Wage agreements for UK public sector staff could lead to increases of up to 5% this year, according to government reports, as ministers try to avoid widespread strikes by key workers.
Amid the escalation of the cost of living crisis, ministers see it increasingly unsustainable to keep public sector wage agreements, especially for nurses and teachers, in the range of 2 to 3% they have set. .
However, the Treasury refuses to fund more generous wage agreements, meaning Whitehall departments would have to find the money for 5% settlements within existing budgets.
A government aide said the independent salary review bodies, which make recommendations to ministers on the salaries of teachers and health workers, police and prison staff, civil servants and the armed forces, were expected in the coming weeks. they recommend salary increases typically of “one or two percentage points” above the 3 percent limit, which implies 5 percent awards in at least some cases.
If ministers accept the recommendations, “unless things change, those increases should come from efficiencies rather than the Treasury allocating more funds,” the assistant added.
Prime Minister Boris Johnson and Chancellor Rishi Sunak have argued that large wage increases in the public sector would be unattainable and inflationary, given the Bank of England’s fears that the so-called wage price spiral is setting in.
But a cabinet minister said: “If we don’t push towards 5 per cent in some of these [pay] agreements, we run the risk of wave after wave of strikes. “
The minister added that Downing Street was mainly concerned about the salary increase for nurses and teachers “who are likely to cause more headaches”.
The Treasury said any public sector wage increase “needs to be proportionate and balanced with the need to manage inflationary pressures and public sector finances.”
With inflation at a 40-year high of 9.1 per cent, opinion polls suggest growing public anger at the government’s suggestion that key workers should suffer severe wage restraint.
“Inflation is not being driven by nurses and health workers who want enough pay to keep food on the table,” said Frances O’Grady, general secretary of the Trade Union Congress.
Most workers in the UK are facing wage cuts in real terms this year, and the BoE predicts inflation will reach 11 per cent in October.
Public sector staff, however, have already suffered a major impact: their salaries are already on average 4.3% lower in real terms than in 2010.
The latest official data show that staff salaries have increased by only 1.5% in nominal terms over the last year, compared to an average total wage growth of 8% for the private sector.
In this context, the UK’s largest rail strikes in a generation began on Tuesday, when 40,000 members of the RMT union abandoned wages, internships and redundancies. Many are employed by the state-owned Network Rail, an infrastructure operator.
Unions representing teachers, doctors and civil servants are now preparing to vote for members on possible union action if their salary demands are not met.
But despite the risk of widespread industrial action, Sunak is resisting pressure from Whitehall departments to reopen its spending review last year to fund better wage offers.
The chancellor unveiled last month £ 15bn in specific support to help households with the rising cost of living, which the think tank at the Institute for Tax Studies estimates will almost completely offset the impact on the poorest families.
But with this support underway, the Treasury is deepening against new demands.
While higher inflation is likely to boost government tax revenue, Sunak’s allies said there would be no additional funding for Whitehall departments to help them manage wage pressures.
Allies of British Chancellor Rishi Sunak said there would be no additional funding for Whitehall departments to help them manage wage pressures © Reuters
They added that departments had “flexibility” in responding to the recommendations of wage review bodies and would have to make decisions about what to cut if they wanted to pay workers more.
In practice, this will force departments to make major commitments in the provision of public services.
The Department of Health and Social Welfare told the NHS payment review body that it could afford a main payment premium of up to 3%.
Each 1 percentage point increase in the pay of the hospital and community health services staff would cost £ 900 million (the equivalent of the salaries of 16,000 full-time nurses) and therefore make it difficult to coping with treatment delay in elective care.
The Department of Education has said that every 1 percentage point increase in pay for the school workforce would reduce £ 350 million in other spending over the next two years, meaning it would be more difficult. for principals to hire new staff or help children make up for the loss. learning from the confines of the Covid-19.
A government official said the Treasury was “in denial” about the level of public sector payments that were reasonable.
The official also contrasted the situation of key workers with retirees, who should see the state’s basic pension increase by 10 percent next April because the increase is linked to inflation.
Sunak has made it clear that curbing inflation is not his only reason to resist more generous wage agreements in the public sector.
At a cabinet meeting on Tuesday, he emphasized the government’s responsibility to avoid any action that “fuels inflationary pressures or reduces the government’s ability to lower taxes in the future,” a spokesman said.
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Sunak pledges to cut income tax by 2024, though Conservative MPs are calling for faster action to help with the cost of living crisis.
Meanwhile, economists challenged the idea that intense pressure on public sector wages was needed to control inflation.
“The Bank of England can cope with inflation,” said Tony Yates, an associate of the Resolution Foundation, another think tank. “Wage policy must be established in accordance with labor market conditions, that is, in terms of hiring, retention and motivation.”
Simon Wren-Lewis, a professor at Oxford University, argued in a blog that, as public sector wage increases do not directly feed consumer prices, “in this very simple sense a wage spiral cannot be achieved. public sector price “.