Budget 2010: pain looms for the civil service

Given pre-election commitments and media briefing in recent days, the measures announced in today's Budget were not necessarily unexpected, but that does not minimise the real hardship that they may cause, or make them any more palatable.

Pay freeze

The Chancellor has announced that there will be a pay freeze for two years across the public sector except for those earning £21,000 or less (almost half of the civil service), who will receive at least £250 a year. This will cause real pain given that the Government's Consumer Prices Index (CPI) forecast for the end of the year is 2.7%, and the Retail Prices Index (RPI) will probably be higher. The previous Government had already announced a pay freeze for the Senior Civil Service for this year.

In the civil service pay will also be frozen in 2010-11 for those who are yet to agree a legally binding pay deal, again except for those earning less than £21,000; these civil servants will then exit the freeze ahead of other groups. This goes further than the previous announcement in May by the Coalition Government that those departments not in legally binding agreements would have to submit their pay remits to the Chief Secretary to the Treasury for review. It is understood that departments affected include DWP, Home Office, DEFRA, DECC and BIS.

Pensions

A change of potential significance to the uprating of public sector pensions was also announced. The Chancellor highlighted that from 2011 - except for the state pension and pension credit - benefits will rise in line with the CPI, rather than RPI, which has generally been higher. This change will also apply to public service pensions, and will be effected "through the statutory link to the indexation of the Second State Pension".

The previous Government had introduced measures to restrict pensions tax relief for high earners (above £130,000pa) with effect from April 2011. The Budget announced that the Coalition Government is considering an alternative approach and will engage with interested parties to determine the details. We will update members as more information emerges.

Departmental spending cuts

The other main impact of the Budget for members, over and above their personal circumstances, will be the further cuts in Departmental Expenditure Limits. The Chancellor explained that this was likely to mean most departments facing an average real cut of around 25% in expenditure over four years. However, it is difficult to assess the impact on jobs and functions until the Spending Review announcement, now scheduled for 20 October. The FDA will be seeking urgent consultation with departments over the coming weeks as work on the Spending Review continues.

The FDA is meeting shortly with the Cabinet Office to consider all aspects of the Budget implications for the civil service, and liaising with the TUC and other public sector unions.

There is potentially further pain in the autumn because the Pensions Commission being chaired by John Hutton has been asked to provide an interim report in September 2010 considering the case for short-term savings on pensions, which might then feature in the Spending Review. The FDA does not want to speculate at this stage as to what those may be, and we will be working with other public sector unions in giving evidence to John Hutton, but the Government is clearly looking to reduce the cost to the public purse of current pension provision.

Letter to The Times

The FDA General Secretary, Jonathan Baume, today wrote to The Times in response to a leader article describing public sector pension provision as a "chronic problem". In the Letter from FDA General Secretary Jonathan Baume to The Times Baume stated:

"It is wrong to argue that current public sector pension provision is a 'chronic problem' and unaffordable in the long term.... the real issue is the retreat from decent pension provision for private sector workers, to which the media should devote more energy and attention."

These are difficult and unsettling times for public servants. A pay freeze and dramatic cuts in public expenditure - which pose a substantial threat to job security - as well as the possibility of difficult proposals for changes to pension provision, reinforces the importance of FDA membership. The FDA will continue to defend members' interests and make the case on their behalf whenever and wherever we can, whether in the media, through engagement with employers, or through dialogue - which may prove difficult at times - with Ministers and other politicians. Our voice is strengthened by every member recruited, so please help sign up those colleagues who are not yet FDA members. It is now possible to join online, so please forward this link - Join us - to colleagues who aren't yet members.

We will keep you informed of developments over the coming weeks.