Public sector pay policy 2024 to 2025

Economic Context

Workforce Size and Pay relative to the UK

Scotland’s public sector is larger and better paid when compared to the rest of the UK and has had a commitment to no compulsory redundancies since 2007. The larger size of the workforce is both in terms of the share of the economy and the share of total employment. The public sector accounts for 22.2% of employment in Scotland, compared to 17.8% across the UK.

Median average public sector pay is higher in Scotland than the UK, and the gap has been widening. After taxes, the average full-time public sector employee now earns around £1,500 more than the UK public sector average, up from around £430 prior to the pandemic. Before tax, the figure is around £2,400 higher in Scotland.

Public sector employees in Scotland also earn more than the private sector average. The gap with the private sector has also been growing over time, and is now around £4,000 after tax in Scotland, compared to less than £2,000 for the UK as a whole, although much of the differential can be accounted for by differences in skills, qualifications and experience. The gap widened during COVID-19 reflecting the impact of furlough on private sector income, although it has since narrowed again.

Public sector pay deals have provided relatively more support to the lower paid. The gap between public sector pay in Scotland and the UK is greatest in the lower half of the income distribution. In the upper half, there is less of a gap between Scottish and UK public sector pay.

In summary, the Scottish public sector pay bill has increased significantly in 2023-24, now standing at around £25 billion. If the UK allocates additional spending for pay deals this would feed through to the Scottish budget via the Barnett formula and would result in additional consequentials for Scotland. But with relatively more public sector workers in Scotland, as well as higher pay for public sector workers in Scotland on average, matching a UK pay deal in Scotland costs more that the consequentials received. Moreover, providing more generous pay deals in Scotland increases the funding gap further.

Additional expenditure on pay deals in Scotland relative to UK must therefore be covered by cutting spending in other areas, services re-design, reduced headcount or increased taxes or charges.