Budget 2021: There are still more questions than answers over the end of public sector pay freeze

Back when Rishi Sunak imposed a year-long freeze on public sector pay, in November 2020, earnings of state workers were outperforming those in the private sector.

The argument for the freeze was that public sector workers should not be enjoying big pay increases while their private sector counterparts were enduring a period of falling wages.

But since then the situation has changed dramatically: private sector wages have bounced back sharply. Public sector pay, on the other hand, remains well below levels elsewhere in the economy.

According to the Institute for Fiscal Studies, pay levels for teachers are currently 8% lower in real terms than in 2007, while the average real terms pay of NHS dentists has fallen by more than a third over that period.

Given the Conservative government came to office with a promise to end austerity, the decision to end that temporary pay freeze makes some sense.

However, as with many of the press notices released by the Treasury before this Budget and Spending Review, there are still more questions than answers.

While the freeze may not be extended, we do not know the level of pay settlements, which will only be decided by public sector pay bodies.

We do not know where the money for these pay increases will come from; the assumption is that they will have to be absorbed into existing departmental budgets, which implies fiscal restraint elsewhere.

Finally - and this is less a criticism of the Chancellor's transparency than a reminder of a major economic trend affecting all such decisions - we don't know whether these pay increases are likely to be high enough to exceed inflation.

Since inflation is already above 3% and is expected to rise above 5% in the coming months, even relatively generous nominal pay increases may not be enough to keep pace with rising prices around the economy.

Follow budget coverage live on Sky News on Wednesday with the chancellor's announcement from 12.30pm