Prime Minister Rishi and chancellor Jeremy Hunt are looking at a pay proposal to end the wave of public sector strikes. This would backdate next year’s wage award for NHS staff and key workers.
According to officials briefed on the talks, Sunak and Hunt have discussed giving workers a lump sum to backdate next year’s salary rise. This will take effect in April but could be extended to January 2023.
Although no final decisions have been made, the talks show fears in Downing Street about the possibility of a wave of strikes that could last for months. This is especially true if public sector workers are expected to suffer another year of real-term cuts in pay.
The government is facing the worst industrial action for decades, as workers in both the private and public sectors demand higher wages amid the current cost of living crisis.
Last month, Steve Barclay, the Health Secretary, suggested the idea of a backdated award for NHS staff in England. However it was never officially presented to trade unions. One government insider stated that it was being considered.
Sunak, Hunt are at risk of striking more when they see what Whitehall departments have said they can afford for their April pay year.
By February 1, each department had to submit documents on their ability to pay for eight public sector pay review boards. These bodies covered sectors such as the NHS, police, and prison staff.
Ben Zaranko of the Institute for Fiscal Studies, an economist, stated that departments could claim they cannot afford more than a 3% pay increase from April without additional Treasury cash. He said, “That is likely will inflame things.”
Downing Street has asked departments not to publish the “affordability papers” because of their sensitive nature. MPs have disciplined Barclay for being several weeks late in submitting his submission regarding NHS pay.
Ministers have privately admitted that the UK’s fiscal watchdog forecasts inflation at 5.5% in 2023-24. This suggests that unions will not be happy with a pay cut.
The public sector awards for 2022-22-23 were approximately 5%. Inflation was at 10.5 percent in December
Hunt has stated to ministers that he gave more money to education and health departments in his Autumn Statement last Nov. However, they will still have to pay for any increases in their budgets.
Hunt’s ally said that any pay deals should be within departmental budgets. They must not increase inflation. “Current union demands cannot be afforded and could fuel inflation further,” said Hunt.
Hunt and Sunak have proposed to backdate the April pay award to sweeten it. This would give workers a lump sum, and address union demands for ministers to open the 2022-23 wage agreement.
The chancellor insists that pay must be controlled and has been briefed to Treasury officials by saying that wage awards in public sector are a benchmark for settlements made in private sector.
According to a Treasury memo, a public sector pay increase of less than 5% for 2023-24 would be “low risk” in preventing high private sector growth. Inflation would worsen if there was 6%, while 7% would “pose a significant risk” and could lead to higher interest rates.
A spokesperson for the government said that ministers value highly public sector workers, and they remain “open to conversations that will bring an endto the strikes.” However, he added: “We cannot risk high inflation becoming embedded into our economies.”
According to the spokesperson, France, Spain, and Norway have all reached below-inflation public sector settlements for 2022, 2023. He added that “Finding a fair equilibrium is exactly why we have an independent process for setting pay.”
The Royal College of Nursing, and the PCS civil servants union, whose members are involved in strikes, declined comment.
Both unions insist that the government address their demands for a raise in pay in 2022-23.