Catch Up or Keep Up?

Has our 2006 pay settlement kept pace with inflation? 

PDF summary

Our 2006-08 pay settlement was the first three year pay deal in our history. It was also unusual in containing a staged increase, as follows:

August 2006 3%
February 2007 1%
August 2007 3%
May 2008 3%
October 2008 2.50% or RPI

Three year pay deals are new to us, but there is an increasing suggestion that they should become the norm. The government is pressurising public sector employers to hold pay awards at or below 2.1% for the next three years. The concern is that inflation is likely to erode such gains. Moreover the final instalment of the last settlement, in October 2008, is supposed to be linked to RPI. 

With union members currently considering how to vote in relation to the JNCHES 'review' of national bargaining, had we not better look back at our last pay deal and ask, was it really as good as it seemed? 

Do we have an outstanding claim for higher pay? Did we achieve a measure of "catch up", or were we still trying to "keep up" with inflation? 

The following graph compares RPI, CPI and compounded pay in percentage terms over the period for which government figures are available to December 2007. The RPI and CPI 100% baseline is taken as the midpoint between the previous settlement and the last (i.e. March 2006). The first three salary increases are clearly seen on the graph. The next increase is May 2008.

Pay vs Inflation graph

RPI or CPI? RPI is defined by National Statistics as 'a general purpose measure of inflation based on average expenditure patterns' (sometimes called the 'basket of goods' inflation measure). CPI is the (lower) government measure and excludes house price (and thus rent) inflation.

Conclusion: Pay kept up with CPI (exceeding it in places) but fell behind RPI. Unless you are living rent-free, you are struggling to keep up, never mind catch up.