Public sector pay: ‘A decisive first step on the road to reform’

The Chancellor’s acceptance of the pay review bodies’ recommendations, including a 22% pay rise for junior doctors, triggered one hell of a fight this week. The gloves are well and truly off, with the Shadow Chancellor accusing the government of lying, and much else.

Putting the bickering aside, Hunt did advance an interesting line of argument: that it was a mistake to “pay up” and not tie the pay award to working practice changes.

I sympathise with the Shadow Chancellor: the public sector is in urgent need of reform. Through Demos’ Future Public Services Taskforce, we are working to define a new era of public service reform for the government.

The route to reform

But I think Hunt is wrong. Paying public sector workers properly is pro-reform, not anti-reform. The government should make clear that boosting the public sector is demonstrating a commitment to public service reform. There are two reasons for this.

First, the issues facing the workforce are perhaps the biggest challenges facing public services today. The NHS has more than 120,000 vacancies. Similar issues plague our schools, prisons and children’s and adult social care. Paying public sector workers properly, at a time when we know public sector wages have decoupled from the private sector, should help close these gaps.

It’s also about morale and respect. The last few years have been tough for all of us, but some have had it tougher than others, not least frontline public service professionals. Just as we vow to never forget the heroic efforts of our armed forces, we should never forget the sacrifices our public service heroes made for us during the pandemic.

While respect is about much more than pay, it’s a necessary condition to getting the relationship between workers and the government back on the right track.

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Put simply, you cannot reform public services with record vacancies and exhausted, demoralised workers. Fixing the workforce is a necessary first step to reform; you can’t fix the roof when the house is on fire.

Second, arguments against paying public sector workers properly are often motivated by the idea that their interests are always opposed to the interests of service users. That the best approach to motivate professionals is through targets, diktats and a confrontational culture between ministers and workers.

These ideas, rooted in ‘public choice theory’, shaped government policy for decades, including under the last Labour government, when ministers frequently talked of concerns about ‘producer interest’. But such thinking is years past its sell-by date. Developments in psychology have shown the limitations of attempting to motivate workers through punishments and controls; better to motivate workers to engage for positive reasons.

That demands a more liberated approach to managing public services, in which frontline workers and managers are freed to experiment; because they know how to improve services, working in partnership with the public, not decision makers in Whitehall.

Labour in government

These ideas seem to be resonating with the new government. While the pay rise got the coverage, there was some interesting detail in the Treasury’s public spending audit, including a commitment to greater long-termism, prevention, devolution and integration of services. The appointment of Georgia Gould to the Cabinet Office, former leader of Camden Council which has pioneered new approaches, particularly in children’s social care, should also give reformers hope.

However, the government does need to use the opportunity created through taking this difficult decision as the start of a wider conversation about public service reform. Solving our recruitment crises, retaining staff and improving morale are necessary conditions to getting better outcomes in public services, but they are not sufficient.

The danger for this government is that public sector workers may see the improvement in pay as making up for past failures instead of seeing it as part of a fresh approach to the delivery of public services.

This is why our Future Public Services Taskforce has suggested the government should commission a White Paper on Public Service Reform as soon as possible so that pay and conditions can become part of a national conversation on how we fix our public services.

Settling public sector pay disputes is no substitute for a radical reform agenda which puts devolution, experimentation and trust at the heart of the design of public services. Its announcement on pay is a decisive first step – but just that, with more work required to develop its agenda.

We will be engaging with the government in the coming weeks and months to shape that.

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