AFTER their unexpectedly dismal performance in June’s general election, the Conservatives are soul-searching. Since taking charge in 2010 they have presided over the longest and biggest fall in spending on public services on record. Yet Britons are fed up with the Tories’ austere fiscal policy, as the large vote for Jeremy Corbyn’s Labour Party suggested. According to the British Social Attitudes survey, a long-running questionnaire, half the country supports higher taxes and public spending, the highest level in a decade. Even within the Conservative Party, calls are growing for a change of approach.

The restrictions on pay for Britain’s 5.4m public-sector workers are particularly controversial. All but the lowest-paid public servants had their salaries frozen between 2011 and 2012. Their pay rose slightly in the following three years. Then the government announced that it would cap annual public-sector pay increases at an average of 1% until 2020.

The cap has been blamed for all manner of ills, from difficulties in recruiting teachers to nurses being forced to use food banks. In recent weeks the heroism of firefighters at the Grenfell Tower disaster and unarmed police officers fighting terrorists has made the stinginess seem especially mean. Meanwhile, the government’s ability to rustle up £1bn ($1.3bn) to buy enough votes from the Democratic Unionist Party to stay in power has made people doubt that the cupboard is as bare as politicians claim. Michael Gove, the environment secretary, and Boris Johnson, the foreign secretary, have both hinted that they would like to scrap the cap (partly, perhaps, to destabilise Philip Hammond, the chancellor, who is pushing for a softer Brexit than they would like). Is Britain due a pay rise?

Following the financial crisis of 2007-08 poor productivity growth, coupled with high inflation, crushed British wages. One advantage of the squeeze was that unemployment did not rise by as much as in other rich countries. But nearly a decade on, average real pay is still below its pre-crisis peak.

Although attention is focusing on the woes of public-sector workers, they have done relatively well in the past couple of decades. In the early 2000s Labour boosted public-sector pay to plug shortages of teachers and nurses (see chart). In 2008-10, after the financial crisis, public-sector workers got pay rises well above inflation, while others saw big falls in real terms.

Statutory “pay-review bodies”, which cover roughly half of public-sector workers, from dentists to teachers, may have given their members a measure of collective bargaining rarely available to those in the private sector, suggests a recent report by the quaintly named Office of Manpower Economics, a government agency. By 2010 the premium enjoyed by public-sector workers over comparable private-sector folk, after taking into account their generous pensions, reached 15%, according to research from the Treasury. But the belt-tightening since 2011 has eroded the unusually large public-sector wage premium that had built up. And the pain has not been equally shared. The median annual pay of junior firefighters has stagnated in real terms since the cap was introduced in 2011. Nurses, the mascots of the anti-pay-cap movement, have seen theirs fall by about 6%. Police officers at the rank of sergeant or below have seen a similar decline. Senior police officers, however, have enjoyed a 2% pay rise. Yet overall the caps on pay have been implemented in a fairly progressive way. Public-sector workers in the poorest decile have seen their real salaries increase by a tenth since 2011, in part because of a higher minimum wage from which all workers can benefit, but also because many were excluded from the cap altogether. And the axe has generally fallen hardest on those earning big bucks. Despite a stream of articles about “public-sector fat cats”, public servants in the top earnings decile have seen their salaries fall by about 2% since 2011, the most of any. A report last year from the IMF drily commended Britain for “stricter monitoring and control of approval for salaries above that of the prime minister.”

With the public-pay premium still fairly healthy, the public sector has faced less trouble recruiting staff than is commonly supposed. A recent paper from the Institute for Fiscal Studies, a think-tank, looks at the quality of new teachers, doctors and nurses. It finds that up to 2015 there was “no decline in the educational attainment amongst graduates going into these major public-sector occupations.” On July 5th Theresa May defended austerity policies, warning that Britain could go the way of Greece if it failed to tame its deficit.

Pushing their luck

But the toughest years lie ahead. The government announced the 1% cap at a time when inflation was close to zero. Now, inflation is nearly 3%, meaning that the cap is imposing real-terms cuts in pay. Private-sector workers are also expecting measly pay growth in the coming years, in part because of higher inflation, but the squeeze on them is less severe.

On current trends, therefore, the public-sector wage premium may soon reach its lowest level in at least two decades. For reasons that are not understood, the pay of public servants appears to be falling fastest in London. Perhaps not coincidentally, the capital is a hotbed of anti-austerity feeling.

At some point the quality of public services will suffer. Recruiting is already more difficult because of Brexit-related falls in immigration. The Health Foundation, a charity, points to a 96% drop in the number of nurses from the EU registering to practise from July last year to this April. Similar problems may be emerging in schools. The Migration Advisory Committee, an official expert panel, recently recommended widening the number of subjects for which schools could recruit from outside Europe.

So just as in the early 2000s, the government may before long have little choice but to boost public-sector pay. That worries Mr Hammond, the chancellor. Within his self-imposed fiscal targets he has some £25bn of fiscal room for manoeuvre. But he is keen not to use it yet, in case the economy slows after Brexit. Keeping public-sector pay in line with inflation might cost around £5bn a year by 2021-22. Allowing it to rise as fast as private-sector pay could cost a further £4bn or so. The chancellor may feel that is money he does not have, but before long his hand may be forced.