CBI calls for public sector pay freeze, "fundamental reshaping" of service provision

May 19, 2010

The CBI has called for an immediate pay freeze in the public sector pay bill for two years and a “fundamental reshaping” of public service provision achieved in part by greater use of the private and third sectors.

The business group said the measures needed to go hand in hand with measures to allow businesses to foster economic growth and job creation.

In its report Time for action: Reforming public services and balancing the budget, the CBI said a public sector pay freeze lasting for two years from 2010-11 would save £18bn.

The group pointed out that public sector pay had continued to increase during the recession, with average pay rising by 2.8% in the public sector in 2009. By contrast, pay in the private sector fell by 0.9%.

However, the CBI ruled out an across-the-board freeze in pay for public sector workers. “Provided the overall pay bill did not increase, there would be scope to exclude frontline staff and the lowest paid from pay and recruitment freezes,” it argued.

Among the other measures identified by the CBI for short-term action were: 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”.

The public sector also needs to make use of new and proven technologies, improve workforce management to reduce staff sickness rates, and allow the private sector to provide non-core activities, it said.

The group claimed that “far bigger savings” than the £18bn delivered through a pay freeze could be achieved through increased involvement of the private and third sectors in delivering services.

John Cridland, deputy director-general of the CBI, said: “The new Government will need to show strong political will to contain public sector labour costs. It needs to slam on the emergency brake now by introducing an immediate two-year pay bill freeze across the public sector, and sweating its assets to ensure that every pound is well spent.

“While spending cuts and efficiency savings are important, there is a much bigger prize to be had through fundamental re-engineering of public service delivery. Allowing the best provider to deliver public services will increase innovation, while keeping a lid on costs. We believe that this is the best way of ensuring that frontline services can be maintained without resorting to crude cuts.”

The CBI report also said a number of measures were essential to deliver growth, including: