UK Government pay restraint strategy in the public sector : the experience under cash limits, 1979-83

This thesis focuses on a novel form of UK public sector pay restraint strategy: the indirect control of pay through the limitation of the budgets and expenditure of authorities by means of cash limits and other devices. The 1979-83 period is covered. Four issues are investigated on the basis of archival work, interviews and quantitative data. Since the cash limits pay restraint policy is a relatively new phenomenon, it has received little academic attention. Hence, this investigation makes a contribution to knowledge in respect of all four issues. First, the reasons for Government intervention in pay determination are analysed. The role of the Government's price inflation and public expenditure objectives is highlighted, as are the sources of wage inflation in the economic and political context where finance is determined; in the institutional environment; and in strategic influences. Second, the style of the policy design and policy support is analysed and distinguished from past forms of strategy. Attention is drawn to the greater flexibility of the cash limits policy, and its imposition rather than agreement. Third, the counter-inflationary performance of the strategy is investigated. A statistical and econometric assessment shows the policy had as great an effect as the most successful incomes policies. The explanation is found to lie in the economic and political markets which determined the policy constraints and other financial exigencies; a less inflationary institutional setting; and the acquiescence of negotiators. Fourth, the theoretical and practical implications are drawn out. A theoretical model of pay determination under cash limits is derived from the findings. On a practical note, the contrasting long run experience of incomes policies and cash limits is explained in terms of policy design and support. The likely counter-inflationary effects of variants of the cash limits policy approach and of alternative strategies are assessed