OBR’s latest forecast is that average earnings across the private sector will grow by around 17% (in cash terms) between 2015–16 and 2019–20. The government’s announced 1% limit on annual pay increases for a further four years from 2016–17 is therefore expected to reduce wages in the public sector to their lowest level relative to private sector wages since at least the 1990s. This could result in difficulties for public sector employers trying to recruit, retain and motivate high quality workers, and the IFS suggests, raises the possibility of industrial relations issues.

This confirms what the view this blog has taken ever since the four year deal on a one per cent per annum rise was announced, that where alternative graduate jobs exist in the private sector, teaching looks less enticing as an area of work than in the past. However, with the cuts in budgets, this may matter less if schools cannot afford to offer the same number of jobs.

As mentioned in earlier posts, what happens to the numbers leaving the profession will be the key to whether the recruitment crisis of recent years either eases or remains a problem in a range of subjects across much of the country? I expect English to be the subject to provide an early steer as the free pool of trainees is relatively smaller as a proportion of overall trainee numbers than in many subjects, so schools not involved in training new teachers may struggle to recruit in 2017.

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