A cost of living gap between the rise in Scottish wages and the soaring rate of inflation has doubled in just six months, the Herald on Sunday can reveal.
The development has led to new concerns about the spiralling costs of taxpayer-funded public sector pay rises to plug the gap with inflation running at over 11%.
It has emerged ministers have managed to find £130m-a-year more in taxpayers money to settle the NHS Scotland pay dispute after a “final offer” in June.
The extra cash is over and above the £350m needed to fund the original 5% pay hike summer pay hike offer.
Union sources say that a further £33m was found since a second ‘flat rate’ offer was made and less than two weeks after health secretary Humza Yousaf said that there was no more money to pay NHS staff.
Union sources have said that the improved pay offer averaging 7.5% that has been made to NHS Scotland health workers threatening industrial action will cost the taxpayer some £513m.
In September, it emerged taxpayers were forced to foot a further £200m every year to fund huge local authority staff pay rises and within days the Scottish Government said savings of £500m would have to be made following the pay awards.
The lowest income households are expected to be hit hardest as UK inflation hit a four-decade high at 11.1% two weeks ago.
Pay As You Earn data for September shows that average gross monthly pay in Scotland is at £2,641 per month – a rise of 5.09% in a year – leaving a cost of living gap of 6.01%.
In April, when inflation was at 7% – average monthly wages in Scotland were at £2593 – an annual increase of 3.9%, leaving a far narrower 3.1% gap.
But in September, last year, the gap was at just 0.4%. The typical Scot took home £2497 a month, seeing a 2.8% annual pay rise when inflation was at 3.2%.
The cost of living is currently rising at its fastest rate in almost 40 years, largely due to the war in Ukraine.
Energy and food prices have shot upwards, leaving many people struggling to pay their bills.
The cost of living gap will put further pressure to put up the salaries of the public sector in particular, where spending is controlled by the policies of politicians.
Scotland’s Auditor General has warned that a higher public sector wage bill – brought about by settled wage claims with the likes of train drivers and local authority workers could fuel Scottish Government overspending this year and “could have implications for future budgets”.
The Scottish Trades Union Congress, which has 40 affiliated unions, insisted urgent action must be taken to close the cost of living gap and for pay to keep up with inflation.
STUC general secretary Roz Foyer said: “The inexcusable abandonment from the UK Government on soaring inflation has sent the cost-of-living spiralling. Workers should not be held to ransom for the inaction of Tory politicians.
“The STUC has been abundantly clear: we must raise public sector pay, giving working people throughout the country more money in their pockets to help stimulate their local economy.
“We cannot return to austerity. The energy companies, corporations and pandemic profiteers have made a killing these past years on the backs of their workforce. It’s high time both governments – Scottish and UK – use their powers and tax the wealth, land and property of those with the most in our society. They won’t struggle to survive this winter; it’s those with the least who will.”
Teachers are the latest to escalate strike action saw schools shut on Thursday with further strikes being planned.
The £515m NHS Scotland deal is now being considered by the unions.
First Minister Nicola Sturgeon and Mr Yousaf were involved in “extensive” talks ahead of this latest proposal.
Unite and GMB have both suspended action by ambulance staff and confirmed that the offer will be put to members in a ballot.
Unite’s Scottish Ambulance Service members had planned a work-to-rule on Friday and 1,700 GMB members were scheduled to begin a 26-hour strike on Monday.
The Roya College of Nursing, which had delayed a formal announcement on strikes while negotiations took place this week, confirmed that its board members would consider the detail of an offer that “still does not meet our members’ expectations”.
It had asked for at least 5% above inflation, which is currently 11.1%.
Public services union Unison, have recommended that its 50,000 members including nurses, midwives, health visitors, healthcare assistants, paramedics, occupation therapists, cleaners and porters accept the offer.
One Unison source said: “We think we squeezed the most we can get out the system. If we want anymore, god knows where you can get from.”
NHS pay increases would range from 11.24% for the bottom of band 2 to 5.56% for the top of salary band 7.
The Scottish government said the new deal was a “record high pay offer” for front line employees, including nurses, paramedics, allied health professionals and healthcare support staff.
On November 13 Mr Yousaf said “we don’t have more money for pay deals” and confirmed both he and his Welsh counterpart had written to UK health secretary Steve Barclay to ask for more funding to help avert strike action this winter.
In September Deputy First Minister John Swinney said the new pay agreements after money was found to end a local authority staff dispute had led to a bill of £700m, which meant “taking money from elsewhere”.
Union sources said the local authority group COSLA increased the pay pot from Scotland’s 250,000 local authority workers from around £400m to £600m at the 11th hour allowing the lowest paid staff to get a pay increase of around 10 to 11% following the intervention of the First Minister.
The increase in funding raised questions about how the pay rise was able to be funded days after Nicola Sturgeon and the Deputy First Minister John Swinney insisted there was “no more money”.
That dispute saw piles of rubbish build up in city centres as waste workers went on strike.
Deputy First Minister John Swinney is due to unveil tax and spending plans for the coming year on December 15.
And the Scottish Labour Party has insisted that the protection of public sector wages must be a priority in the forthcoming budget and has called on the Scottish Government to guarantee no frontline public sector worker will be left facing redundancy.
The UK is facing a collapse in living standards, higher bills, tax hikes and increased unemployment as the economy slumps into recession.
Chancellor Jeremy Hunt said he is having to make difficult decisions to ensure a “shallower downturn”, but the economy was still expected to shrink 1.4% in 2023.
A majority of households will be worse off as a result of Mr Hunt’s decisions, which will see the cap on energy bills increase and the tax burden rise to its highest sustained level since the Second World War.
The Chancellor blamed Russian president Vladimir Putin’s invasion of Ukraine for a “recession made in Russia”, with the spike in energy prices driving up inflation, but he was also being forced to manage the financial turmoil caused by his predecessor Kwasi Kwarteng’s mini-budget in September.
The Office for Budget Responsibility (OBR) forecast unemployment would rise by 505,000 from 3.5%, to peak at 4.9% in the third quarter of 2024.
Inflation is expected to be 9.1% over the course of this year and 7.4% next year, contributing to a dramatic fall in living standards.
The OBR’s assessment said: “Rising prices erode real wages and reduce living standards by 7% in total over the two financial years to 2023-24 (wiping out the previous eight years’ growth), despite over £100 billion of additional Government support.”
In an effort to get a grip on the public finances, Mr Hunt set out plans for almost £25bn in tax increases and more than £30bn in spending cuts by 2027-28.
A Scottish Government spokesman said: “The Scottish Government is doing everything possible within our limited powers and fixed budget to help address the cost of living crisis. We are unable to raise revenues in-year and have had to find savings from the emergency budget review published this month to support pay and related cost of living pressures.
“However, most of the key policy levers are held by the UK Government, which needs to take urgent action. Despite the UK autumn statement, there was no additional funding for Scottish Government in this financial year.
“We have allocated almost £3 billion in this financial year that will contribute towards mitigating the increased costs crisis, including the provision of services and financial support not available elsewhere in the UK, such as the Scottish Child Payment which is only available in Scotland.”