Britain’s Two-Tier Economy: Public Sector Pay Soars as Private Firms Buckle Under Labour
CP
New figures from the Office for National Statistics have laid bare the widening gulf between Britain’s public and private sectors, with taxpayer-funded workers enjoying pay rises more than double those available to employees in private business, even as unemployment remains stubbornly high and hiring grinds to a halt.
Private Wages Crushed, Public Sector Rewarded
Private sector pay growth, excluding bonuses, slowed to just 2.8 per cent in the three months to June, the weakest performance in six years, dating back to the depths of the pandemic in August 2020. Public sector workers, by contrast, saw pay climb by 6.1 per cent over the same period, a gap the ONS attributed largely to the timing of NHS pay awards, but which critics say reflects a Labour government emboldened by union backing since taking office two years ago.
Unemployment Stuck, Jobs Market Flatlining
The unemployment rate held at 4.9 per cent, defying economists’ forecasts of a fall to 4.8 per cent, while the number of payrolled employees dropped by 13,000 between May and June. Vacancies fell to 707,000 in the three months to July, their lowest level since 2021, and job postings for entry-level roles have collapsed at a faster rate than the wider market, leaving school leavers and graduates struggling to gain a foothold in work.
Youth unemployment, among 16 to 25-year-olds, sits at 16.2 per cent, still well above the pandemic-era peak, and business groups have squarely blamed Labour’s policy choices.
Conservatives Round on Government
Andrew Griffith, the shadow business secretary, said the figures showed “Labour isn’t working,” pointing to almost 100,000 payrolled jobs lost over the year and warning that 30 per cent of 16 and 17-year-olds are now unemployed. He called on the government to abandon what he termed its “attacks on business,” halt the Employment Rights Act, and adopt Conservative proposals to get young people into work.
Business groups echoed the criticism. The British Chambers of Commerce warned that a “costs crisis,” compounded by looming changes to zero-hours contracts that could cost firms almost £3 billion, is forcing companies to reassess recruitment. The Institute of Directors said the government must urgently address the mounting costs of employment stemming from the Employment Rights Act, higher employer National Insurance contributions, and repeated above-inflation rises in the minimum wage, if it is to deliver on its promises of growth.
Economists at PwC and the Work Foundation likewise pointed to an “uneven” and stagnant jobs market, with retail and hospitality shedding staff even as public sector employment rises, and vacancies at their lowest level outside the pandemic since 2014.
Rates Likely on Hold
The weak wage data is expected to reinforce the Bank of England’s caution on interest rates, with economists at KPMG and the ICAEW suggesting a September rate rise is now less likely, given contained private sector pay pressures. Inflation is nonetheless forecast to climb to 3.2 per cent by year-end, driven in part by rising oil, gas, and fertiliser costs linked to the conflict in the Middle East.
The figures land as a fresh test for Andy Burnham in his first month as Prime Minister, with the Conservatives arguing that Labour’s tax rises and workplace reforms are actively deterring firms from hiring, even as public sector pay continues to climb unchecked.
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(UKR)