Unions in strike threat after pay freeze warning

PUBLIC-SECTOR workers raised the threat of industrial action last night after Chancellor Alistair Darling warned they could be forced to share the pain of the recession with wage cuts.

The Chancellor put himself on a collision course with public-sector staff after saying that wage deals thrashed out in the weeks ahead had to reflect the tough economic reality.

Unions reacted with fury to suggestions of a pay cut to mirror the many freezes across the private sector.

Brian Strutton, national officer of the GMB union, said the government should stay out of negotiations or face strikes.

"Many public-sector bodies are in the middle of long-term deals and others are covered by pay review bodies," he said. "Any interference is bound to be disruptive and could lead to unnecessary calls for industrial action.

"In local government, we are trying to put together a deal for this year, and ministers should stay out of it. They should give a higher priority to capping the earnings of the multi-millionaire elite in the City, where the greed shoots of recovery are already visible."

The cuts could have a disproportionate impact on Scotland, where 623,300 people are employed in the public sector – about a quarter of all workers.

But Mr Darling said inflation had come "way down" and many in the private sector had seen wages frozen or cut.

"Public-sector pay obviously has got to reflect prevailing conditions and, in particular, inflation has come way down," Mr Darling said. "And, of course, we have got to be fair with regard to people who work in the private sector, many of whom have seen their pay conditions somewhere near freeze."

The Chancellor had been responding to the suggestion by Audit Commission chief Steve Bundred that public-sector workers could "tolerate" some pain through wage cuts to save £5 billion.

The government faces a shortfall of £50bn and will have to decide between cuts and tax rises to plug it.

Mr Bundred said: "At a time when inflation is likely to be between 2 per cent and 3 per cent, a pain-free way of cutting public spending would be to freeze public-sector pay, or at least impose severe pay restraint. This is especially true if real wages in the private sector are still falling."

The government is due to give its submission on public-service wages by the autumn.

Union leaders, however, warned that the economy could be further damaged by wage cuts in the middle of a recession.

TUC general secretary Brendan Barber said: "This call to freeze the pay of all public-sector staff – however low-paid and however vital their job – is not just unfair, but would make the recession even worse. Britain's businesses need customers ready to spend."

The Unison general secretary, Dave Prentis, who has already warned that the union is withdrawing funding from individual MPs in marginal Labour seats, said:

"Low-paid public-sector workers, who will be helping communities through the recession, shouldn't be expected to pay. At the same time, City bonuses are making a come-back, with figures that most workers can't dream of earning in a lifetime. That is wrong.

"Let's have some fairness injected into the system and crack down on tax evaders, and make the rich pay their fair share."

A spokesman for the Public and Commercial Services Union warned that an across-the-board wage freeze would hurt many low-paid staff.

Alex Flynn said half the workers in the civil service earn less than £20,000 a year, while a quarter are paid less £16,500.

"Many of them have already been on the receiving end of wage freezes and the most some can hope for is a 1 per cent rise."

He added that many were staff working in JobCentres, trying to help others who were casualties of the recession.

The Scottish Government also signalled a more cautious approach on hammering public servants, but admitted there had to be restraint in pay awards.

A spokesman for finance secretary John Swinney conceded that the Scottish Government had already said all pay settlements had to be affordable.

He added: "We don't believe cutting spending is right in the midst of a recession. Because of the UK Labour government's spending plans, Scotland is facing the most significant spending cuts in a generation, with almost £500 million in planned cuts from next year's budget.

"Instead of cutting spending, the UK government should be reducing unnecessary spending on projects like replacing Trident and ID cards."

However, there was no indication that the Scottish Government would ram through generous pay awards.

The Conservatives, who are likely to win the next general election, have also said they will be as hard as necessary on public-sector pay.

Shadow business secretary Ken Clarke said the Tories would be "as tough as we have to be" on spending cuts, but sounded a cautious note about the possibility of needing to raise taxes.

"Public-spending cuts are inevitable if we are going to have responsible government after the election, and we will decide which they will be when we get in, see how strong the recovery is then, and decide on what the best, least painful options are for introducing some sensible constraint at long last.

"We hope to avoid tax rises (and] the increases in National Insurance on employees and employers which he (Mr Brown] has left ticking away, coming into effect in 2011. But it depends on our success in making proper cuts in public spending."

Liberal Democrat Treasury spokesman Vince Cable said an " across-the-board freeze" in public-sector pay did not make sense due to different contractual obligations, but he added that a stop should be put to bonuses.

"It's ridiculous that people at the top end of the civil service, in the current public finance environment, two-thirds of them are being paid bonuses over and above their salaries," he said.

Meanwhile, Mr Darling said that the recession had been worse than predicted. He also did not deny that he had been close to being replaced by Ed Balls as Chancellor.