NI civil service pay freeze 'could give major savings'

Freezing civil service pay in the North could cover £800m (€952m) of the massive savings the Stormont Assembly must make in its new budget, experts giving evidence to the Finance Committee have said.

First Minister Peter Robinson has already signalled that agreement is close in talks on brokering a budget following the £4bn (€4.76bn) in cuts ordered by Westminster for the next four years.

The economists John Simpson and Victor Hewitt gave evidence to the committee on the best way forward and backed the view that major savings could be made by a pay freeze.

The DUP and the Ulster Unionists are already among those who have called for a pay freeze for some civil servants.

It is understood the percentages presented to the committee suggest a saving of around £800m (€952m) could be made if a large-scale freeze is introduced.

Mr Simpson raised a number of cost saving issues with the committee, and added: “What are you saying for the next four years about the public sector pay bill?

“Are you prepared to commend the freezing on public sector pay, on the same formula as is being adopted London-wise 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.

“And it’s that sort of trade-off; it’s 4 or 5% of your labour force might be involved.”

The £4bn (€4.76bn) savings that Stormont needs to find include both current expenditure, which involves wages, and capital spending, which relates to the building of projects such as roads and schools.

But Mr Simpson said his estimates for current expenditure savings suggest a pay freeze could have a major impact.

It was later estimated that his forecast translated into a saving in the region of £800m (€952m) over four years.

The Scottish government’s recent budget announced plans for a pay freeze for public sector workers earning over £21,000 (€25,000).

As the political parties at Stormont negotiate a new financial package, the DUP has already proposed a pay freeze for civil servants earning above £21,000 (€25,000), while the Ulster Unionists set the bar higher at £26,000 (€30,900).

Mr Hewitt, meanwhile, noted that politicians negotiating the new Stormont budget have signalled there will be some protection for the health sector.

The Department of Health holds by the far the largest Assembly budget, with an annual £4.5bn (€5.3bn).

But Mr Hewitt said ringfencing such a large area of government from cuts 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 said.

“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 seeking out potential areas where savings could be made in government would have been a useful exercise for the Assembly before they embarked on deliberations.

“To some degree you are entering unchartered 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.

He pointed to what he described as “an interesting time ahead” as politicians wrestle with the problem.