Civil service pay freeze ‘will save £800m’

Thursday, 2 December 2010

Freezing Civil Service pay could cover £800m of the savings the Assembly must make in its new budget and health should also be exposed to cuts, experts have advised the Finance Committee.

First Minister Peter Robinson has already signalled agreement is close on a new budget after Westminster ordered £4bn in cuts over the next four years.

Economists John Simpson and Victor Hewitt yesterday gave their backing to the view that a pay freeze could make major savings.

Mr Hewitt noted politicians had hinted the health budget — at £4.5bn by far the largest annual departmental budget — would be protected.

But he said ring-fencing such a large spend could limit options if financial pressure increases.

“Particularly, having a red line on a huge programme really does put you into a corner when anything goes wrong over the next four years, and health is a huge programme,” he added.

“So the amount of room to manoeuvre you would have — if you protected health to any great extent — would be seriously, seriously diminished.”

He said an independent review to identify potential savings would have been useful before the Assembly began deliberations. To some degree you are entering uncharted territory without a great deal of information on what really works and what doesn't really work, and how to prioritise in those circumstances,” he said.

Mr Simpson, meanwhile, asked: “Are you prepared to commend the freezing on public sector pay, on the same formula as is being adopted London-wide and is being adopted in Edinburgh.

“It seems to me that will prospectively save you maybe 40% of your total savings.

“And the basic question is: is it better to continue to employ 95 people at slightly lower pay or to only employ 90 at the continuing rate of pay?”

It is understood the percentages presented to the committee suggest a saving of around £800m could be made if a large-scale freeze is introduced.