Amid mounting concern about wage awards fuelling inflation, ministers have been given the message that there will be “no new money” for pay rises, meaning that any extra funding will have to be found through spending cuts or underspending.
In the spending review last November, the government assumed that increases in public sector pay would amount to about 3 per cent. But the review, and the assumptions underpinning it, took place before Russia invaded Ukraine, which has helped to spur inflation. The Treasury has told cabinet ministers that any pay rises for public sector workers must come from their existing budgets.
At the time of the spending review the Bank of England forecast that inflation would rise to 3.4 per cent at the end of this year. It is now expected to hit 11 per cent. Teachers, NHS staff, soldiers, prison officers and civil servants will receive significantly lower settlements than the rate of inflation, opening the way to a wave of industrial action. Boris Johnson has warned that Britain will face a “wage-price spiral” if it gives in to the demands of unions and accepts big increases in public sector pay.
David Canzini, a senior adviser to Johnson, told government aides that there should be no appeals for new spending. Downing Street argued that it would be “reckless” to raise public sector pay in line with inflation. The prime minister’s official spokesman said the government wanted to reward workers in the public sector with an increase, but warned against “chasing inflation”, which he said could lead to people’s take-home wages counting for less.
