Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Downing Street has put itself on collision course with trade unions over public sector pay, insisting that there will be “no additional funding” for any rises above 2.8 per cent recommended by independent pay review bodies.
Number 10 did not deny that pay review bodies have recommended rises for teachers and NHS staff above what Whitehall departments say they can afford.
That means that if the government accepts the pay recommendations, as it did last year, then some of the increases will have to be funded from public spending cuts and efficiency savings.
“There will be no additional funding for pay if the recommendations exceed what departments can afford,” a spokesman for Prime Minister Sir Keir Starmer said on Monday.
Union leaders want fully funded pay rises above inflation and do not want cuts elsewhere, creating a new political problem for Starmer and chancellor Rachel Reeves, who are already struggling to balance the books.
Number 10 did not deny a report in The Times that half a million teachers should receive a pay rise of nearly 4 per cent according to a recommendation by their independent pay review body.
Another pay review body representing 1.4mn NHS workers has recommended a figure closer to 3 per cent.
Both are higher than ministers had wanted when they set out their pay expectations before Christmas.
Last December the education and health departments said in evidence to independent pay review bodies that anything beyond a 2.8 per cent increase in pay for teachers, NHS staff and doctors for 2025-26 would be unaffordable.
Soon after winning July’s general election, the Labour government gave generous pay increases of 5 to 6 per cent for 2024-25 to public sector workers in order to settle a spate of long-running disputes.
Ministers argued that those awards were enough to bring public sector pay level with the private sector.
But since then, UK private sector wage growth has proved stronger than expected, with the Office for Budget Responsibility now predicting wages and salaries across the economy will rise by 5.2 per cent in 2025. Inflation is also set to rebound in the short term, with the OBR and Bank of England expecting it to rise from 2.6 per cent in March to about 3.7 per cent over the next few months.
Stephen Kinnock, care minister, confirmed the government had received recommendations from the pay review bodies and would give them “very careful consideration”.
“I would . . . urge our colleagues in the trade union movement to engage constructively with us and recognise the reality of the financial position,” he told Sky News.
But some unions have signalled that they could take industrial action if pay offers fall short of their expectations.
Daniel Kebede, general secretary of the NEU teachers’ union, called on the government to publish the pay recommendations immediately and make clear how they would be funded.
The pay award needed to be above inflation and fully funded, he said, adding: “No one wants to take strike action but of course as a trade union we do stand ready to act industrially if we need to.”
The NASUWT teaching union has also threatened strikes unless pay rises for teachers are fully funded by the government, rather than taken from school budgets.
One health official said any gap between the government’s offer and the sector’s expectations would be a problem: “This is probably the tightest budget round for years.”
They added that it was unlikely the government would approve anything over 3 per cent “given how tight the budget is, but then again they won’t want to face the prospect of the strikes restarting”.
Junior doctors have also signalled that they could return to industrial action if this year’s offer falls short of their hopes for long-term “pay restoration”.
Any industrial action could dent the government’s target of ensuring 92 per cent of NHS patients in England wait no more than 18 weeks after referral to begin non-urgent hospital treatment by the end of this parliament.
Professor Nicola Ranger, head of the Royal College of Nursing, warned last year that the sector could be forced to take further strike action and that nurses were “no longer going to be passive”.
The Treasury said the government was considering the recommendations and would respond in due course.
