Analysis published today (Friday) by the TUC shows how the West Midlands’ economic recovery can be sped up by reversing cuts to key workers’ pay.

The analysis by the TUC and Landman Economics models the economic impacts of reversing cuts to the value of public sector pay that took place over the period 2010/11 to 2020/21.

It finds that the West Midland economy would get a boost of £330 million, speeding up recovery from the pandemic and making pay rises for other workers more likely too – the ‘pay circle’ effect.

The average economic boost for a parliamentary constituency in the West Midlands would be £5.6 million. The move would make 429,000 public sector workers in the West Midlands better off (and 4.3 million across England) – in some cases by thousands of pounds a year.

England’s economy would receive a £3.3 billion boost, based on restoring median public sector pay by 3.2% in line with CPI inflation. As this is a median figure, some workers would need a higher increase to restore the real value of their pay.

For example, between 2010/11 and 2020/21:

·         Maternity care assistants’ and nursery nurses’ pay was down by £2,000 (-7.6%)

·         Nurses’ and community nurses’ pay was down by up to £2,500 (-7.3%)

·         Firefighters’ pay was down by £2,600 (-7.4%)

·         Teachers’ (M6, outside London) pay was down by £2,000 (-5.1%)

The TUC also cautions that CPI can underestimate the degree to which the cost of living is rising. And in pay negotiations, RPI is often a better guide.

If the Chancellor restored median public sector pay by 10.1% in line with RPI inflation, it would boost the West Midland economy by £1 billion, and England’s economy by £10.5 billion. The Chancellor has put in place a pay freeze that is affecting the majority of public sector key workers, such as police, teachers and civil servants.

Those currently earning less than £24,000 will get a guaranteed pay rise for one year of £250, but this isn’t permanent and will not be consolidated into their pay for future years. Pay offers have been made of 1.5% for higher education staff, 1.75% for local government staff, and a 3% pay award for NHS staff.

But many key workers in the public sector are excluded from these awards, including outsourced NHS staff such as cleaners and porters. And with CPI inflation currently 3.2% and RPI inflation currently 4.8%, all these workers are likely to find they that the value of their pay has been cut this year.

The TUC says that, in addition to restoring the value cut from pay between 2010/11 and 2020/21, the Chancellor must make sure that in the current year – and the years covered by the forthcoming spending review (27 October) – pay for all key workers rises each year at least in line with inflation. The analysis is part of a policy briefing sent by the TUC to all MPs, which sets out the importance of protecting the pay circle – the chain of spending that connects workers’ wages around the whole economy.

The policy briefing calls on government to avoid the mistakes of the last decade when pay freezes and caps damaged the pay circle. Consumer spending and economic demand were reduced, affecting all workers. Living standards fell for workers across both the public and private sector. And the UK suffered the longest pay slump for 200 years.

The TUC argues that former Chancellor George Osborne failed to recognise that all workers are connected in the same pay circle. When nurses, care workers, teachers and other public sector key workers are forced to cut their spending, it impacts on the wages of other workers too.

The union body is calling on the government to protect the pay circle and prioritise pay rises for public sector key workers across the period of the forthcoming spending review.

The TUC argues that everyone in the pay circle will benefit when public sector workers spend their wages in private businesses and services. And the national finances will recover faster as wage growth boosts government revenue.

TUC Midlands Regional Secretary Lee Barron said: “We’re all part of the same pay circle.

 “When key workers in the West Midlands spend their pay, it goes into other people’s pay packets. Nurses, carers, shop staff, drivers, small businesses – right around the economy, we’re all connected.

“It is up to government to keep the pay circle moving. If the Chancellor gives key workers the pay rises they’ve earned, it will protect the spending businesses need to recover. And that will help other workers get pay rises too.

“But if the Chancellor attacks the pay circle in his spending review, everyone in the West Midlands will suffer. And we could have another slump in living standards across the whole economy.”