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CHAPTER 5 General pay levels
132. In Chapter 4 we have made a number of recommendations for progressing the pay structure reform which began last year and have also addressed new issues which had been raised with us. We now turn to the question of pay levels for the coming year, which we were asked to look at in the context of a range of considerations. These included: funding generally for 2001-02; specific expenditure for delivering educational priorities which the Secretary of State said should not be diverted to fund a pay settlement; the Government's inflation target, which he said required responsibility in all pay settlements; and teacher recruitment, retention and motivation. Chapter 3 examines most of these considerations; we now comment on the latest economic indicators, starting salaries and overall pay levels before making our recommendations for general increases in pay from 1 April 2001.
133. The Government's inflation target continues to be an underlying 12 month increase of 2.5 per cent in the retail prices index, excluding mortgage interest payments. The DfEE said in its evidence that the prospects were for low inflation and for moderate and affordable pay settlements. The latest figures available to us related to December 2000 for the RPI and November 2000 for average earnings. The underlying RPI rate was 2.0 per cent, and the headline rate was 2.9 per cent. The underlying annual rate of increase in the average earnings index for the whole economy, reflecting overall changes in pay including such elements as bonuses and promotion rises, stood at 4.2 per cent.
134. There has been upward pressure on graduate starting salaries, although the market for new graduates is increasingly diverse. Figures published by the Association of Graduate Recruiters (AGR) largely relate to the better-qualified graduates on special recruitment programmes with major graduate employers; they account for perhaps 1 in 8 of all graduates entering employment. The AGR information shows that the starting salaries in 2000 among such employers ranged from £14,000 to well over £20,000, the latter being offered primarily by some London-based employers; the median starting salary was £18,000, a rise of 2.9 per cent on a year earlier. Other salary surveys, such as those conducted by Barclays Bank and by the Higher Education Careers Services Unit, indicate that graduates are entering a widening range of jobs with employers beyond the AGR membership, often on salaries that are £2,000 or more below the figures reported by the AGR. This diversity in starting salaries reflects different degree subjects, locations, types of employer, work, career prospects and other elements of the reward package on offer. 135. The current minimum starting salary for a teacher outside London with a good honours degree is £16,050. Those beginning their career in London are paid the appropriate London area allowance, currently £2,316 in inner London raising the minimum starting salary in that area to £18,366. In addition, teachers in London and elsewhere can be paid recruitment and retention allowances which start at £909. This will follow on from trainee salaries and grants, and be in addition to golden hellos where payable, to which we refer earlier in our report. 136. The pay reforms being introduced are aimed at enhancing pay prospects for teachers at all levels of the profession. There is new scope for classroom teachers to progress quickly to the top of the main pay scale. After seven years or sooner a large majority of them will be expected to cross the performance threshold to the new upper pay scale. The threshold uplift will give such teachers a £2,001 increase in pay, a rise of around 8 per cent establishing a minimum salary for them of £25,959. Additionally, by that stage a majority of teachers will have responsibilities for which they will be receiving a management allowance of at least £1,485. They may also be in receipt of recruitment and retention or SEN allowances. 137. Further salary opportunities will then arise for teachers who in due course progress up the upper pay scale, and there are similar opportunities for ASTs and members of school leadership groups. Average salary levels in the profession are therefore set to rise significantly in addition to increases to general pay levels arising from the recommendations which we are asked to make each year. 138. While recognising these enhanced prospects, the teacher unions collectively and individually have called on us to recommend a substantial increase in pay levels, particularly to enhance the immediate financial attractions of joining the profession but also to improve the pay of teachers generally. They were especially concerned about the position in London. Referring to the new, well-publicised pay measures being introduced for groups such as nurses and the police, they said that the rates of London allowances should be greatly improved to help tackle widespread teacher supply problems in London schools. There was much support for such improvements to pay levels and the rates of London allowances among other consultees. The National Employers said that a pay award above the rate of inflation would affect LEAs' ability to support the agenda for raising educational standards. They nonetheless proposed an increase to the inner London allowance of 10 per cent, and to the outer and fringe area allowances of 5 per cent, even though they said this would put financial pressure on London authorities. Our views 139. It remains vital that underlying pay levels are sufficient to recruit, retain and motivate all the teachers needed to achieve the challenging targets for improvement set by the Government. 140. We have a particular concern on this occasion about the starting rate for new teachers, despite the scope which exists to enhance the minimum salaries which are payable. The Government has acknowledged the seriousness of the problem of recruiting sufficient numbers of new teachers, especially for the secondary shortage subjects. The introduction of trainee salaries and golden hellos has had some effect but more needs to be achieved to continue attracting the substantial numbers required. The improved pay prospects will play their part but we also consider that there should be a relative improvement in minimum starting salaries over and above the general increase we recommend from 1 April 2001. 141. The particular recruitment and retention problems for schools in London are also widely acknowledged. We have made our view clear that full use should be made of the new recruitment and retention allowances to address specific problems - not all schools share the same degree of difficulty in attracting and retaining staff, which points to the selective use of discretionary allowances. We are strongly of the view, too, that specific measures are needed to address the problem of housing costs in London. However, we also consider that the time has come to recommend a substantial improvement in London allowances to underpin other discretionary responses to the teacher supply problems affecting schools right across the London allowance areas. 142. Taking all factors into account, we make the following recommendations on salary levels, which should be implemented in full without staging.
143. The recommendation for a minimum starting salary of £17,001 for a new entrant with a good honours degree represents a rise of 5.9 per cent. The increase we recommend in London allowances will mean that such a new entrant in inner London will have a minimum starting salary of £20,001, a rise of 8.9 per cent. Details of all the current and recommended pay levels are provided in Appendix E.
144. In addition to the 3.7 per cent cost of the recommended general increase, the additional adjustment to the main pay scale for classroom teachers will add a further 0.2 per cent, and the additional increase to London area allowances will add a further 0.3 per cent, to the overall teachers' paybill.
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