Watch: Public sector workers face pay freeze to plug gap left by virus spending
UK chancellor Rishi Sunak will announce plans to freeze or cap pay rises for millions of public sector workers next week, according to reports.
The finance minister is reported to be planning a limit on wage rises across the public sector, from police officers to teachers. Non-managerial NHS workers are said to be likely to escape the curbs, however.
The move is expected to affect around 5.5 million people, as the chancellor seeks to cut UK government spending which has soared alongside borrowing to tackle the coronavirus crisis.
He had previously said his immediate priority was safeguarding the economy through fiscal stimulus, suggesting efforts at “balancing the books” should wait until after the crisis.
It is likely to prove spark a significant backlash from staff and unions after a decade of severe public sector spending cuts, and to spark concerns among economists and firms over a knock-on effect on the ailing wider economy.
The Treasury was not immediately available for comment on the reports by multiple media outlets, and declined when approached by the BBC.
But the department pointed the broadcaster to language used in a letter written by Sunak in July. It said in the “interest of fairness we must exercise restraint in future public sector pay awards, ensuring that across this year and the spending review period, public sector pay levels retain parity with the private sector.”
Official figures show average private sector pay between July and September was down 2.4% on levels between April and June. Public sector pay was 4.1% higher."After a decade of pay austerity in the public sector which has seen pay increases lag behind inflation and the private sector, a further pay freeze across the public sector will be seen as an insult and have a devastating impact,” said Mike Clancy, general secretary of the Prospect union.
"At a time when the economy urgently needs demand and a level of confidence, to arbitrarily rule out even modest increases is economically illiterate."
It comes as new public sector borrowing figures show borrowing levels at their highest in October since records began in 1993. Borrowing has jumped this year to plug the gap between soaring spending and lower tax receipts as the country has battled the pandemic and the economic impact of restrictions.
UK government debt reached almost £2.1tn ($2.7tn) October, according to data published on Friday by the Office for National Statistics (ONS).
Sunak said in a statement in response to the figures: “We’ve provided over £200 billions of support to protect the economy, lives and livelihoods from the significant and far-reaching impacts of coronavirus.
“This is the responsible thing to do, but it’s also clear that over time it’s right we ensure the public finances are put on a sustainable path.”
Suren Thiru, chief economist at the British Chambers of Commerce, called the borrowing figures “eye-watering,” but warned: “The temptation to start fiscal tightening too early must be resisted to avoid prolonging the economic damage from COVID.
“Instead, the focus must be on boosting economic activity to sustainably grow the UK’s tax base.”
Next Wednesday will see the UK spending review, where Sunak will set out the government’s departmental budgets for the year ahead including the expected pay restraint.
Watch: Why tax rises may be inevitable in Britain