Armed Forces Covenant Annual Report 2017 Contents

5Armed Forces Pay

105.The Armed Forces Continuous Attitude Survey 2018 cited satisfaction with the basic rate of pay and Recruitment and Retention Pay (RRP) as being at their lowest recorded levels.150 Only 31% of all personnel were satisfied with the basic rate of pay and 20% with RRP.

106.The Armed Forces’ Pay Review Body (AFPRB) recommended in March 2017 that the MoD should continue to increase pay by 1% across the board for 2017–18.151 This was in line with the cap placed on most public-sector workforces since 2013.152 The AFPRB, however, also found that:

… if the private sector continues to recover and if inflation continues its upward trajectory, we could foresee recruitment becoming more challenging and morale being adversely impacted.153

The Review Body found evidence that for some skills, in particular engineering, the adverse impact was already real.154

107.In her letter of 21 September 2017 to the Chairman of the Armed Forces Pay Review Body, setting out the parameters for the annual review of Armed Forces’ pay, the Chief Secretary to the Treasury , Rt Hon Elizabeth Truss MP, indicated that there might now be some flexibility for pay review bodies to move away from the 1% cap from 2018–19.155 However, she also warned that the 2018–19 annual pay round marked a shift to a “Single Fiscal Event” in the Autumn. This would delay the submission of Departmental evidence to pay review bodies—which would lead to a delay, from the usual date of 1 April, in the implementation of new pay rates.

108.In evidence to us in October 2017, the then Secretary of State for Defence, Sir Michael Fallon MP, welcomed the new flexibility that the pay review bodies were being given to recognise certain areas of skill shortage and move above the previous 1% cap. He argued that flexibility would enable the pay review body to look specifically at what needed to be done to improve either recruitment or retention in those areas. However, he also cautioned that the Chancellor had been clear that any pay increases would be borne by the Defence budget.156

109.The delay in introducing the new rates was confirmed by Rt Hon Gavin Williamson MP, Secretary of State for Defence, in his letter of 7 December 2017 to the Chairman of the AFPRB which stated that the MoD would be submitting its evidence to the review body in the coming weeks and that the Secretary of State would give oral evidence early in 2018.157 The Secretary of State added that Armed Forces personnel had been informed of the delay which the Department would try to keep to a minimum and that pay awards would be backdated to 1 April 2018.

110.In evidence to the Public Accounts Committee on 5 June 2018, the MoD Permanent Secretary confirmed that the AFPRB’s recommendations were being considered by the Secretary of State and discussions were ongoing with the Cabinet Office and the Treasury.158 Lieutenant General Richard Nugee, Chief of Defence People, said that the negotiations on this year’s award were more complex than normal, as there was a possibility that the award might be above 1%, but he hoped for an announcement by the end of June 2018.

111.We welcome the Government’s signal that there is some flexibility for Departments to move away from the public sector pay cap of 1%, although we note that no additional funding will be made available to the MoD for increases above this level for Service personnel. The pay cap has had a negative impact on the morale of, and recruitment to and retention in, the Armed Forces. The MoD must ensure that these factors are taken into account when determining the pay award. An award limited to 1% would be very disappointing, and risk further undermining morale and increasing the negative effect of pay restraint on recruitment and retention.

112.We are also concerned that the move to announcing budgets in November may mean that it is difficult to implement awards recommended by the Armed Forces Pay Review Body and agreed by the MoD on the 1 April each year. The Treasury, the MoD and the Armed Forces Pay Review Body should make every effort to implement awards on time.


150 Ministry of Defence, UK Armed Forces Continuous Attitude Survey Results 2018, 24 May 2018, p 7

151 Armed Forces’ Pay Review Body, Forty-Sixth Report 2017, Cm 9437, 28 March 2017, p xi

152 Commons Library Briefing, Public Sector Pay, CBP 8037, 3 May 2018, p 3

153 Armed Forces’ Pay Review Body (March 2017), Forty-Sixth Report 2017, Cm 9437, 28 March 2017, para 5.2

154 Armed Forces’ Pay Review Body (March 2017), Forty-Sixth Report 2017, Cm 9437, 28 March 2017, p xv and para 5.3

155 Letter from the Chief Secretary to the Treasury to the Chairman of the Armed Forces Pay Review Body, dated 21 September 2017

156 Oral evidence taken before the Defence Committee on 25 October 2017, Work of the Department 2017, Q13

157 Letter from the Secretary of State for Defence to the Chairman of the Armed Forces Pay Review Body, dated 7 December 2017

158 Oral evidence taken before the Public Accounts Committee on 4 June 2018 on Skills shortages in the Armed Forces, HC 1027, Qq1–3




Published: 30 June 2018