Raise low-paid public-sector wages: calculation note

Central fiscal result

+GBP 3.2bn - Net public-finance impact in 2027-28

Low case: +GBP 0.8bn. High case: +GBP 8.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Give public-sector workers below median pay an extra GBP 1,500 annual uplift from 2027-28.
• Baseline is current law and published official data unless stated.
• Private business costs are excluded unless they affect tax or procurement.
• Target year is 2027-28, with later years shown separately.

Affected population

• Unit is lower-paid public employee jobs.
• Central count is 2.4m jobs below median pay.
• Count is inferred from ONS workforce and WGA paybill.
• Compression affects staff above the cutoff.

Gross impact

• Central affected count: 2.4m employee jobs.
• Direct uplift: 2.4m times GBP 1,500 equals GBP 3.60bn.
• Compression and procurement add GBP 0.90bn.
• Tax and NI offsets remove about GBP 1.30bn.

Fiscal build-up, central case

• Direct low-pay uplift: +GBP 3.60bn
• Compression and procurement: +GBP 0.90bn
• Tax and NI receipts: -GBP 1.30bn
• Administration: +GBP 0.05bn

Central net impact: +GBP 3.2bn in 2027-28.

Behaviour and pass-through

• Low case assumes fewer eligible jobs and limited compression.
• Central uses GBP 1,500 per affected job.
• High case includes broader eligibility and compression.
• No automatic productivity gain is scored.
• Unfunded costs reduce service capacity.

Phasing

• 2026-27: +GBP 0.1bn. Policy design only.
• 2027-28: +GBP 3.2bn. Full-year uplift.
• 2028-29: +GBP 3.4bn. Threshold effects persist.
• 2029-30: +GBP 3.7bn. Pay bands adjust.

Main source groups

• S1: S1 ONS: 6.19m public-sector employees.
• S2: S2 WGA: staff-cost base and wages.
• S3: S3 HMRC: tax and NI offsets.
• S4: S4 IFS: low-paid public pay context.
• S5: S5 DiNardo/Fortin/Lemieux: institutions compress wages.