Raise low-paid public-sector wages: calculation note

Central fiscal result

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

Low case: +£0.8bn. High case: +£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 £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 £1,500 equals £3.60bn.
• Compression and procurement add £0.90bn.
• Tax and NI offsets remove about £1.30bn.

Fiscal build-up, central case

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

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

Behaviour and pass-through

• Low case assumes fewer eligible jobs and limited compression.
• Central uses £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: +£0.1bn. Policy design only.
• 2027-28: +£3.2bn. Full-year uplift.
• 2028-29: +£3.4bn. Threshold effects persist.
• 2029-30: +£3.7bn. Pay bands adjust.

Main source groups

• Office for National Statistics, "Public sector employment, UK: December 2025" (2026): ONS estimates UK public-sector employment at about 6.19 million in December 2025; sets the population exposed to public-pay policies.
• HM Treasury, "Whole of Government Accounts 2023-24" (2025): Whole of Government Accounts report £240.5bn staff costs and £263.7bn purchases in 2023-24; anchors paybill and procurement exposure.
• HM Treasury, "Economic Evidence to the Pay Review Bodies 2026-27 Pay Round" (2025): Treasury says pay awards must be funded from departmental budgets; means higher awards can crowd out services if unfunded.
• HMRC, "Rates and thresholds for employers 2026 to 2027" (2026): HMRC thresholds define income tax, employee NI, employer NI and statutory-pay recovery; used for tax and statutory-payment offsets.
• Institute for Fiscal Studies, "Recent trends in public sector pay" (2024): Used to support the baseline, affected-population sizing or behavioural assumptions in the illustrative scenario.
• DiNardo, Fortin and Lemieux, "Labor Market Institutions and the Distribution of Wages, 1973-1992" (Econometrica, 1996): Labour-market institutions can compress wage inequality through wage floors and bargaining power; useful for distributional channels, not for claiming free fiscal gains.
• Autor, Kerr and Kugler, "Does Employment Protection Reduce Productivity?" (Economic Journal, 2007): Employment-protection changes can reduce productivity where firms face higher firing and adjustment costs; supports caution on policies that raise dismissal, scheduling or adjustment costs.
• Green Party of England and Wales, "Workers' Charter 2026" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.