Rishi Sunak and Jeremy Hunt are finalising decisions on pay for millions of public sector workers against a backdrop of a doctors’ strike, a weak economy and persistent high inflation.
The Prime Minister and Chancellor are meeting on Thursday to decide whether to accept the recommendations of pay bodies which are thought to be suggesting rises of around 6-6.5% for a variety of professions from medics to teachers.
A failure to accept the reports would provoke further rows with the unions, a problem underlined as junior doctors embarked on their longest walkout yet in England on Thursday.
The Treasury has ruled out increasing borrowing to pay for wage rises, meaning any extra cash for workers may have to come from raiding existing departmental budges, potentially meaning cuts to services.
The current level of CPI inflation is running at 8.7% and Mr Sunak – who has promised to cut it to around 5.3% by the end of the year – wants to avoid pay increases which could fuel a wage-price spiral.
The wider economic challenge facing the Chancellor and Prime Minister was illustrated by official figures showing the UK economy contracted in May.
Written statements listed on Thursday’s order paper show ministers are due to give updates on the NHS, police, teachers, the armed forces, civil service and the justice system.
Disruption to thousands of planned appointments is expected as junior doctors in England on Thursday started their longest walkout yet in protest over pay.
The strike started at 7am and ends at the same time on Tuesday.
Meanwhile, teachers from the NASUWT union in England plan to stage continuous action short of strikes starting in September, although its members could still walk out in the autumn if the row continues.
Mr Hunt urged workers, during an appearance on ITV1’s Peston on Wednesday, to “understand this difficult period”.
The Chancellor said: “We will take a responsible attitude when it comes to the element of pay that we directly control, which is public sector pay, and we’ll make sure that any awards we give don’t themselves fuel inflation.
“But what I would say is that just to take your bigger point, because public sector isn’t the entire economy, is that if people can see that the trajectory of inflation is actually to fall dramatically… then people won’t be asking for these pay awards that feed that pay spiral.”
He urged workers to “understand this is a difficult period” and that if ministers “show discipline” they will avoid “having the same discussion in a year’s time”.
