The independent pay review body, which represents teachers and NHS workers, has recommended an above-inflation pay rise, which could require the government to spend up to £10 billion more, according to a leading economist.
The groups will recommend a 5.5% pay rise for the 514,000 teachers and the around 1.3 million NHS staff they represent. according to The Times said this was far more than the government was believed to have been prepared for and such a move would pose an early challenge to the fiscally disciplined Treasury under Rachel Reeves’ government.
Paul Johnson, director of the Institute for Fiscal Studies, said he was “not particularly surprised” by the figure, which is in line with wage increases across the economy and would cost an extra £3 billion for schools and the NHS alone.
He told the BBC’s Today programme: “In terms of costs, there’s no hard figure that’s budgeted for schools – maybe 1% or 2% – definitely not 5.5% or anything like that.”
“So we would certainly need at least an extra £1 billion in costs for schools compared to what is currently expected, and at least double that across the NHS if the NHS proposals are similar. It looks likely that the NHS proposals will be similar.”
Mr Johnson added that if the 5.5% figure was applied across the entire public sector, the government may need to find an extra £10 billion.
Reeves promised during the election campaign to rein in debt and rule out tax hikes, but the larger-than-expected wage increases could pose a major challenge to his first budget, expected to be released in the fall.
Schools and hospitals are unlikely to be able to meet a 5.5 percent wage increase in their existing budgets without making cuts elsewhere.
Asked where the money would come from, Johnson said: “When people ask me where the money is going to come from my answer is always the same.
“That can only come from higher than planned borrowing, higher than planned taxes or cuts in other spending. There is no fourth option here.”
Failure to meet the pay review body’s recommendations, due to be published this month, would set off a clash with unions representing six million public servants.
National Education Union secretary-general Daniel Kebede warned that ignoring the pay review body’s recommendations could lead to strike action.
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He noted that the new Education Secretary, Bridget Phillipson, had “worked really hard” to improve relations with teachers, but said it was “enormous that the Treasury has not stepped in and implemented the 5.5 per cent pay rise”.
“We want to avoid a strike at all costs, but if the Treasury Department gets involved it will be almost inevitable.”
A government spokesman told The Times: “We value the vital contribution that our nearly six million civil servants make to our country.”
“The pay review process is ongoing and no final decisions have yet been made. We will provide updates in due course, but we are under no illusions about the scale of the financial legacy we face.”
